Many who know me know that I am far from being a cheerleader for outsourcing. There are situations and circumstances for which outsourcing is just not the right answer. In future blogs, I’ll touch on some of those settings, but one topic is really top of mind for me today.

I’m headed to India to participate in the annual NASSCOM conference — essentially a gathering of the various participants of the India-based outsourcing industry. While I’m not entirely sure what I’ll see on this visit, I know what I’m hoping for: More emphasis on increasing productivity in outsourcing. I mean that for the industry as a whole, as well as for the segment that is exploding in India.

Productivity differences in software development in particular have been the subject of many studies. These studies typically find a large variation in productivity. The best performers are often 10 times more productive than the average. The least productive are often found to be negatively productive — that is, more time is spent fixing the work than would have been required had someone with an average level of productivity written it in the first place. The variation is not so surprising when you consider the challenge of managing projects with distributed development teams from different cultures working in offset work shifts.

Much of the India-based outsourcing industry has taken flight on the wings of lower-cost labor, not necessarily more-productive labor, though leaders of the many India-based service providers are now talking about the need to increase productivity. Some have introduced management process discipline to sell their services based on rather abstract measures of "goodness" (capability maturity model levels, Software Engineering Institute standards, etc.).

These same management disciplines have rarely been adopted in the U.S. because, generally, they drive up the cost of the project. In the U.S., it has been more efficient to simply hire from the first quartile (people that "test" as being best among peers; highest grades or aptitude scores), and put everyone in the same room. Sounds good for smaller initiatives, but hardly workable for complex services.

I think the outsourcing industry is emerging from a period in which companies that are confronted with choices of better, faster or cheaper will usually make cheaper the predominant buying criteria. With an emphasis on productivity, we seek all three traits: higher quality results, delivered in less time, and for less cost. As the industry moves toward a productivity-based model, I think we¹ll see new definitions of “better” will emerge. — Peter Allen

Peter Allen is a partner and managing director for market development with the sourcing advisory firm Technology Partners International. You can reach him at peter.allen@tpi.net.

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