Steve Mezak, CEOwww.Accelerance.com

+1-650-472-3785 x101Steve@Accelerance.co

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Global Software Development-- & --

Why U.S. Companies WillOutsource to Mexico

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Outsourcing Software Developmentfrom a U.S. perspective

• Who– in the U.S. is outsourcing?

• What– kind of outsourcing?

• Where– is the work going?

• Why– are U.S. companies outsourcing?

• How– are they making their decisions?

And perhaps how Accelerance can help you reach the U.S. market . . .

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Who is Outsourcing?Software Development from the U.S.

• Independent Software Vendors (ISVs)– Growing but can’t find programmers in U.S.

– Want cost savings

– Startups with limited funding

• Small company IT department– Fixed-price SW development

projects

• Large companies– Create an offshore operation

– Mix of IT services & SW development

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Who is Outsourcing?Target Markets

█ Bronze (< $100K)– Software Startup: Entrepreneur/CEO/Founder– Create demo for customers and investors. Validate market opportunity &

raise funding █ Silver (< $500K)

– Funded Startup: Entrepreneur/CEO/Founder/CTO/VPE– IT Department: CIO/IT Manager– New product launch or IT project implementation

█ Gold (< $1M)– Small & Growing Software Company: CEO/CTO/VPE– Enable growth with dedicated global team & control/reduce costs

█ Platinum ($1M+)– Medium & Growing Software Company: VPE/Engineering Director– Enable growth & control/reduce costs with own offshore operation

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Who is Outsourcing?Example Deals

• Small PHP team– 4 engineers for 6 months

– Approx. $96K

• Medium Java Team– 8 engineers for 6 months

– 12 engineers next 6 months

– Approx. $360K

• Medium .NET Team– 15 engineers for 12 months

– Approx. $540K

• Large Team– Custom vendor search

– 20+ engineer team

– $1M+ per year

Bronze Silver

Gold Platinum

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What Kind of Outsourcing?Engagement Models

• Fixed-Price Project– Good spec required!– Used as pilot for ODC

• ODC– Offshore Development Center– Dedicated team– Paid monthly

• In-house / Outsource Blend– Staff augmentation

• BOT– Build, Operate, Transfer

• Offshore Subsidiary

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What Kind of Outsourcing?• Software Development

– To a detailed spec

– Java and .NET

• Design & Development Process– Architecture

– Agile vs. CMMi vs. Waterfall

• Quality Assurance

• Special Technical Expertise

• SAP or Oracle practice

• What is your specialty?

• Also BPO - Business Process Outsourcing

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Where are they Outsourcing?Everywhere!

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Where are they Outsourcing?Pros & Cons & Costs

• India ($20/hr)+ 80% of outsourcing– 10 to 12 hours away

• China ($18/hr)+ Many engineers– Limited English

• Philippines ($20/hr)+ English & low cost– Limited tech workforce

• Russia ($25 to $30/hr)+ Analytical technologists– Limited English & stability

• Eastern Europe ($20/hr)+ Well educated & low cost– Limited English skills

• Canada ($40/hr)+ Almost same culture & time zone– Almost same cost as U.S.

• Mexico ($25 to $30/hr)+ Near & time zone overlap– Higher cost than other countries

• Central & South America ($20 to $30/hr)+ Low cost in same time zone– Limited tech workforce

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Why Are US Companies Outsourcing?The Million Dollar Outsourcing Decision

• Ignore Outsourcing & Overspend– 20 engineers for one year

– Difference between In-house ($64/hour) &Offshore Outsourcing ($32/hour) is about $1 million

• Competitors Are Outsourcing – Joining the global economy

– Foreign-born executives

• Needed Technical Expertise

Estimated Costs

$2,520,000

$1,320,000

$0$500,000

$1,000,000$1,500,000

$2,000,000$2,500,000$3,000,000

In-house Offshore

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How Are Outsourcing Decisions Made?

Sourcing Options

• Strategic Consulting Firms– NeoIT

– TPI

– Equiterra

• Single-Country Experts• Personal Referrals• Elance Project• Global Partner Network

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How Are Outsourcing Decisions Made?Selecting the Optimum Outsourcing Team

• Vendor Selection Criteria1. Location / Culture

2. Positive References in U.S.

3. Technical Competence

4. Time zone

5. Domain Experience

6. …

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How Are Outsourcing Decisions Made?The Selection Process – can take 6+ months

• Matrix with evaluation criteria• Define evaluation process

– Number of vendors, schedule

• Create RFP– Define optional pilot project

• Choose countries• Contact vendors• Send RFP / Get responses• Select semi-finalists

– Using evaluation matrix

• Final selection– Visits, pilot, pricing & terms

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How Are Outsourcing Decisions Made?How Do You Get Selected?

• Differentiate your services– What are you best in the world at doing?

– Java, .NET, C++, …

– CMMi, Agile, XP, …

– Wireless, embedded, web apps

– Software as a Service, Web 2.0

• Sell your value, not low price• Have great references• Understand your customers

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How Are Outsourcing Decisions Made?Why Mexico?

• Close to the U.S.– Same time zones– Fast travel– NAFTA– Agile development

• Smart Engineers• Lower cost

– Less than U.S. engineers

• What else?

“Pobrecito Mexico—tan lejos de Dios y tan cercas de los Estados Unidos!”

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Global Software DevelopmentConclusion

• Who– Most companies in the US

• What– Software & business processes

• Where– Everywhere, each with pros & cons

• Why– Savings & global economy

• How– After a careful evaluation process

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The Accelerance SolutionSpeed Dating for Outsourcing

• Global Partner Network– 40+ vendors in 14 countries– Proven, pre-screened & qualified

• Outsourcing Jumpstart– Select by Region or Technology– Guided DIY vendor selection– Money-back guarantee

• Rapid Ramp-Up Programs– More consultation– Custom vendor searches– Setup of offshore operation

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The Accelerance Value PropositionTo U.S. Clients

• Cost of Vendor Selection– 3 months, part-time: $15K

– Unproductive programming with the wrong vendor: $30K

– Selecting a new vendor: $5K

– Delayed time to market: $huge

• Other Consultants – $50K to $100K

• Accelerance Programs– Only $497 to $15K

“The outsourcing partner we found through the Accelerance Outsourcing Jumpstart service has successfully finished our initial project and we've now re-launched our website and programs. Again, thank you for guiding me in our outsourcing endeavors!“

— Vince Turk, Directory Manager, Find White Papers, Inc.

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The Accelerance Value PropositionTo Global Partners

• Network Member Benefits– Low cost lead generation– Another sales channel – Joint promotion opportunities– Lost deal feedback– Leave network at any time

• Application Fee– Only $500– Money-back guarantee

• What’s the Deal?– Accelerance earns a one-year

10% referral fee when you are selected by a client

“We still find U.S. clients through our personal connections, but being an Accelerance partner has tremendously increased our business and enables usto win clients we never would meet otherwise.” — Vijay Shah, CEO of V2Solutions in Mumbai, India

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How Are Outsourcing Decisions Made?How to Make Contact

• Outsourcing is a relationship business– Personal networking & referrals– Partnerships– Publish articles– Give talks & seminars– Webinars & teleseminars– Virtual networking with

LinkedIn, Plaxo, Facebook, etc.– Attend conferences

• Cold calling does not work

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Promotional Tools• Copies of Software without Borders

• Promotional discount codes

• Ezine content to use or contribute

• Frequent updates to www.SteveMezak.com author blog

• Joint Teleseminars

• Listing on the Accelerance Global Partner page

• Blurb for your website

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Next Steps

• Questions ???– Honest feedback

– Suggestions

• Apply to Join– Meet with me today