Offshoring is not for Everyone

I am often asked what our offshoring strategy is. The answer is that we keep an eye on it as an option, but have not yet seen the value for our business.

The appeal of a much lower unit cost for development is enormous. Even though prices are being bid up in India, Malaysia and elsewhere, the delta in pay rates between the US and the Low Cost Countries is still compelling, often 4x or more.

Offshoring seems to work best when there are structured releases that can be managed as projects with detailed design documentation and the whole works. Formal requirements definition, database design, user interface design and all the rest can be created and packaged, then sent offshore for coding. Code can be developed in Asia while we sleep and then reviewed and tested during the day here in the US. The developers show up the next day with comments and course corrections to guide the day’s activities. Many software companies have gotten very good at managing this process.

But what if the software vendor has a shorter release cycle and an iterative approach? Plexus, for instance, does not rely solely on product marketing, choosing instead to work with real customers on real problems. The tight iteration cycle allows developers to understand the business problem and get a solution in the users hands very quickly. Then, it is tuned and adjusted very rapidly. This has lead to software that is not only very useful, but also easy to use.

With a SaaS model, vendors can release changes every day. They also need not be concerned with supporting multiple operating systems, databases, versions and so on. All of the effort can be focused on providing features that customers will actually use.

This agile, rapid, joint development approach makes it difficult to manage a 10,000 mile supply chain.

Mark Symonds, CEO of Plexus Systems, Inc., is an operations expert with 25 years of experience. His blog is about the convergence of ERP and the on-demand (software as a service) delivery model, and its impact on manufacturers.