matt perez diapositivas.ppt

MexicoMexico

The Nearshore Alternative

Copyright © 2005 Nearsoft 2 Company Confidential

AgendaAgenda

Morning8:30-8:45 (0:15)

Jorge Zavala, TechBAIntroduction

8:45-10:50 (2:00)Company introductionsNearshore advantages

10:50-11:00 (0:10) Break

11:00-12:30 (1:30)Total Cost of EngagementPricing

12:30-13:30 (1:00) Lunch

Afternoon13:30-14:20 (1:20)

First impressions14:20-14:30 (0:10) Break

14:30-16:00 (1:30)On your marks…FAQ

16:00-17:00 (1:00)[TBD]

17:00–17:30 (0:30)Jorge Zavala, TechBAClosing comments

Morning Afternoon


Please… !Please… !

Turn off your mobile phones

Turn off your pagers

Turn off your walkie-talkies

Turn off your everything that beeps, vibrates, plays music, makes other noise

If you expect an important call

Please, sit close to the door

Now, relax…

… this is going to be fun!

Matt PMatt Pérez’ érez’ BackgroundBackground


Bio: SummaryBio: Summary

Nearly 30 years of high-tech product development experience

20-year successful track record as product development Executive

Managed remote teams since 1991, onshore and offshore


Bio: ExperienceBio: Experience

Large (200+) software organizations and very small (tiny) start-up teams

Public companies, private companies, big and small

System-level software, Graphics & Multimedia software, Enterprise solutions

Rapid-growth, dynamic (even chaotic) environments


Bio: Curriculum Vitae Bio: Curriculum Vitae 1976-1986 (first decade)

R&D Rush-Presbyterian Hospital, U of Ill Med Center

Consulting Henry Ford Hospital, Bell Labs, International Harvester, etc.

Two system hardware startups

1986-1995 (second decade, almost)

Sun Microsystems, Graphics & MM, Solaris OS

1995-2005 (third decade)

Per-Sé — OR Scheduling for large hospitals

SCI Solutions — ASP/SaaS, Patient Scheduling for hospitals of all sizes

Compassoft — Change discovery, tracking for Enterprise repositories, “Masters of metadata”

BSCS from the University of Illinois


Questionnaires… Thank You!Questionnaires… Thank You!

Eugenio Gallegos,Novutek

Jorge Arturo Cabrera,IMK Sistemas Activos

Pedro Garza,InterWare

Daniel González,Sinapsis


Elevator PitchElevator Pitch

Your turn…

Nearshore AdvantagesNearshore Advantages

NearNearsoftsoft

Software Product Development Outsourcing Nearshore


Target ClientsTarget Clients

Software product typesEnterprise solutions

Embedded software

High-tech product companies≥ $5M investment

≤ $30M Revenue


Outsourcing Benefits & RisksOutsourcing Benefits & Risks

Benefits

Savings

Do more for less

Staff extension

Flexibility

Risks

High rate of failure

More overhead than expected

Not as much savings as expected


Minimize Risks: Local LeadMinimize Risks: Local Lead

Lead by Matt PérezOver 20 years product development

Sun Microsystems, several start ups

Teams in India, Russia, North Carolina

Discover, specify requirements

Scope control

Plan, manage every task

Deliver on time, on budget, high quality


Minimize Risks: ProximityMinimize Risks: Proximity

Teams work closer, overlap most of the day

Constant, easy communications avoid crises

Regroup quickly, easily to meet new demands


Minimize Risks: Low TCEMinimize Risks: Low TCE

Less management overheadSix hour overlap

Eliminate extra tech leads

High productivity

Very low staff turnover

Inexpensive, same-day travel

Lower TCE65% of US

20% < India


Next StepsNext Steps

Identify suitable projects

Primary contacts

Project goals, targets


Why Mexico?Why Mexico?

Technical

Good schools

Native markets for technology

Development experience

Good English skills

Cultural Alignment

“Yes” means yes, “done” means done

Goal oriented

High commitment

Flexible


Why not India?Why not India?

Outsourcing doubled every year, 2001-2004

High demand

High staff turnover

High TCE, getting higher

Not a good fit for product development

12.5-13.5 times zones away

2-day travel time, each way

High process, low flexibility


Why not China?Why not China?

Not a good fit for product development

8-9 times zones away

2-day travel time, each way

Immature management skills

Limited English skills

High cultural misalignment

High TCE


Presentation BreakdownPresentation Breakdown

7 slides, including title slide

8 backup slides

3 locale suitability

5 TCE

10-15 minutes

Total Cost of EngagementTotal Cost of Engagement


US-Based CostsUS-Based Costs

Engineer pay, on average$ 100,800/year

30% overhead

Total, $ 131,040/year or $ 63/hour

Technical lead pay$ 120,000/year

Total $156,000/year or $ 75/hour

Engagement Manager$ 160,000/year

Total $ 208,000/year or $ 100/hour


Offshore & Nearshore Costs Offshore & Nearshore Costs

Engineers

$ 25/hour

$ 52,000/year

Tech Leads, Project Managers

$ 36/hour

$ 74,880/year


Great Story! Isn’t It?Great Story! Isn’t It?

USUS OffshoreOffshore Leverage!Leverage!

EngineersEngineers $ 63/hour $ 25/hour 2.5x

Tech Leads &Tech Leads &Project ManagersProject Managers

$ 75/hour $ 36/hour 2.1x


Hidden DifferencesHidden Differences

IndiaIndia MexicoMexico

Productivity lossProductivity loss 25% 10%

Staff turnoverStaff turnover 40% < 3%

Trips/year forTrips/year forEngagement ManagerEngagement Manager

2 4

Trips/year forTrips/year forEngineersEngineers

4 6

Cost per tripCost per trip$ 1,700,22 hours

$ 500,5 hours


ResultsResults

Dramatic TCE difference

US

$ 2,773,900

India

$ 2,356,600 (85% US)

Mexico

$ 1,763,800 (64% US)

Over 20% difference, offshore and nearshore

PricingPricing


Average RatesAverage Rates

HourlyHourly $/month $/month EquivalentEquivalent

$/year $/year EquivalentEquivalent

Technical LeadTechnical Lead $ 36 $ 6,240 $ 74,880

Sr. EngineerSr. Engineer $ 30 $ 5,200 $ 62,400

EngineerEngineer $ 25 $ 4,333 $ 52,000

QA LeadQA Lead $ 25 $ 4,333 $ 52,000

QA White-boxQA White-boxEngineerEngineer

$ 25 $ 4,333 $ 52,000

QA Black-boxQA Black-boxEngineerEngineer

$ 18 $ 3,033 $ 36,400

Project ManagerProject Manager $ 36 $ 6,240 $ 74,880


Discounted Rates (15%)Discounted Rates (15%)






QA LeadQA Lead $ 21 $ 3,683 $ 44,200


$ 21 $ 3,683 $ 44,200


$ 15 $ 2,578 $ 30,940



Net RatesNet Rates






QA LeadQA Lead $ 17 $ 2,947 $ 35,360


$ 17 $ 2,947 $ 35,360


$ 12 $ 2,063 $ 24,752


MexicoMexico

The Nearshore Alternative

First ImpressionsFirst Impressions

Brief Companies Assessment


NovutekNovutek

Vitals17 months6 customersEducation, Government

Has$ 10,068 $/emp$ 147,000 $/client

Will investTBD

Expects$ 6,849 $/emp$ 41,667 $/client


NovutekNovutek

Great site

Very clear offerings

Good design

Una Empresa del Instituto Tecnológico de Sonora ¿?

Student programmers?

Commercial customers in the US?


IMKIMK

Vitals17 months1001 customersProduction, Government, Logistic, Foods & Services, Transportation

Has$ 20,000 $/emp$ 2,500 $/client

Will invest$ 24,000

Expects$ 25,000 $/emp$ 2,500 $/client


IMKIMK

Direct-to-Consumer?

Looking for distributor? Contract design work?


InterWareInterWare

Vitals8 years23/100 customersFinancial Services, Commercial, Manufacturing, Services, Government

Has$ 38,235 $/emp$ 56,522 $/client

Will invest$ 120,000

ExpectsTBD $/empTBD $/client


InterWareInterWare

Great name

At a good spot

Realistic expectations

Good chance to succeed


SinapsisSinapsis

Vitals15 years10/50 customersFinancial Services, Commercial, Manufacturing, Services, Government

Has$ 30,000 $/empl$ 750,00 $/client

Will invest$ 250,000

Expects$ 2,000 $/empl$ 166,667 $/client


SinapsisSinapsis

(Too much use of Flash )

Established

Ready to take on bigger challenges, opportunities

Very realistic expectations

High chance of success

On Your Marks…On Your Marks…

Get Ready to Win


Some BasicsSome Basics

Sell, sell, sell

US is driven by sales

Client expects to be sold

Technical presentation= Sales presentation

Every interaction with client= Sales presentation

Before, during, after sales

Close early, close often

Technical presentation


Be Ready to Respond… Fast!Be Ready to Respond… Fast!

Slow response will kill the deal

Respond within one business week

Commit to delivery date on spot

Deliver on or ahead of committed date


Key CandidatesKey Candidates

Expect to put key candidates on conference call

Informal interview


Reference CustomersReference Customers

Must speak EnglishOtherwise, provide polished translator

Exact or close match to prospectSame type of business

Same level of responsibility

Realistic endorsementNot “too good to be true”

Better if the reference can say “we had a small problem, but they took care of it right away at no cost to me”


Be Ready for Site VisitBe Ready for Site Visit

Client will visit your offices

Will want to meet core team

May want to meet your references

Make it easy

Suggest specific flight

Make hotel reservations

Have a car waiting at airport

Assign somebody to help client


Key DisciplinesKey Disciplines

Requirements

Project Management

Communications

Architecture, Design


RequirementsRequirements

Requirements gathering

Documentation

Prioritization

Formal acceptance

Scope management


Project ManagementProject Management

Timeline

Work breakdown

Many small tasks

Tracking

Exception reporting

Change management


CommunicationsCommunications

Commitments

Responsibilities

Expectations


Architecture, DesignArchitecture, Design

Engineering requirements

Feasibility

UML, High-level design

Frequently Asked QuestionsFrequently Asked Questions


FAQFAQ

Mexico? Really? Are there enough experienced engineers in those places? Do they speak English?

Yes. Mexico by itself has more than 100,000 engineers with over seven years of experience.

The domestic economy has grown and supports an thriving market for technology businesses.

New graduates learn English as part of their requirements. Earlier graduates have learned it on the job along with other work experience.


FAQFAQ

How do the rates compare to India’s?

The hourly rates are about the same, for equivalent experience.

However, due to the time and geographical proximity, the Total Cost of Engagement (TCE) can be up to 20% lower than in India or China.


FAQFAQ

Offshore must be the safe thing to do, everybody is doing it and it works, right?

In many cases, that’s true. Call Centers, Business Process Outsourcing, and other back room activities can even benefit from the time separation. Software development is not one of those activities.Software development is hard as it is and trying to split development across teams that are 12 time zones apart dooms it to failure.If you plan to outsource software development, the much preferred alternative is to do it nearshore or onshore. Your Total Cost of Engagement (TCE) will be lower in the end and your risks much more manageable.


FAQFAQ

If offshore is too far for some projects, then why stop at nearshore? If close is better, why not outsource onshore?

If cost is not significant and the nearshore locale holds no other benefits for your business (e.g., as a market for your own products), then the best solution is to keep software development in-house.

If you want to outsource onshore, keep it within two time zones. Going beyond that makes it extremely more difficult to keep everybody in-sync and working as a team, even within the US.


FAQFAQWhat about the benefit of “working around the clock” that offshore offers?

If you are building widgets, then this model may work for you. It may also work for Call Centers and back office, repetitive functions. However, if you are doing software development, this does not apply.

Even trying to do QA offshore is problematic, particularly when the teams’ working hours have no overlap whatsoever, as it is the case if you do this in India.

The teams will play email ping-pong, sending questions and counter-questions back and forth. One team will ask a question today only to get a request for clarification to the question the next day. This is very frustrating to both teams and causes delays.

On the other hand, doing QA in a nearshore location that is ahead of the development team has the effect of “stretching the day” by a few hours, without the negative side-effects.


FAQFAQ

In this scenario, the QA team in Mexico gets to work two hours ahead of the development team and starts to test the code changes from the previous day.By the time the development team gets to the office, they’ll have the results of the testing.Most importantly, the QA engineers and the developers will be at work at the same time for most of the day during which they can ask questions of each other and clarify any issues.

California (PDT)

Mexico

India

China


FAQFAQ

India and China graduate a lot more engineers every year than in all of Latin America. Isn’t that an advantage?

That is true. But everything is relative. India and China also have a lot of demand for engineers which means that your outsourcing partner may still have trouble finding and retaining experienced engineers and project managers.

In particular, India’s outsourcing industry has doubled every year for the last four years and the unfortunate side-effect is extremely high turnover and a shortage of experienced engineers.

In any case, the critical success factor for software development is the time difference and having access to a large number of engineers is a moot point if they are 12 time zones away.


FAQFAQ

How long does it take you to find qualified engineers?

TBD.


FAQFAQ

How do you make sure that engineers are qualified?

We use behavioral interviewing, a well-known technique to discover a candidate’s actual accomplishments

We also interview forTechnology experience, including technical testsEnglish proficiency, both written and conversationalPsychological fit to the team


FAQFAQ

What is the staff turnover in Mexico?

In the technology sector, Mexico has a turnover rate of less than 5%.

What was your company’s turnover for the last 12 months? 24?

TBD

matt perez diapositivas.ppt

Documents

year total

year equivalent

hour engineers us

high productivity

year tech leads

hour overlap

hour engagement manager

years product development