Outsourcing L10N, G11N and i18n

Just read an interesting article somewhat related to offshore on China success stories; while widely promotional and hardly unbiased that site offers great insight which could prove invaluable to those planning to outsource to China. The article Mind The Gap – Localization in China is about localization (L10N using common development lingo) and in particular soft and political aspects of it. “Localization is the process of adapting software for a specific region or language by adding locate-specific components and translating text, and it is further revised and expressed as “A process of planning and implementing products and services so that they can be adapted to specific local languages and cultures”. Yes, L10N means both linguistic accuracy and cultural fitness, the latter is even more important.

I believe that localization, in particular in web world, is one of the areas which could be easily outsourced. It is also one of the rare areas in s/w development which is almost always better off to be outsourced. However, far not anyone who claims to have experience in localization makes a good partner. There are multiple aspects of localization which require skills, knowledge and expertise besides just knowing language and culture.

Some things are fairly obvious – your localization partner need to understand technology and its impact on multiple dimensions of localization. Some are less obvious, for example, consider simple fact – Russian words take approximately twice as much characters than English, that will have it’s impact on the size of the labels and inevitably on screen layout, which ripples into serious impact on usability.

If you are new to L10N, G11N and i18n or even if you dealt with it to some degree you may find the presentation put by good friend and long time colleague Doug Kunz quite interesting…

Outsourcing Trends for ‘09

As I mentioned earlier in ‘08 – the Year of Predictions it’s difficult to not to yield the temptation of making predictions. First, in the uncertainty of today’s economy almost every one is looking for those; second, all of us with strong opinions on the outsourcing have some predictions at least in our minds; and third, personally I am very curious whether I can get any close to what ’09 will eventually show…

Being new to the fortune telling market I have been considering cold reading techniques, the art of creative vagueness, and audacity of stating the obvious. Those all seem like winning strategies and after some considerations I decided to use them all and present my predictions in a form of Outsourcing Trends for ’09, so here we go:

1. India will remain the leading outsourcing destination. How about that? Well, let me add at least something meaningful to this “discovery”. When it comes to India I expect:

  • a notable decrease in the rate of growth, I’d say mid teens to low twenties;
  • minor decrease in a market share;
  • consolidation with many casualties in the low end of the market;
  • improvements in quality of resources and general metrics of the services such as turnover ratio for top providers;
  • we will see a few megadeals mostly from the top tier vendors.

2. China will continue to straggle to grow its IT outsourcing offering:

  • there won’t be substantial growth in IT outsourcing, the figures at best reaching high single digits;
  • there will be some reshuffle of the top tier with some of the current leaders substantially giving up their position; my bet on the biggest loser is Freeborders;
  • the outsourcing for Japan will grow stronger, US business will grow at a lower rate.

3. Russia, Ukraine and Byelorussia will continue loosing their edge:

  • there won’t be any considerable growth in IT outsourcing, the figures will be in low single digits;
  • there will be no reshuffle of the top / second tier; a few of the current leaders will be responsible for the most of the growth figures; companies below second tier won’t show growth and many cease to exist; the big guys will get bigger and stronger, my bets are on Luxoft and ePAM.
  • the outsourcing for Europe will be responsible for majority of the growth, US business will grow at a very low rate.

4. Brazil, Argentina, Mexico will show some positive signs:

  • the growth figures in IT outsourcing will be in a mid to high teens;
  • formation of tier one will create a few prominent names with some companies really pushing for leadership position, in Argentina my bets are on Globant;
  • emerging leaders in LA market will build ODC in smaller or less developed in terms of outsourcing countries;

5. Supply of IT resources will increase across the world:

  • there won’t be any considerable growth in IT outsourcing in gross volume sense, the figures will be in low to mid single digits;
  • the new outsourcing players such as Egypt, Morocco, Nigeria won’t make any ripples or bring anything substantial to the market just a few 100K of additional resources that will play in the low end of the market;
  • while overall number of IT resources will go up, the rate of growth will go down, with less interest in the IT arena across the world;

6. IT outsourcing volume from US, UK, Germany, Japan, and other large IT consumers will grow at very low pace:

  • there won’t be any considerable growth in IT outsourcing in gross volume sense, the figures will be in low to mid single digits;
  • there will be however increase in percentage of work outsourced across the industry;
  • geographical pie chart won’t change dramatically yet it will show more aggressive outsourcing to new destinations and nearshore.

7. ’09 will be a buyer’s market:

  • Closing new deals, renewing existing and retain current customers will become increasingly more challenging; companies that do not invest in “farmers” and solid account management will pay for that dearly.
  • The price wars and cost pressure will affect everyone; boutique shops with typical sales pitch “we do not compete on price” or “we are not the most inexpensive but we have excellent people” will need to adjust their message or get ready to face dwindling revenue stream.
  • Vendors catering to small companies need to be ready for a wild ride, especially in the first couple quarters of ’09 – many contracts will broken, payments delayed, AR will grow and cash flow degenerate; even “good clients” will develop hearing problems and it will take much longer for US mail to deliver checks.

8. Rates on average will fall slightly or stay the same:

  • the disparity in rates among offshore destinations will narrow: rates from Asia will grow while Latin America and Eastern Europe rates will fall;
  • the average ratio of US “full time” rate to Offshore rate will slide notably;
  • the gap between freelance rates across the world will continue to narrow.

9. One of the most interesting trends with some tangible events will come from top tier vendors going outside of their native land:

  • The trend will be led by Indian outsourcers building ODCs in Asia (other than India) and Latin America. I would expect top destinations being China, Philippines, Brazil, Chile, and Mexico in no particular order.
  • There will be some moves in opposite direction, e.g. China companies opening centers in India. The volume of those would be rather small.
  • We’ll see some promising cross country hiring, in particular in sales and executive roles; this activities are likely for many vendors even outside of top echelon.

10. Engagement structure, contracting approaches and model usage will generally remain the same with a few emerging trends:

  • We will see more large corporations with substantial offshore engagements buying those engagements from the vendors. Some companies will execute of their BOT strategy, some will approach vendors with “offers they can’t refuse”, some, especially smaller companies won’t be too generous and would cut the relationships without giving much warning.
  • The new contracts will become more complex and will aim for accounting for currency exchange volatility, political instability, changes in standards of living, etc.
  • We will see more usage of Disposable Outsourcing Model mainly driven by readers of this blog.

Well, that is a lot of trends, and some are neither sufficiently vague nor 100% obvious. We’ll see how well the world of outsourcing performs on a challenging task of meeting my expectations. The trick is of course will be in measuring the performance versus my objectives… Some of the stats should be available in late ’09 / early ’10, some would be very difficult to find, I guess I will run some polls or try other bullet proof methods of gathering BI…

’08 – the Year of Predictions

End of year is usually also the busiest time of the year… unless it’s 2008. Moving deals across the finish line, inking contracts, pushing code into production to meet contractual obligations and milestones, writing employee performance reviews … there are fewer of those this year. Well, many of us are still extremely busy, it’s what we are busy with is a bit different. Some update their resumes, some dive head first into networking, some pull out dusty crystal balls to become fortunetellers. I would say this year could be called the year of predictions, at least it feels like everyone either making those or looking for them, even though we all know the value of predictions we just can’t yield the temptation. And it’s no surprise that when I am looking in my immediate neighborhood in the blogosphere I see some great posts in one or another way linked to predictions:

Phil Fersht offers an interesting high level forecast of trends in his Horses outsourcing predictions for 2009 with some interesting thoughts with very clear messages – Survival of the fittest. Let’s not beat around the bush here… we’re in for a very tough economy, budgets are being cut across the board and companies won’t be increasing their spending on IT and business operations.

James Wheeler in his The Dao of Outsourcing tells about how Chinese software services revenue predictions fall short.  Here is just one of his observations – ‘02 Gartner prediction of the software services revenues for 2006 from China with 0.6 probability – $27.1 billion, reality – $12 billion…

Dean Stevens does something completely unusual – ranking his last year predictions. He got 46 out of 100 which he is not impressed with “Not so good, hunh? I both underestimated the severity of the global slowdown, and overestimated the progress that Chinese vendors would make this year. Sigh…” Well, as far as I am concerned that’s amazing considering the rollercoaster we’ve seen.

Jamie Liddell offers a great sentiment on value of predictions in his The Perils of PrognosticationWho could have foreseen only a year ago that by the turn of 2009 we would be living in a world where the US president-elect was an African-American with the middle name “Hussein”; where several western governments – including that bastion of economic liberalism, the United States – had effectively nationalised major financial institutions; where oil prices would stand at the end of the year at effectively one-third of what they were halfway through it; and where Oprah had finally turned her back on dieting for good?

Well, whether it’s a right thing to do or not I guess I will jump on the bandwagon of predictions and do my best as well, in a separate post though.   And I will be happy if I can get close to 50% by the end of ’09.

Still looking for ’09 Predictions?

Well, what could be a clearer confirmation of outsourcing trends than a mega deal signed just before the end of the year? Infosys just signed a multi-million dollar, five-year outsourcing deal with pharmaceutical giant AstraZeneca. A brief article in InformationAge says “The deal will be seen as both an endorsement of the Indian IT industry’s viability in a downturn and a confirmation of the UK IT sector’s worst fears. The deal forms part of an operational transformation initiative that will begin in the UK, and that will see the Indian IT outsourcer provide application management services for many of AstraZeneca’s key business departments.” Well said “UK IT sector’s worst fears”… Outsourcing is here to stay; it will continue increase its market share and compete with domestic IT providers exacerbating the problems brought in onto IT sector by the economic downturn.

Mumbai Sad Nomination

An interesting and very important aspect of selecting an outsourcing destination is the location safety.  And it is quite different from what it used to be just a few years ago.  The recent terror in Mumbai brought a lot of attention to the subject and put Mumbai in the top ten riskiest places.    Here is a how the list looks today:

The Most Dangerous Ten

1. Jerusalem (Israel)
2. Mumbai (India)
3. Rio de Janeiro/ Sao Paulo (Brazil)
4. Manila/Cebu/Makati (Philippines)
5. Delhi/ Noida/ Gurgaon (India)
6. Kingston (Jamaica)
7. Kuala Lumpur (Malaysia)
8. Johannesburg (South Africa)
9. Bangkok (Thailand)
10. Bogota (Colombia)

The Safest Ten

1. Singapore
2. Dublin (Ireland)
3. Santiago (Chile)
4. Krakow/Warsaw (Poland)
5. Toronto (Canada)
6. Prague/Brno (Czech Republic)
7. Budapest (Hungary)
8. Monterrey (Mexico)
9. Beijing (China)
10. Cairo (Egypt)

See more in Mumbai named second most dangerous outsourcing location by Matthew Scott

1 out 4 IT jobs moving offshore

Large companies are accelerating their use of offshore outsourcing, and as many as a quarter of IT jobs at Global 1,000 firms may be moved offshore by 2010, according to The Hackett Group, a Miami-based consulting firm whose clients include many multinational corporations.  See  Survey: One in four IT jobs moving offshore from www.computerworld.com And the chances are they are correct. Increase if offshoring combined with unemployment rate highest in 26 years paints a very scary picture. What does it mean for IT professional in this country? Does it really mean “R.I.P. Good Times”? Probably not, it just means that times have changed and it’s time to change. First and most important it to recognize that offshore outsourcing is here to stay, as long as there is substantial difference between compensation rates for IT skills around the world there will be compelling reasons to move the jobs top the regions with lower rates.

Of course with world getting flat one day that place could be closer to you home than you have thought… A good friend of mine just came back from her trip to Hong Kong / Beijing / Shanghai. While she was deeply impressed with all new constructions and Olympic architecture she was really astonished with price raise across the board. Cost of living in cities such as Moscow, Kiev or St. Petersburg is astounding. Real estate prices in Bangalore challenge many US cities. A few months ago while walking on Rambla in Barcelona I just had to take a picture of great deal on flip-flops – and that’s before the dollar surged against Euro (so the discounted price below is ~$270).


Take another look at the price above and think about Spain which according to Gartenr is one of top 30 outsourcing destinations… The changes in prices are dramatic and they are just a reflection of changing standards of living, of changing and reshaping a distribution of wealth. Changes in cost of living inevitably find their way in offshore rates and eventually in IT execs minds.  And that means profound changes in the IT Outsourcing landscape.

Gartner’s Top 30

Selecting offshore destination just got easier – Gartner has its new list now. While I am often skeptical about info you can get from Gartner reports, in particular in its application to small to medium sized businesses, I believe in its value as long as it’s taken with a grain of salt. “Determining the country or countries that are best placed to host offshore IT operations is a daunting task for many organizations, according to Gartner, Inc. This year, Gartner has assessed the suitability of 72 countries as offshore locations, and has announced its ‘Top 30’*. The analysis showed that the dynamic nature of the market has seen a number of countries position themselves as credible alternatives to the BRIC countries (Brazil, Russia, India and China)…

In 2008, Gartner’s top 30 locations for offshore services, by region, were:

  • Americas: Argentina, Brazil, Canada, Chile, Costa Rica, Mexico and Panama
  • Asia/Pacific: Australia, China, India, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, Thailand and Vietnam
  • Europe, the Middle East and Africa (EMEA): the Czech Republic, Egypt, Hungary, Ireland, Israel, Morocco, Poland, Romania, Russia, Slovakia, South Africa, Spain and Ukraine

Although only seven countries from the Americas appeared in the final list of 30, these countries are becoming an attractive proposition for the largest buying market for offshore services – the US.

See more on Gartner Identifies Top 30 Countries for Offshore Services in 2008.
Also see good insight in NetworkWorld reaction By John Ribeiro India’s competitors catching up as outsourcing hotspots.