Why I Outsourced Application Development to China

One CIO explains why her company struck its first-ever offshore outsourcing deal in China -- and what she's learned in the two years since.

By Stephanie Overby
Thu, December 02, 2010

CIO — Imagine that your company has never done any offshore outsourcing of IT—never even signed a major domestic outsourcing deal. Where in the world would you begin? Probably not China.

But that's exactly where Marie Lee, senior vice president and CIO for Interval International, a $405 million timeshare broker, sent her company's new application development work two years ago. Geography, according to Lee, is one of the last things CIOs should consider when settling on a service provider. "Our selection was based on the qualities of the IT services partner and whether they met our specific criteria rather than the location of the delivery center," she says.

Tactically, Lee wanted to replace Interval's core applications and move to a service-oriented architecture (SOA). Strategically, she wanted to create an agile IT organization better able to respond to changes in the business. Outsourcing new application development to an offshore provider with experience in SOA and agile development would enable a quicker—and cheaper—transformation on both fronts.

Influenced by the recommendation of IT leaders at former sister companies of Interval, Lee awarded the work to Freeborders, a San Francisco-based provider of IT services from China. "They had the exact mix of skill sets and industry expertise that were needed for the project," Lee says.

And the price was right. Development costs, even based on a blended rate of on-site and offshore resources, were one-third less than if Interval had done the work in-house.

The Shenzhen-based application development staff had "comparable expertise" to counterparts in India, says Lee. But there were China-specific risks Lee had to mitigate. "One of our requirements was that the team members have adequate English language skills," she explains.

Lee addressed the perception of intellectual property risk in China by involving Interval's CSO and legal department in the vendor evaluation process and worked with them to develop a three-pronged security approach combining, technical security applications, strict HR processes, and governance. All offshore professionals are screened and trained on security procedures, and access Interval's development environments via a virtual desktop. All source code and data are stored in the U.S.

Given that this was the first IT services deal Interval had ever inked, Lee was also diligent about requirements and process definition. The Freeborders on-site staff spent two to three weeks with Lee's team in Miami to familiarize themselves with Interval's project management processes and application development methodologies. Lee's IT leaders also provided the outsourcers' on-site staff with customer training on Interval's business and the timeshare trade industry. "Choosing the right on-site resources and bringing them on-board early is very important as these are the individuals that work with you to ensure the correct procedures, structure and tools are in place to effectively work with the team in China," Lee says. The vendor's Miami-based staff then traveled some 9,000 miles to train the Chinese development team.

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