Written By Jeff Onesto, Director of Business Development, ASi (Originally released on MSDynamicsWorld.com)
Thomas L. Friedman wrote about the transition toward globalization in the best-selling book “The World is Flat - A Brief History of the Twenty-First Century”. This widely accepted metaphor of visualizing worldwide commerce and competition with equal opportunity to local competition has started to receive criticism. It is easy to challenge the ‘level playing field’ view by asking:
•Why has 90% of the world’s phone, web traffic and investment remained local?
•Why do global companies hire local professionals to run foreign operations?
•Why are more and more call centers coming back to the States?
While we cannot deny that the Internet and other business and political developments have enabled borders to be crossed and have expanded many companies’ reach, there remains a clear preference by many—especially smaller and mid-size companies—for local support and competition. It is safe to assume that certain business elements can be effectively purchased or performed abroad, while others should not.
Looking at manufacturing in general, fierce competition, industry pressures and cheap overseas labor continue to lure many manufacturers into trade agreements and/or contract manufacturing offshore. Yet, almost every company struggles with on-time deliveries from their Asian or Latin America resources. Because of this, custom, make-to-order or engineered-to-order production typically remains in the U.S while lower margin, make-to-stock type-production has transitioned to overseas.
Yet as budgets tighten in today’s ERP market, we are already beginning to see an increase in offshore development for Microsoft Dynamics AX. But, is it the right fit?
I know there are always exceptions to the rule, but my experience has found that most mid-market companies lack the time, expertise, and resources to safely evaluate and take advantage of Offshore Development Centers (ODCs). Under no circumstances should mission-critical Microsoft Dynamics AX development, defined typically as functional design specs, development design specs and/or any quality control be outsourced.
If you do decide to consider this option, I strongly recommend that you carefully review the Microsoft Dynamics AX partner’s local track record first. If the partner has trouble performing locally, you need not look any further. Microsoft Dynamics AX partners who do not have reputable onshore delivery models have no business venturing into these complex offshore models until organizational capabilities have matured.
Secondly, as a procurer of these services, I suggest you look closely at your own organization’s tolerance for risk and your internal available resources. Mid-market ODCs’ offerings do not have enough volume to warrant compliance or certifications with strict standards from Software Engineering Institute (SEI) such as Capability Maturity Model (CMM), International Standards Organization (ISO) or Six Sigma. This means that your company will most likely be responsible for managing the quality of these far-away resources. Any hourly price savings is quickly lost through only a small amount of project overruns or mis-steps.
Finally, make sure you review the components you are looking to outsource. Is this something that gives your organization a competitive advantage? And if so, is this something that you want your competition to have? With an open source code structure such as with Microsoft Dynamics AX, you can bet at least one disgruntled, underpaid offshore resource may be tempted to CUT/PASTE your code. And, any legal council will tell you that enforcing NDA’s internationally is expensive, and often more trouble than it’s worth.
In my eyes, the average volume of safe, non-critical Microsoft Dynamics AX customizations that can be shipped overseas for mid-market implementations of Microsoft Dynamics AX does not provide enough benefit via costs savings to outweigh the increased level of risk. If you want high quality, the answer probably begins and ends with your partner’s location, location, location!
