Doing the dollars on development

Australia's software development market is in over-supply with developers now being sourced in Vietnam and Russia which is overtaking India as the new outsourcing hot spot.

Compared to Australia, contracting rates being offered in Russia "appear too good to refuse" according to Information Technology Contract and Recruitment Association (ITCRA) executive director Norman Lacey.

Russian software developer contracts command $US20 to $US25 ($37.50 to $47) an hour compared to the local going rate of $45 to $65 an hour, but one project manager questioned the technical competence on offer.

"While the offer of Russian developers promises knowledge of all Windows and Unix platforms, the question is, is [their work] all done on 386s and Win95? The developers' knowledge of English and of local business practices is likely to be minimal," he said.

The ITCRA - of which 80 Australian IT recruitment companies are members and which represents 12,000 contractors and consultants - found most companies here are outsourcing IT to local contractors. However, India and Pakistan are hot spots, particularly for programming work requiring C, C++, Java and HTML skills.

"Australia is still the predominant source of IT contract labour for local clients, but the cheaper way to do it can be in regions like middle Asia," Lacey said. The contractor market here is oversupplied, and with the tech industry experiencing an unprecedented level of consolidation over the last few years due to the downturn, the IT labour market is a buyer's market, thus making overseas contracting even more attractive now.

Lacey was adamant that a corporate dash for overseas contractors during a downturn and Australia's loosening last year of immigration laws for skilled professionals would limit local contractors' opportunities here.

Moreover, the offshore outsourcing option appears desirable given companies can expect to achieve cost savings of up to 70 per cent on labour-intensive, back-end projects like CRM implementations if they contract to countries like India, said Phil Hassey, IDC senior analyst for IS outsourcing services, Asia Pacific.

ITCRA's Lacey added that India and Pakistan were not only cheaper sourcing options, but strong on skills because of their highly developed tertiary education systems and steady supply of IT professionals.

But recruitment executives like Felix Borenstein, managing director of Canberra-based IT recruitment company Parkside Consulting, questioned the ability of other countries to provide appropriate services.

"Consider the problems of communication and distance and what they could do to tech support over the Web."

Borenstein stressed he was not insular in opposing offshore outsourcing, but the current state of the IT economy was too dire to take money and opportunities out of Australia.

"It's not about the country you outsource to, but [IT services companies] have failed to take into account the cost to the Australian economy and Australian job seekers by outsourcing work to countries like India.

"As a business person who believes in Australia, I find it offensive."

Another hot alternative is Vietnam with a growing list of multinationals outsourcing their software development there including IBM, Nortel, Cisco and Hewlett-Packard to take advantage of impressive tax breaks.

According to a recent Arthur Andersen report, project managers in Vietnam average an hourly rate of $US26. One company interviewed charged as little as $US10, while another as much as $US95. Developers in Vietnam average an hourly rate of $US11.

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