U.S. Businesses View Canada as Viable Alternative to Offshore Sourcing

5/12/2004 - Compuware Corporation (NASDAQ: CPWR) announced the results of a recent study commissioned by Compuware and conducted by IDC. The study entitled, “Global Sourcing Trends Necessitate Considerations of Nearshore Sourcing in Canada” surveyed 127 U.S. IT executives regarding their sourcing decision-making processes when considering outsourcing their application development projects outside of the United States.

Study findings reveal that respondents are more likely to use nearshore rather than offshore when the cost benefit is 65 percent or lower than the cost of a U.S. provider.

The study also found that cost is not the most important criterion for choosing an outside service provider. When asked to rank in order of importance, ten factors for selecting a service provider, more than 46 percent of respondents said the availability of experienced professionals was the most important, followed by the access to specific technical skills. Cost came in third with the high quality of English language competency ranked closely behind. Shared business culture and access to a local expert are also significant factors.

“A key conclusion that can be drawn from this study is that outsourcing to a nearshore location such as Canada represents a valuable compromise between on-site/on-shore service delivery and offshore service delivery for reducing outsourced services costs,” said Jim Westcott, Senior Analyst, for IDC Canada. “Canada’s proximity to the United States, its large community of expert IT professionals, and its favorable currency exchange rate positions Canada as an important component in the global sourcing services strategy.”

The results of the study also confirm that IT projects are again in the works. Only one-eighth of the respondents have no projects planned and the average is three project categories per respondent. Eighty percent of the respondents are considering or plan to use external providers, while only 50 percent have used them in the past. Yet, only half had knowledge of offshore or nearshore providers.

IDC predicts that enterprises that align their global sourcing strategy with their business objectives and their complexity challenges will be more likely to be successful than those that rush to offshore with cost reduction as their only goal. “Service providers, such as Compuware, that invest in nearshore or offshore capabilities along with the appropriate assessment, management and allocation of their skills, will be well positioned to help their clients with these tasks,” said Westcott.

For some organizations, the option of using an offshore service provider is not a viable alternative due to security concerns as well as accessibility and proximity. The Compuware NearShore Development Center (NSDC) in Montreal, Canada, combines the best of the offshore model (reduced cost) with the best of the nearshore model (proximity and familiarity) to deliver a services sourcing model that provides a specific value proposition. It provides a comprehensive approach to application development, quality assurance, and testing while using Compuware methodologies, tools, processes, people and best practices.

“We recognize that customers are under increasing pressure to reduce their overall IT costs while increasing the effectiveness, usability and functionality of existing and new corporate applications,” said Steve Oehler, Director, Compuware NearShore Development Center. “Our NSDC represents Compuware’s commitment to provide cost-effective, customer-oriented solutions for application development and support.”

IDC’s Nearshore and Offshore Outsourcing Study for Compuware delves into the criteria followed by U.S. enterprises in regard to outsourcing their application development services (including Web-based development, migration, maintenance, and testing) to an external service provider. Topics covered include type of outsourcing model adopted, leading criteria for service provider selection, certification qualifications, cost of outsourcing, extra/hidden costs inherent to offshore outsourcing, local support, geopolitical stability, business culture, cost benefit of outsourcing.

The survey was administered from November 2003 to December 2003, with 127 completed interviews conducted over the Web. Qualifying participants had to have knowledge of offshore and/or nearshore service providers and had to have used external service providers for application development projects. Target respondents were primarily IT management and professionals for U.S. organizations, with all participants having explicit involvement in their respective organization’s decision to use external service providers for application development services projects. This involvement was either making the final decision, recommending a specific service provider, approving a service provider, or managing a service provider’s activities on behalf of their company. Screening and demographic questions were also used to stratify the sample by size and industry disposition.

Compuware Corporation
Compuware Corporation (NASDAQ: CPWR) is a world leader in delivering software and services that enable businesses to manage their enterprises and maximize the value of their IT assets. Compuware solutions accelerate the development, improve the quality and enhance the performance of business-driving applications. Founded in 1973, Compuware serves the world’s leading IT organizations, including more than 90 percent of the Fortune 100 companies. Learn more about Compuware at http://www.compuware.com.

IDC Study: Global Sourcing Trends Necessitate Considerations of Nearshore Sourcing in Canada: http://www.compuware.com/dl/nearshoresurvey.pdf

For More Information on the Compuware NearShore Development Center: http://www.compuware.com/services/1392_ENG_HTML.htm

Compuware is a registered trademark of Compuware Corporation.

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