Information Technology Reference
In-Depth Information
to outsource a part of their software testing function to an offshore service provider.
Because it was a new business model for them, they decided to start the engagement
with a pilot project and then gradually go for the full-fledged contract. The study is
done for a 3-year period starting from the pilot.
11.6 .1
The Current State Scenario
The customer has a 45-person testing team, comprising 30 full-time employees and 15
contractors. Salary for testing team members is $80,000 per year and that for contrac-
tors is $100,000 per year. Annual voluntary attrition is 5%, with the average cost of
replacement cost equivalent to 3 months' salary and benefits. The customer has imple-
mented some automation with about 20% of functional test cases being automated.
11.6 . 2
The Future State Scenario
The customer decided to retain 10% of its internal and contract resources for testing.
Thirty percent of the workforce will be eliminated and the remaining 60% of inter-
nal full-time employees will be reassigned to other tasks within the organization.
In the proposed new scheme of things, 70% of the service provider's team would
form the fixed team, while an additional 30% capacity would ramp up cyclically
every 6 months. About 10 to 15% of the service provider's team will be on-site
and the remaining 85 to 90% of the team will be at an offshore location. The
knowledge transfer and piloting would last for a quarter, with a 12-person team
(6 on-site, 6 offshore). In a 3-year period, the service provider's team will achieve an
overall 15% improvement in efficiency compared to efficiency levels in the current
situation. Total resource requirements would drop year after year based on automa-
tion and efficiency gains. (See Table 11.3.)
Table 11..
Existing Internal Testing Labor Costs
Year 1
Year 2
Year 3
Total
Full-time
employees
costs × 30
$2,400,000.00
$2,400,000.00
$2,400,000.00
$7,200,000.00
Testing
contractors
costs × 15
$1,500,000.00
$1,500,000.00
$1,500,000.00
$4,500,000.00
Voluntary
attrition costs
$60,000.00
$60,000.00
$60,000.00
$180,000.00
Total costs
$3,960,000.00
$3,960,000.00
$3,960,000.00
$11,880,000.00
