Business Solutions with SAP

Where Does SAP Offshore Development Make Sense?

October 10th, 2011 by
SAP Return on Investment or ROI

SAP Offshore Development Cost

If you are capable of providing detailed design specs where there is almost no deviation or thought required this is a great option.  The instant your SAP design requires a measure of experience and insight to make judgment calls, or to look for data or processing that is not explicitly spelled out in detail, you are headed for huge hidden costs. 

The level of detailed spec design work by SAP functional consultants merely shifts the development time and costs to the higher priced resources where it is “hidden” from TCO and sales quotes.  If you are capable or writing “functional” specs that are really more like technical specs with specific table and fields spelled out in detail, program pseudo-logic defined, every possible alternative anticipated, and no detail left out then SAP offshore development works well.  If you are not prepared for that level of detail and “perfect specs” then you are likely headed for a much larger invoice in change order costs and hidden functional time than you ever anticipated.

Offshore resources are often smart, industrious, and hardworking but the ugly reality no one talks about are the real rates because these resources do NOT have any significant amount of SAP experience.

This is the final post in this series.

A quick “test” for the SAP outsourcing or SAP offshore fit is the nature of the work.  “Commodity” services are a perfect fit for SAP outsourcing or SAP offshore work. 

If the effort involves any type of innovation, business transformation or needs any level of change management then SAP outsourcing or SAP offshore development may be dangerous and it WILL cost you far more than you are led to believe.

SAP Upgrades Might Support SAP Offshore Development

One area I have seen where SAP offshore development work makes sense is with upgrade projects.  Much of the development work there is re-working existing objects where the requirements from previous projects have been well tested and adjusted.  Or, if there are enhancements the gaps are well-known and understood so that the detailed SAP development requirements can be easily defined.  From this standpoint SAP offshore review and adjustment of existing code makes sense.  There is little in the way of experience needed to use the syntax checker and to do the occasional program adjustment.  And other than poor coding which causes performance problems the risk is lower.

SAP Production Support Might Work With SAP Offshore Development

In a fairly stable production environment, where there are not a lot of enhancement or new functionality requests SAP offshore support might work well.  The “fix” requirements are very specific and limited so that these types of small adjustments or corrections work well in an offshore environment.  Even for some of the smaller and less complicated enhancements or improvements SAP offshore support might work well.  However, for more extensive troubleshooting, or very complex requirements, you are likely better with some sort of local or onsite support. 

For a more details see Outsourcing Your SAP Application Support.  This provides some insight and a little framework for understanding the SAP outsourcing or SAP offshore fit.

Conclusion on SAP Offshore Development

Regardless of the hype and sales pitches SAP Off Shore development has far more Total Cost of Ownership than anyone has been led to believe.  There is a place for it but that is rarely in a new project or an extensive rework of complex processing requirements.  While you may not see the costs, the offshore project model will cost you unless you are fully aware of the requirements and hidden costs that are never defined in any of the sales pitches or materials.  Of course they will never tell you SAP offshore development might cost you far more than higher priced local resources in many situations.  If they had that level of integrity you would never engage with them for those services. 

For more information and insight on this topic see IT Outsourcing, Off Shore Support, Cost Cutting and IT Department Changes.  That post provides some additional insight on helping to understand where SAP internal resources should focus as well as where offshore support might make sense.

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Hidden SAP Offshore Development Costs

October 3rd, 2011 by
SAP Offshore Development

SAP Offshore Development

My experience with SAP offshore development is that no matter how detailed your spec is their lack of experience with standard SAP transactions and functionality means they will never properly test their own creations.  Their results are more than just full of bugs, often times they crash when attempting to do even basic testing.  Repeat testing by expensive functional resources happens so frequently and consumes so much hidden time from parallel project activities that entire project timelines are frequently affected. 

Functional resources have to babysit and handhold these SAP offshore resources through the whole process because of the language barriers and lack of experience.  More functional time, more project management time, more unplanned distractions from functional Realization activities and your entire project timeline can be wiped out.  If that happens you have to pay even more for a missed development date because you have to move your go-live date.  And that cost is completely hidden from you by some of the shell games they play on their supposed efforts.  All of that functional time and the risks to the project timeline point to some of the real hidden costs of SAP offshore development. Develop, test, bugs, fix, develop, test, bugs, fix, rinse and repeat at least a dozen times.

A common SAP offshore practice is to keep throwing “crap” at you saying it is “done.”  With all of the crashes and bugs that are so common with offshore development, and especially all of the program crashes, how much testing could they have done?  The bigger question is how much is this really costing you and how do you find the hidden costs?

SAP Project Timeline and Budget Due Diligence

Because of the nature and pace of SAP project work whenever the issue of blown budgets and blown timelines come up most companies rarely perform root cause analysis or due diligence.  Instead the accusations and recriminations fly in the heat of the moment.  Meanwhile the offshore developers keep saying “we finished x development on y date… the functional teams didn’t support us…” or “the specs were bad and we had to make 20 changes…”  You name it, the extent of the excuses are never ending.

Evaluating Hidden SAP Offshore Development Costs

Because of how SAP “functional” consultant time (needed to support the offshore development) is hidden from you it never shows up anywhere in the rates you were quoted.  You really have no idea about the real Total Cost of Ownership (TCO) for that offshore SAP development.  The offshore company constantly claims the “specs were not detailed enough” or every microscopic change and adjustment becomes a “change order.”  I’ve even seen this where standard SAP functionality was completely broken by the development and the developers insisted because there was nothing spelled out in the design spec about allowing standard functionality to continue working a change order would have to be separately paid for!

On new SAP implementations the functional time premium can easily cost you 50% to 75% (and in some cases even exceed 100%) of the total development hours.  Think about that for your next quote as you try to put the pen (or your spreadsheet) to the numbers.  Have you really factored in the amount of high priced functional resource time needed to support those “inexpensive” offshore developers?  Between writing “super enhanced” specification documents, repeated endless functional testing of buggy SAP development, “training” of inexperienced developers, language barriers, “babysitting” the actual development, and the lost opportunity to focus on other functional Realization activities can kill any supposed savings.  It’s all a shell game.  You pay just about the same amount (and on many occasions even more) with far more headaches and lower likelihood of making your go-live date.

Even after all of this, there is still one more hidden cost that is not realized immediately at go-live–, the cost of poor coding.  You may have significant performance problems, constant bug fixes, and a whole host of other maintenance activities that you never planned or budgeted for.  Now this is true of any development but because of the language translation issues and the modest (at best) quality of coding you are likely to have incrementally more production maintenance costs with the offshore development.

Some Considerations to Help Reduce The SAP Offshore Development Shell Game

First and foremost NEVER accept the offshore development group’s code review options.  One way you can help to combat so much of this is to budget for at least one local developer, even at premium rates, to serve as a quality checker.  They do not have to review all of the code from all of the developers but they should look for the “tells” of experience over inexperience.  And your SAP statement of work (or SOW) as well as your contract with the offshore developers should include various protections about the quality and expectations of the development work and functional consultant time and contributions.  That SAP SOW should also include some definition around what a “change” is and what a “defect” is.  Without that everything will be considered a “change request” and destroy any supposed savings.

Next week the wrap-up part 3 of this series:  Where Does SAP Offshore Development Make Sense?  There are some situations where it is a great cost saving alternative.

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SAP Offshore Development Project Experience

September 26th, 2011 by
SAP Offshore Development

SAP Offshore Development

There is a time and a place for everything–, even SAP project offshore activities.  Unfortunately in the quest to save money the wrong approach can sound good on paper but cost you far more than the sales pitches would lead you to believe.  The SAP offshore sales pitch uses enticing rates like getting an offshore developer for about 15 to 20% the rate of an onshore resource (about 1 / 5th to 1 / 7th the price).  The initial reaction to all of the sales pitches is “wow, that will save us a bundle!”  The truth is sometimes it does and sometimes it does not.  And in many cases it can even cost you far more in hidden costs than local (higher priced) developers.


This is the first in a 3 part series on SAP offshore projects:

  • Part 1 – SAP Offshore Project Development Experience (this post)
  • Part 2 – Hidden SAP Offshore Development Costs
  • Part 3 – Where Does SAP Offshore Development Make Sense?

I’ve worked on 3 projects where off-shore resources were used for the initial project and 2 others where they were used for upgrade.  This is the “inside scoop” from my experience.

The Real Reason Offshore Development Seems So Cheap

Let’s set the record straight on one thing immediately, there is a REASON those rates are that cheap.  In the global SAP world it has less to do with the wages of the host country than you might realize.  In the SAP space there is still strong demand for strong SAP skills globally so market forces plainly dictate that real experience will pay market rate no matter what country it is.  Work Visa requirements for many countries with high SAP skill demand will allow the importing of actual skills –, heck, they let massive numbers of total fakes and frauds in the United States so real experience (rather than faked) makes it easy to move out of these host countries for far higher wages.

When Off-shoring Might Cost You More Than Local Resources

When your SAP project depends on large amounts of custom development work you may be in for reverse “sticker shock” at the actual hidden costs.  And by reverse “sticker shock” I mean it is like getting a car for 25% of what you thought you would have to pay BUT you find out the tires, battery, seats, steering wheel, and all of the key components of the car are “required” add-ons that you have to pay for separately.  But they only show you the nice, finished, new car with all of the “extras.”  The actual cost for a HUGE portion of the offshore development is hidden and that rate you were quoted is a joke! 

Your “offshore” resources have very little if any actual SAP development experience no matter what kind of a sales pitch you are given.  What you are “hiring out” is some smart college kid who is learning on your dime but *maybe* under the supervision of an experienced developer.  Yes, the rates are lower but in today’s economic climate you could probably find some aggressive local college kids who would do as good or better, for the same wage, and without any language barriers.  Maybe you should consider that and bring in one of those expensive local resources to train, shepherd, supervise, and teach them.  At least then you have the skills in house.

Some of the huge costs that are buried for a new project are in the whole development process itself.  SAP functional consultants, who are typically higher priced than technical or development resources, end up taking 2 -3 times the effort spelling out requirement details.  That extra effort translates into hidden cost that you do not see but it creates a great target for the offshore resources to “blame” for why they are struggling–, “I’m waiting on the functional consultant…” or “the spec had to be re-written…” or “it didn’t have enough detail…”  A truly experienced local resource already knows and understands the table structures, data sources, actual requirements, and has probably done similar SAP development work or reporting.  With a higher level spec in plain English, rather than detailed design with pseudo-code required for offshore work, local SAP resources can churn out a polished first pass development effort which needs only minor tweaks, takes less time to test and adjust, and has better performance.

The actual cost for a HUGE portion of the offshore development is hidden and that rate you were quoted is a joke! 

There really are situations where Offshore development is ideal for your SAP project, just don’t be surprised if the overall project “savings” you expect don’t materialize on a new project or one with complex development requirements.

How Can You Tell If You Are Being Bitten By Huge Hidden Offshore SAP Costs?

The one simple metric that will clearly illustrate if you are a victim of hidden offshore development costs is the total CALENDAR timeline for all development work.  In other words, after you get past the excuses, the finger pointing, the supposedly finished items that are always being reworked, etc., the calendar timeline tells all. 

No matter how many times the offshore development tries to suggest they are having problems getting “complete” functional specs, or how often they say they are done but have defect after defect to resolve, or whatever the excuse is, the simple calendar test will tell you the TRUE project impact.  If it takes 90 calendar days to complete development to the point that it can be used (defects corrected, tested, and ready for production) then it doesn’t matter if they estimate and then claim completion at 3 weeks.  The other 9 weeks to actual completion is project time that is taken from SAP functional resources, reworked development, business resources, etc.  So there is a huge hidden cost no matter what claims sales people may offer.

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