Changing Nature of Software Outsourcing to India: The role and significance of SMEs as Service Providers

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ACKNOWLEDGEMENT

I would like to thank my supervisors, friends and family, without their support this research study would not have been possible.

DECLARATION

I adjudge that the entire content of this dissertation is entirely my own work; the content used in this dissertation has not been submitted before in any educational institution and represents my own opinion.

Signed __________________ Date _________________

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

CHAPTER 2: LITERATURE REVIEW1

Small and Medium-Sized Enterprises (SMEs)1

Characteristics of SMEs1

Software Development in India3

SMEs in India4

Software Development Processes5

CMMI5

CMM6

COBIT8

COBIT Quick start8

ITIL9

COBIT and the SME9

Spice11

Outsourcing11

Changing Nature of Outsourcing13

Internationalization15

Internationalization necessary for SMEs15

Internationalization and Recruitment Process of Software SMEs19

Recruitment Process19

Hiring Decision19

Recruiting Process Outsourcing19

Advantages20

REFERENCES22

CHAPTER 2: LITERATURE REVIEW

Small and Medium-Sized Enterprises (SMEs)

SMEs account for approximately 50% of GDP and 60% of employment in national economies, and 25% to 35% of world manufactured exports. Differences between small and large firms have long been recognized (Papp 2004, 20). Firm size is as a key factor in strategic literature. In contrast to large firms, SMEs have limited financial and managerial resources which may impede growth and foreign expansion. It is believed that small businesses and large businesses are different species (Veciana 1994, 109). Although there is no generally accepted definition of a SME, entrepreneurship literature most commonly uses the definition provided by the Small Business Administration. The SBA defines SMEs as independent enterprises with less than 500 employees. Use of firms with fewer than 500 employees for classification as a SME is congruent with SME characteristics deemed appropriate by researchers and in accordance with the North-American Industrial Classification System (NAICS) (Starkey 1998, 220). According to an in depth examination of SMEs, the established definition of a SME is a smaller firms employing 500 or less employees, and/or having sales turnover less that $25 million U.S. dollars.

Characteristics of SMEs

The definition of micro, small-sized enterprises-SMEs varies depending on country or region. For example, in Australia as micro enterprise is defined as if you use 1 to 4 peoplesmall business if it employs between 5 and 19 employees and medium enterprise if it employs between 20 and 199 people. European Union defines micro, small and medium enterprises - SMEs by making a categorization of these businesses in terms of number of peopleworking on it and the income earned in the business (Rivard 2008, 33). Some characteristics of micro and small development organizations software is given below:

They have a flat organizational structure and have a flexible internal organization.

The leadership style encourages entrepreneurship and innovation. They have specialized departments.

They have limited financial resources and the return on investment is short term. Rich in intangible assets and virtually have no tangible assets. Little access to bank financing and usually cannot afford to invest in consultants.

The number of employees is small and performs multiple functions. There isspecialization of roles. The responsibilities are not well defined. There is greatdependence on individuals.

They are highly dependent clients. Their businesses are based on knowledge.

They have difficulty in accessing other markets. They are subject to the dynamics ofservice economy while developing products. They are oriented mainly todevelopment of specific software for known users and not for the entire market.

To ensure their success and existence in the market usually specialize in one areaspecific job (the health sector, transport, education, etc.).

They manage a few projects, not too big and not very time consuming hasplanning or poor planning is short term.

Unaware of the importance of the development process on quality product. The construction of software, in many cases is done traditional, empirical and chaotic.

Software Development in India

Software systems today are built to meet the increasing demands of users and business. Each company has different sets of users or customers and their ...