5 Top Trends in Offshore Outsourcing
US – Russia technology conference gathered offshore outsourcing experts and lead industry analysts in San Jose, Calif. During the conference the participants defined the five general trends in offshore development:
- In the following years, increasingly more IT jobs will be moved offshore
- More multinationals open dedicated offshore development centers in locations such as India and Eastern Europe
- Point-by-point adoption of Western intellectual property norms
- Offshore sourcing scores higher values
- Stratification of offshore countries cost and skill sets principle
Analysts predict that the demand for software outsourcing will account for 28% of IT budgets in Europe and the U.S. The number of offshore IT staff globally, software engineers engaged overseas on projects for Western companies, will rise from 1 million in 2006 to 1.5 million in 2007. The existing market supply can not satisfy the global demand for offshore development: people strive to find the best resources and the highest quality for the lowest price.
Most organizations try offshore sphere with small pilot projects, whereas multinationals try to anchor these relationships by establishing dedicated development centers in offshore hubs. Several years ago Microsoft, for example, established campus in India. While in recent years Intel and Motorola preferred Russia as the best location for dedicated centers. Some time ago, Dell, established a dedicated software engineering center in Moscow as well. The center is a scalable-upon-request team of software engineers, where each member was selected by Dell grounding on relevant experience, domain knowledge. Having transferred some functions to the Moscow Center, Dell freed their IT departments some time and efforts to enable them to focus on value-added technology tasks and innovations. Moreover, such development centers tend to evolve as companies become confident in the abilities of their offshore partner.
Its quite clear why most companies hesitate to develop software in countries where software piracy is widespread and where IP legislation is nascent. For example, today Russia can be compared to the U.S. in the early ’80s in terms of intellectual property. Lots has to caught up, but the hard work is done to do so as soon as possible.
The legislative situation is changing considering the involvement of leading global corporations in Russia and India. Governments are quite adoptive to changes that will encourage greater business cooperation. Russia and other CIS countries have made great strides in this direction, Russian IP field legislation is starting to resemble American ones.
Some time ago offshore software development was trusted mainframe maintenance, Y2K fixes and general IT treadmill work. But nowadays the situation changed drastically. Java, XML, Oracle, system analytics and software architecture became the common phenomenon – at least in the countries able to provide the relevant skills.
Once India and Ireland were entrants of offshore outsourcing. They bot offered very low rates and vast resource pool. Some time later, these benefits diminished, mostly due to their becoming popular outsourcing destinations. Ireland is no longer able to compete in price with most countries. India is alive and kicking but herself sub-contracts work to China and Malaysia trying to stay competitive.
To remain competitive and survive, such countries must move up the value chain whereas others take their place. Russia and China are the two candidates to replace Ireland and India in offshore world.