Outsourcing Is In

 
 
By Eric Lundquist  |  Posted 2003-07-21
 
 
 

Outsourcing your software development or business processing to a company in another country can make a lot of sense—unless you see your livelihood go away. The irony is that a rising, technology-driven stock market combined with a rising interest in outsourced software development lends itself to the prospect of companies seeking Wall Streets favor by cutting loose the people who built their technological underpinnings. Outsourcing will continue growing, I believe, but that does not mean all projects will be outsourced.

In one small segment of outsourcing, business process outsourcing, the offshore component is expected to increase from $1.3 billion to $1.8 billion, according to Gartner. While the increase is large, $1.8 billion represents only about 1.5 percent of the business process outsourcing market overall and still has a focus on lower-end tasks such as contact centers and transaction processing. Many current contracts are going to Indian companies that offer English-language compatibility and technical competence.

For workers in India, the software development profession holds the allure that drove many in the United States to enter the field.

Yatish Rajawat, a writer for The Economic Times, in Mumbai, India, wrote the following in an e-mail exchange: "The salary of a software engineer in India is not low in India. They are among the better-paid professionals in the country, and it is a very sought after profession. The difference in the purchase power, cost of living and the rupee-to-dollar value makes these salaries lower when compared to U.S. salaries."

"The cost savings are indeed significant," said Frances Karamouzis, an analyst at Gartner. "A number of enterprises save from 25 to 40 percent using outsourcing. India says its 90 percent."

Outsourcing has always been on the corporate menu of available options, but why the big interest now—particularly in software development and business process outsourcing? Certainly, the current corporate directives of return on investment and bottom-line benefits are drivers. Theres also an interest in consolidating all operations, including IT. And the idea of calling on resources only when theyre required is gaining currency.

More important is that high-speed connections and groupware available to distribute, develop and maintain global projects are now widely available.

On the other end of the outsourcing wire are companies with expertise that has improved greatly over the past year and continues to get better. One of the enduring ironies is that the development of high-speed networks and solid groupware provided the tools required to move work away from the developers who created those technologies.

While the rise of outsourcing and the use of special-visa workers are clearly and legitimately contentious issues, I dont think calls for additional legislative protection or prohibitions are the correct response to developers facing the bitter prospect of losing their livelihoods. The better answer lies in the ability to stay ahead of the development curve and offer a competitive service without the distance. And I believe people managing those projects will be willing to listen to a reason to keep projects nearby.

"I am not considering outsourcing software development to offshore firms," said Gregory Smith, vice president and CIO of the World Wildlife Fund and an eWEEK Corporate Partner. "Although I believe that there may be some potential cost savings, the decision for me goes beyond costs. Im more inclined to outsource development and implementation to organizations that are geographically more accessible to our core project team, can be more closely managed and by default lend more towards a team implementation."

As one CIO who requested anonymity told me when I asked if a company can balance the needs and costs of IT development with being a good employer, "If they cant, when the good times return, people will remember, and the company will suffer in terms of getting the wrong people."

Outsourcing is part of the corporate agenda, but developing expertise that is a cut above your competitors is a strategic difference that cant be matched regardless of the location.

Eric Lundquist can be reached at eric_lundquist@ziffdavis.com.

Rocket Fuel