Software outsourcing

Outsourcing software development to India has become more and more popular over the last few years, and picked up even more momentum lately. Corporations in the USA has followed this path because a technology worker costs some five times less in India than in the USA.

Motivation for Outsourcing

Corporate executives started seeing software development and support, and the whole of Information Technology as a cost, and not as a strength, nor a differentiator. So they started thinking of it as something they can subcontract, just like security guards, janitorial, landscaping and snow removal.

Objections to Outsourcing

However, this is not always the case, and there are hidden costs, and some pitfalls, such as difference in work culture, communication styles, and time zones, not to mention the long term safety and security concerns of giving everything to a foreign country, and a foreign jurisdicition.

The analogy of janitorial and landscaping is not an accurate one though. The reason being these services, although they are outside the company, they are still within the city or the country. This gives some soft of control, being under the same jurisdiction, and there is no danger of political tensions, wars, or the international scene affecting the service. Moreover, janotorial is a low skill, low risk, and not core to the business. Software and Information Systems in general contain many functions that are vital to the company doing business, and in many cases it is part of the "Intellectual Capital" of the company.

Moreover, it seems that there is little evidence for the huge cost savings that are the main motivation for outsourcing. For example, a Deloitte & Touche study says that 70% of companies had negative experience with outsourcing. Moreover, 44% of companies got no cost savings from doing it.

This may be caused by the fact that growth of outsourcing in India is slowing down, mainly due to labor shortage and wage inflation as a research report by Gartner puts it.
software outsourcing