State of Global Outsource Software Development
How to Reap the Benefits of Outsourcing Software Development
It’s hard to fathom the rapid escalation of software outsourcing—only since the new millennium has the idea of outsourcing software development weighed heavily. It was in the late 90’s, when every company was scrambling to fix the Y2K bug before 11:59, December 31, 1999, that US-based companies started to outsource more frequently for low labor costs. Since that mad dash, offshore companies are sophisticated and have specialized areas of research and development, bringing their work into a new class. It is important to know the rich history of third-party software development to recognize the trends of today.
The initial onset of outsourcing was limited to IT-focused development, but it did not take long for a shift to bigger, broader projections, including software product development. The root of this was India’s leverage by having both a skilled IT workforce and excessively low labor costs.
The cheap costs were an irresistible offer and the shift was made. Unfortunately, the variables between IT projects and software production projects were unforeseen—IT projects tend to be short with definite beginnings and endings, whereas product development is often a long-term engagement with an innovative product. As a result of this chasm between working styles, product development outsourcing companies tend to either do IT work for large American companies or they are developing products for smaller US companies.
The specialization of the workers is very important. The product-oriented companies will typically carry no more than 10 developers with agile programming sensibilities and stable employees. IT companies will only focus on large-scale engagements and look for up to 100 employees on a team, conversely having very high rates of attrition and project for such results.
The primary objective of any outsourced project is how to effectively manage multiple sites simultaneously. Multi-site development that stretches across time zones amplifies the work required for effective communication between branches and managing the engineering process. While there is still a ways to go before the peak of multi-location communal processes, tools are being supplemented to the project development process to make global offices look more like cubicles.
The End of Staff Augmentation
In terms of multi-location project development, one of the most difficult problems is how to compensate for small-scale staff augmentation. The management overhead tends to dictate the entirety of cost/benefit equations when dealing with offshore developing. An extreme trend to avoid this has been moving the entire project team to a single location instead of spread them across multiple sites. The realities of the limited sources of capital for startup and small companies generally make this approach a lucrative savings opportunity.
Outsourcing in Growing Regions
India is no longer the predominant location to outsource any sort of developmental work. The amount of knowledgeable workers combined with the boom at the turn of the century made Indian development labor costs skyrocket. These attributes also contribute to the attrition problems for current outsource firms in the country. As a result, US companies are looking towards other areas to establish foreign work centers. Eastern Europe, Asia and South America are all increasing their outsourcing potential.
Geographically, Asia has the same time detriment as India—with a polar opposite workday compared to US headquarters, project management teams are forced to work deep into the night. Europe does not have this time zone issue as drastically and people in the region have shown strong work ethic and good backgrounds in education. Latin America, however, is the most favorable trend in modern times. The outsourcing to countries like Argentina and Ecuador are efficient, as centers are located in relative time zones and the workmanship is proportionally more beneficial than it was 10 years ago.
Teqniksoft predicts the next trend will be many development companies moving locations out of India in favor of Central and Eastern Europe and Latin America and take advantage of a “follow the sun” model, proven to be very cost efficient.
The shattered economy of America has only accelerated an outsourcing process that was bound to happen. With the demands of today and the rapid production of products and software solutions, many companies that held speculations about outsourcing production jumped in with both feet. The inability to raise capital domestically forces companies, especially early stage firms, to utilize third-party development teams around the globe.
Teqniksoft is heavily investing into this trend. Many investors and recommending to their companies to shed expenses quickly in light of the brewing crash. The motto of the day is to make money quick and people are looking at their biggest expense—human resource cost with research and development. The trend for development partners to actively participate in accessing equity for developmental service has become increasingly popular. This is the best way to preserve cash in a world where cash is the bottom line. Exchanging services for equity is even more effective for preserving revenue than outsourcing itself. By having a value upon exit by developing a portfolio of equity, the product and services industry benefits by dramatically lowering its expenditures.
About Teqniksoft, LLC
Teqniksoft is an international software development company with operations in North America, South America, Europe, and Asia Pacific.
We provide complete product lifecycle solutions for desktop, Web 2.0/Cloud, and mobility applications, and core competency in embedded systems engineering, CPLD and FPGA design and development, integrated circuit and PCB design and development, and building software systems for both Bare-Metal and RTOS environments. We also provide consulting services for all stages of development from architecture through QA, provide component technician services, and we have worked with all of the leading suppliers and manufacturers in the industry.
Our team has architected, designed, developed and delivered commercial products for broad spectrum of clients who range in size from large, public technology companies to early stage start-ups. The solutions cut across industries that range from Rotating Media and Solid State storage systems to viral mobility applications running on iPhone, Android, and many other mobility platforms.