The Strengthening Offshore Wave

The Sandhill study on Offshoring reported that offshoring is now a widespread business practice in the software industry. Amongst the findings therein :84 percent of software executives surveyed report that their companies are currently engaged in offshoring, and another 4 percent say they plan to move operations offshore.

The Software & Information Industry Association’s latest survey on the trends and current state of global software development find 80% of companies are achieving their expected goals with half reaching 100% of their savings goals in offshore software development, a significant achievement, indeed measured in any whichever way. The survey covered a mixture of executives of firms who currently offshore and those who do not have come with ringing endorsements of offshoring benefits. Some highlights :
- Aside from cost advantages as the primary factor,a significant majority find that the other drivers include the likes of managing global software development in terms of achieving speed to market, productivity gains
- While 1/3rd are engaging/partially engaging captive units, more than a half currently use offshore service providers, a quarter employing a hybrid model of both approaches.
- Most of them have realistic expectations of achieving cost efficiencies. Most of the respondents were looking at over 25% savings by going offshore for software development and the most notable thing is that over 75% confirming that that they have achieved at least 75% of their cost saving goals.
- Fully two-thirds of companies who work offshore claim the quality of work is above average when compared to onshore staff, with 25% rating the quality as “excellent” or “outstanding.”
- Locationwise, India continues to be the favorite location for offshoring and 20% find china as a choice location.
A recent McKinsey study The Emerging Global Labor Market, predicted that more than half of global software employment could theoretically be executed fom offshore. In an year from now, the report predicted that almost 1/5th of the service jobs could be offshored. More than 3/4th of the R&D could potentially be sent to offshore locations, while 2/3rd of support and services could be offshored.
Clearly realistic goals about offshoring are achievable and no wonder offshore project manager is amongst hottest jobs in IT industry.
What’s the tinge of realism here : Conventional ways of measuring productivity may be slightly spotty and hence the emphasis on specific prodictivity metrics for different type of operations. Obviously, different enterprises are taking different routes towards offshoring services.Some keep the differentiating core processes insourced and the commoditized context elements outsourced and offshore and some companies look at retaining high value-add activities onshore while offshoring low value-add activities. Even while offshoring, some enterprises ponder about having captive units while most look at outsourcing partners and a few manage by balancing these options. But increasingly the drivers of offshoring centered on cost, productivity, speed, risk all can be addressed only by collaborative and concerted management attention. Like managing any business, constant attention and means to improve on the results are permanent in the agenda of offshoring. The pioneers and major beneficiaries of offshoring have understood this and are benefiting adequately. Look at the ever increasing numbers of offshore vendors outsourcing multiple millions of work every year - that number is showing a consistent upward trend for several years at a row - one best source of data could be the quarterly/annual reports of Top Tier India headquartered vendors to study this. Like well managed companies managing to reap better returns in business, well managed offshoring strategies shall fetch better returns.