Information Technology Reference
In-Depth Information
In the initial years IT projects were outsourced to service providers who special-
ized in specific software development expertise like Web enablement, e-commerce
enablement, e-business, and so on. But these service providers were from the same
host countries and were located near customer sites. So this trend was not lever-
aging cheap labor. They were offering flexible workforce opportunities. They also
provided a skilled workforce.
When every business house in the same industry starts using the same strategy,
the advantage for any single company that uses that strategy wanes over time. As
can be seen from an analysis of companies, pioneers adopt any strategy early, but
if the industry consists of agile competitors (this is true in the case of the software
industry where investment in capital goods is not required and any company can
change its strategy without much costs), then laggards also catch up fast and the
differentiation factor vanishes quickly. To be successful in the marketplace, any
business house must have some strategy that is different from its competitors and
stick to this strategy until even laggards catch up and the differentiation factor
wanes. After the benefits of onshore service providers were utilized to the maxi-
mum, the strategic importance of this strategy waned over time and customers
started looking for more cost benefits. To utilize this opportunity some offshore
service providers came up. Customers had started looking at locations where labor
costs were cheaper and where software development could be done at cheaper rates.
This trend was also followed due to a shortage of skilled labor within host coun-
tries. There were also factors like faster go-to-market needs, flexibility in terms of
flexible manpower requirements, right skills required for the project, and so on.
Offshoring has provided a lot of advantages in meeting these needs of parent com-
panies. Offshoring is also the answer for the current global business recession. In
fact, the world is going to witness business recessions in the future more often due
to many factors like global warming, economic slowdown due to the credit crunch,
saturating markets, aging of populations, and so on. Software vendors and end
users of software are equally facing the problem of continually reduced budgets for
IT and software spending. In this situation offshoring is the right answer. It enables
software vendors to keep developing their products at the same pace or even at a
faster pace than they have been developing their software products and addressing
new business issues through adding new features in their software products at sig-
nificantly lower costs. End users benefit because even with smaller budgets, they are
able to get IT systems implemented in time or even before time as implementation
costs get reduced substantially and at the same time get more resources to work on
projects at substantially lower costs, which helps in reducing project schedules.
With IT projects including software development, software testing, soft-
ware support, software implementation, business analysis, management analysis,
IT-enabled services, and many such processes being offshored, the next trend is
providing specialized services for clients.
The current trend is that software service providers are offering dedicated
services like software testing services for embedded systems, testing services for
