BOSTON November 27, 2001 In a report released today, Aberdeen Group, a market analysis and positioning services firm, notes that globalization and the emergence of new service suppliers and delivery models have converged to create a highly diverse offshore software industry. This industry has roots throughout the world and is characterized by a range of business models and value propositions that are available to a broad spectrum of industries, both within and outside of the information technology (IT) sector.
"The offshore sector was once considered the sweatshop of the software industry," says report author Stephen Lane. "Moreover, its principal benefit -- low cost development -- was primarily available to enterprises with the resources and expertise to manage global projects. Today, there are hundreds of offshore service suppliers, as well as U.S. and European-based firms that include offshore development in their delivery models. These suppliers offer a wide variety of services and skill sets in addition to cost competitiveness. At the same time, there are several low-wage countries with large IT labor pools that are actively encouraging enterprises to establish development centers within their borders. This is all part of the globalization of the software services industry, a trend that promises tremendous benefits to those companies able to take advantage of them."
Aberdeen research indicates that to achieve the benefits of offshore development and outsourcing, decision makers will need to look beyond cost savings at other benefits and risks when considering offshore software development and outsourcing. In doing so, they will have to understand the different service and delivery models that characterize the sector, as well as adopt new supplier and project management processes and due-diligence practices.
The report, entitled "Offshore Software Development: Localization, Globalization, and Best Practices in an Evolving Industry," examines the impact of globalization and localization in the offshore software development and outsourcing services sectors. It describes how the global supply and demand for IT skills, economic conditions, government policies, and geopolitics are influencing the evolution of the offshore IT services industry by examining offshore activities in India, Russia, China, and Ireland. Finally, it describes the issues that enterprise decision-makers face when considering the offshore alternative.