Outsourcing software development to third party companies brings great value to all sectors of the technology industry worldwide. These third party companies have grown from infancy to adolescence as they become:

1. Increasingly specialized

2. Increasingly sophisticated in providing seamless project management

3. Death of staff augmentation concerning project management and virtual engineering

4. Immersed in new outsourcing regions

Increased Specialization

Outsourcing was first used in the IT sector during the 1990's. India was an attractive country with low labor costs and plenty of capable developers. But many companies soon learned that although this was ideal for IT projects, it was not ideal for software product development. These projects are lengthy and require long term involvement. As such, outsourcing needs to be specialized to IT companies, working for large companies, or to product development companies working for startups.

Increased Sophistication

Today's technology allows for efficient long distance communication and networking, which lets companies manage outsourced teams for multi-size development. This amplifies the requirements for well-managed engineering processes and communication.

Death of Staff Augmentation

For multi-location project development, it is difficult to handle small scale staff augmentation. As a result, increasingly multi-location development consists of moving entire project teams to one site or the other, effectively lowering the management and communications overhead. Many such product engagements start as staff augmentation, but turn to project development over time.

For startups, it is common practice to locate the entire team offshore because of onshore shortage of human capital.

New Outsource Growth Regions

The rising cost of Indian development have led to large attrition problems for many firms outsourcing to India. Now, companies are shifting their focus to Central/Eastern Europe in countries such as Poland as well as to South America in countries like Ecuador for outsourcing. These countries have similar work values as the US, which makes communication and offshore development easier. More importantly, the attrition rates are much lower than those in Asia, while the skill set of the labor force is the same, if not better, than their Asian/Indian counterparts.

To conclude, as the economy becomes increasingly competitive and market-driven, outsourcing is necessary for companies wanting to stay afloat financially while continuing to deliver innovative products in a timely manner.

For more information on this topic, read our full discussion here.


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