Why is the popularity of offshore software development growing so fast?
While cost savings were the primary reason companies outsourced offshore in the early 1990's, in recent years priorities have been changing. Table below shows top 10 reasons for offshore outsourcing according to the International Outsourcing Study completed by Colorado Institute of Technology in November 2004. Values shown below is the percentage of respondents (top managers of American companies using the services of offshore software developers) who chose certain reason as having key importance for their decision to outsource.
| Lower labor cost | 70% |
| Staff augmentation | 65% |
| Access to high quality employees | 30% |
| Access to technology | 30% |
| Meet customer requirements | 25% |
| Meet parent company's requirements | 20% |
| Localization | 20% |
| Match competitors | 10% |
| Extend hours/coverage | 10% |
| Other | 40% |
There are two main reasons:
shortage of domestic IT professionals in USA and Western European countries
customer’s wish to cut development expenses.
Drew Robb’s article from “Information Week” magazine explains both mentioned reasons. Click here to view selected fragments from this article.
Russia has a 40-year history of manufacturing computers and producing original software for them.
For many years Russian universities put into the market more and more high qualified IT professionals
to satisfy the growing needs of military enterprises and research institutes in human resources. Political
and economical changes of recent years caused serious production cutback in many branches of industry. As
a result thousands of well-educated and experienced engineers became unemployed or underemployed. It means
that today it is much easier to find a high-qualified programmer or WEB-designer in Russia than in any
other country.
Another important reason attracting customers to Russian offshore software development market is a
relatively low level of programmer’s salary and small overheads. It allows to minimize expenses that in
many cases is the determinant.
Firstly St.Petersburg is rich in IT professionals. Russian oldest and
most respectable centers of education - St.Petersburg State University and St.Petersburg Technical
University (former Polytechnic Institute) are located in our city. In addition to these two, every year
more than 20 St. Petersburg Collages and Universities train thousands of software professionals having
B.S., M.S. or Ph.D. degree in computer science.
Another important factor is St.Petersburg’s favorable geographical position
in the North-West of Russia, very close to Scandinavian countries and not far from other European countries.
Its seaport, International airport, large communication infrastructure attract foreign customers.
Yes it is true. Such well-known corporations as Sun Microsystems, Motorola, Lucent technologies, IBM, SCO,
Lynx, Nokia, Nortel Networks, Intel, HP, Rockwell, Samsung, Boeing keep long-term co-operation with
Russian programming teams employing from 10 to 300 developers each.
You can easily add to this list more names of Western European and US companies using the services of
Russian offshore development firms if you find a minute to look at articles
from popular IT magazines collected on our site.
These two terms are often confused, but they are not the same at all. Contracting is when a company
(customer) purchases services from another company (supplier). In this situation, the customer "owns"
and controls the process. In other words, the customer tells the supplier exactly what it wants and how
it wants the supplier to perform those services. The supplier cannot vary from the customer's instructions
in any way. The customer can replace the supplier quite easily by canceling the contract.
In outsourcing, the customer turns over the control ("ownership") of the process to the supplier. The
customer tells the supplier what results it wants the supplier to achieve, but the supplier decides how to
accomplish those results. In outsourcing, the supplier has expertise in a certain process (such as
programming or web development, etc.), and it has economies of scale. If the customer were to dictate to
the supplier how to do the job (as happens in contracting), the customer would be destroying an important
aspect that makes outsourcing work – the value that is created by using the supplier's expertise and
economies of scale. Telling the supplier how to do the job also eliminates accountability on the part of
the supplier, and this is an important element in successful outsourcing relationships.
Here is an example of software development services that are outsourced and that are contracted.
Contracted: The customer says it wants a program for staff planning. The customer tells the supplier
how this program should work, how screen and printed forms should look like, which programming language and
development tools should be used, etc…
Outsourced: The customer says it wants to automate the process of staff planning assuming that he
needs some software to reach the result. The customer describes his intentions in general way, assigns the
limit of expenses that he is ready to spend and provides supplier with all necessary information about
planning rules and practice in customer’s company. Then the supplier decides how to accomplish the task,
how many programs customer really needs, should these programs be implemented as client-server system or
no, which programming languages and database systems are most suitable, etc.
We don’t want to say here that one of these two models is better than another. Depending upon the situation,
each of these models may be desirable and successful. Intelligence-Soft engineers have an experience in both.
Both. If your company has only small programming tasks from time to time, then by delegating the work to offshore team you will save your time and money because in this case you don’t need to hire domestic professionals having skills and experience necessary to each project. With big projects you profit even more by the occasion of using offshore development team assigned to work exclusively with your project and manage this team as your own personnel.
It is a very common question. Offshore development model is a joint effort and we welcome all our clients to work in close association with our team from the very initiation stage. We are even ready to take up your requirements verbally and put them into proper documentation formats in order to reflect your needs. We put all our efforts to analyze your business needs and then start working from there. We, along with you, will undergo a brain storming process to bring the best of outputs.
Here is the extract from our standard software development agreement answering to this question:
"Customer may, in its sole discretion, request that changes be made to the Specifications, or
other aspects of the Agreement and tasks associated with this Agreement. If Customer requests such
a change, Developer will use its best efforts to implement the requested change at no additional
expense to Customer and without delaying delivery of the Software. In the event that the proposed
change will, in the reasonable opinion of Developer, require a delay in delivery of the Software
or would result in additional expense to Customer, then Customer and Developer shall confer and
Customer shall, in its discretion, elect either to withdraw its proposed change or require Developer
to deliver the Software with the proposed change and subject to the delay and/or additional expense."
Our agreements with our customers assume that all source codes, graphic images, files, databases, documents and other materials developed under the terms of the agreement become the sole property of the customer upon completion of the development and receipt of final payment.
Communication with Russian development team is often a concern for foreign customers. The issues could be:
language barriers,
quality and availability of
modern telecommunication technologies in Russia.
We can say that once you decided to outsource your project to Intelligence-Soft you don’t need to worry
about communication. We pay special attention to the language education of our employees. Each developer
had passed special tests to confirm his/her ability to speak English fluently before he/she was hired.
Progress of telecommunication technologies and global networks made it possible to communicate with the
foreign contractor staff as easily as if they were sitting in the next room. By using modern communication
technologies like Internet telephony, software for working groups (“groupware”) and videoconferences the
customer has full everyday control over the development process.
And finally, we implemented Web-based Project Management System providing
Intelligence-Soft developers and our clients with the set of convenient planning, monitoring and communication
tools for day-to-day control and collaboration. Visit Project Management
System web site for more details.
Intelligence-Soft accept payments in US dollars or Euro by means of wire transfers to our bank account.
Intelligence-Soft development methodology assumes following of conventional Western standards in planning
of the development process, in execution of administrative, financial and technical documents. Our technology
of the development doesn’t differ in any way from that in other industrial countries.
Furthermore, if our customer has any special demands to forms and contents of the documents (for example,
internal company’s standards) we are ready to follow these demands as well.
If you expect a steady flow of work using consistent programming languages and operating systems for the period of one year or more, it may be good idea to have Intelligence-Soft set up an offshore team dedicated exclusively to your company. Required number of developers is not important - the size of your team may start even from one engineer. Your will have an opportunity to manage the work of your team members as if they were your own employees.
All you have to do is to send us e-mail. Our project manager will contact you promptly. You are welcome also to fill in our Project Description form or Contact Us form.
Want to share your opinion about the outsourcing of IT jobs with other visitors of our web site? Want to get
an access to the answers provided by other people? Take part in our
offshore
software development survey.
