Current IT Outsourcing Trends

In modern business environment major IT companies often practice outsourcing the development part to offshore companies specializing in particular sphere or industry domain (e.g. Telecommunications or GIS/Mapping Solutions) as it is the way to cut their expenses on software development and design by 20-30%. The point is that wages overseas (e.g. India, Russia) are much lower than, for example, in North America or Canada. That gives a way for application development companies to reduce headcount and deliver their solutions at qualitatively different prices.

According to the latest tech market report by Forrester Research , ‘US IT Market Outlook: Q1 2009′, in 2009 the U.S. IT market will go through a tech decay which will result in annual growth decrease. Most probably, a large number of IT companies will turn to offshore market, considering outsourcing the R&D part is a way to avoid losses caused by the decay period. Experts predict the number of such projects will double by the end of 2009.

To make the offshore development model work properly, it is necessary to consider the factors that may be determinative for the whole work process’ success.

The Direction Factor

When a company makes a decision to outsource application development to a subcontractor, usually arises a question of outsourcing direction. The most notable companies that provide application developers with offshore software engineering services are located in India, Russia, and China. Here one is better to keep in mind the fact that custom software development companies from different countries cope better with different types of IT projects.

Indian programmers are of wide specialization: they have a solid experience in PHP development, web design, custom web e-commerce solutions, etc. The IT market in India is far more traditionally concerned as the best outsourcing direction than any other. Eastern type of mentality may cause some inconveniences, though, due to the fact of solid experience in outsourcing projects, such cases are rare.

In contrast, Russian programmers are of more concrete and narrow specialization than Indian, e.g. they are high skilled Telecom OSS/BSS solutions developers and integrators. What distinguishes Russian IT market from others – its scientifically-oriented resources that are used to handle complex tasks and implement innovational solutions. In terms of work process organization and communication, Russians are the closer than others to western type.

Speaking about China, one can say that this direction emerged in a comparatively recent time and represents something in between the 2 extremes of Russia and India. The beneficial side of outsourcing IT projects to China is its rates – the lowest ones. Eastern-type work organization and mentality which is way different from the mentality of a westerner is able to cause misunderstandings.

Awareness saves funds

Taking into consideration what has been said above, we can conclude that if a company is taking a decision to outsource custom application development, it should clearly recognize the differences between major outsourcing directions and correlate them with the project’s type. The outsourcing direction factor is based upon cultural and historical differences that both sides should consider to achieve well-balanced and organic work process.

A possible way to solve the problem of intercultural communication (ICC) is the organization of ICC trainings. By the means of these trainings a company can prepare its employees to successfully communication with representatives of another culture (in our case it is an offshore IT developers). ICC-aware staff ensures avoidance of time & budget losses during the process of intercultural collaboration.

Making mistakes in choosing the right outsourcing direction and defining adopted project’s specifications, or neglecting the intercultural communication & work organization nuances may cost the company more than traditional onsite application development, while properly organized outsourcing work model is able to bring benefits both to the offshore and onshore companies.