Reports from offshoring hotspots such as India show a booming IT outsourcing and services economy that seems to be growing from strength to strength.
The Indian government`s long-term commitment to education and promotion of technology is paying dividends for the country and for corporations around the world that are able to move their IT burdens offshore and reduce their spend.
"The pro-offshoring marketing teams would have the world believe that India, and increasingly China and other emerging Asian countries, are the utopia where IT problems vanish and costs shrink," says Richard Firth, chairman and CEO of MIP Holdings. "While many companies have attained great benefits from offshoring, there are signs that offshored and even locally outsourced software development projects are not delivering as expected."
Reports of customers dissatisfied with the progress of their software development projects are becoming more common, with many companies terminating contracts long before the completion date and absorbing the loss. This unhappiness is not as a result of poor technical skills or inferior development methodologies - India, for one, has proven its capabilities time and again.
"There is more than one reason for the decline in faith in outsourced software development, but one of the main reasons is industry knowledge and experience," adds Firth. "When a company outsources its hardware and the running of commodity software such as an operating platform - factors which no longer confer competitive advantage - a generic service delivering processor cycles and agreed upon uptime is perfect. Taking the drudge work that adds no real value to the organisation`s goals out of the company and allowing a third-party to handle it is good business sense and normally leads to cost savings."
The reality of business in the global economy is that commodities, while necessary for the day-to-day functioning of a company, do not offer any competitive advantages. How can an application that every company competing in the same industry uses provide any one of them with an advantage?
In Jim Collins`s book "From Good to Great", the author found companies that had stood the test of time and delivered constant growth for years almost exclusively opted for bespoke business applications. Having your own business processes mapped onto software specifically designed for your company is the path to competitive advantage.
Bespoke challenge
The challenge with bespoke software is in determining who will develop it. Using in-house resources for development projects ensures the people involved understand the business and can interact more efficiently with users and analysts.
"Interaction is necessary when one considers that at most 70% of a development project can be completed on specification; the additional work will only be done after users have a chance to apply real-world conditions to the application," notes Firth. "When the developers are sitting halfway across the world, with all the technical skills and no industry-specific experience, this interaction becomes more important and more difficult - and let`s not even get started on the language and cultural issues."
Developing software to deliver a competitive advantage to a company is not something that can be done by people without industry-specific knowledge. No matter how intricate the application specifications are or how much time and effort is taken to develop them and ensure they cover every angle the programmers may need, every industry has unique aspects that only people involved in the industry will inherently understand.
Leaving the programming to outsiders will ensure the solutions developed are generic and the unique angles that give a company the edge will be missing. The result will be more interaction with analysts and programmers, which in turn requires more money and more time to finish the project.
"Companies are commonly advised to stick to their knitting and focus on their core competencies, leaving non-core functions to outsourcing providers," says Firth. "While this is good advice, these organisations need to realise that achieving the cost and productivity benefits from software depends on them building their core operational competencies into their software platforms. Trying to convey these competencies to someone not even involved in the same industry is asking for trouble."
That is not to say all development must be in-house, especially when technology is not a company`s core strength. However, industry knowledge must be part of the programming team`s repertoire if the final application is to deliver to expectations and within cost. Distance programming may initially be less costly than in-house initiatives, but without the appropriate personnel, the final tally could prove very expensive.
Share
Editorial contacts