Software outosurcing and product development

Indian software outsourcing companies are providing offshore software development since over a decade. That has matured offshore software development process and now, with the rise of rupee against dollar, cost advantage is getting lesser. To counter this, indian companies are required to offer business process consulting and product development services rather then just providing coding services offshore. Many indian companies like i-Flex are trying to get a market in product development and move up in the value chain.

With indian companies trying to move up towards niche market, outsourcing product development is emerging as the very attractive market for them. Software outosurcing for product development is the latest trend catching up and many established as well as startup companies are going for offshore outsourcing for their product development. Startups funded by venture capitalists asks for indian outsourcing first. Many VCs are funding enterpreneurs who have good knowledge of their domain and who partner with indian software outsourcing company to provide low cost high quality solution.

Startups who want to do product development comes with just requirements and vision. This becomes a very challenging task to create a successful product from it. And Indian companies are getting substantial experience with offshore product development. Europe has specially not enough skills for the product development. Many european companies are increasing their product development to India. India has a wide talent pool. So offshore product development is going to increase and will become main trend in the year 2005.

Software outsourcing

Software outsourcing to India

With the booming business of software outsourcing to India, Indian companies are now starting to compete with global service providers like IBM, Accenture and HP. Indian offshore outsourcing companies are facing challenge of scaling up their offshore software development center as per client requirements and getting new contracts. With the expertise they have got by providing third party software development services to some of the major service providers, they have gained expertise and experience to compete for the contracts of fortune 500. And with low cost, this has opened option for fortune 500 companies to consider offshore outsourcing to India.

In their quest for the multinational giants, Indian software outsourcing companies have improved their quality standards tremendeously. India has maximum number of CMM level 5 companies then any other country in the world. Indian companies have clear focus on software outsourcing objectives, understanding offshoring process and experience of managing cultural challenges.

With gaining expertise from software outsourcing, Indian companies have now targetted business consulting and R&D work for their clients. Previously only low-end work like programming, designing and web development was coming to India. But now a days, indian companies have started product development and R&D work along with application development. But along with this, challenge has came to recruit best suitable minds in technology. Although india is producing more then 3 million college graduates every year, majority of them are not good enough to work on high-end technology.

Although, countries like china are producing high number of graduates, china is producing around 50,000 engineers every year compare to india's around 300,000 engineers every year. And although all engineers coming out of college are not good enough, it is considered that, overall quality of Indian engineers is very strong. That is why, software outsourcing was started to save software development cost. But Indian companies proved that, along with cost, there are many other benefits in software outsourcing.

Offshore India

More and more offshore software outsourcing work is going to India because India offers many more advantages. There is a lot of negative press coverage, some political oppose and scams like recently exposed by a UK based news paper. Yet, India is maintaining its edge in offshore software outsourcing. Many factors affect this advantage of India like its price, quality, economic policies of Indian government, big English speaking population.

Offshore India software development companies

To match the expectations of global multinational companies, Indian companies started implementing CMM Level 5 quality assurance procedures and today, India has highest number of CMM level 5 software development centers. Rather then providing raw low quality low cost coding, Indian companies are determined to provide quality coding at higher cost. Indian software companies are increasingly adopting the standards of US companies to provide quality.

Although, in offshore outsourcing deal, quality is not a very important factor. Once a client and service provider starts working together, and software outsourcing service provider starts providing good service, customer generally continue with the same vendor for longer term. Generally clients don’t leave software outsourcing service provider unless there is a huge difference in cost by other providers or something goes dramatically wrong. Offshore software development companies are now a days continuing to improve their quality process. Because, they understand the importance of achieving domain expertise and quality along with specialization rather the one stop for all service.

In India, cost of programmers is increasing rapidly. Every year 15-20% increment in salary is lot higher then programmers in US who get around 2-3% increase in salary. But an Indian programmer gets around 25% of the salary of his American counterpart. As this difference is very high, there is enough room to grow for Indian offshore software development companies. Along with the cost, Indian companies also started recruiting their managers from US and other countries. This reduces cultural difference between client and offshore outsourcing team.

Software outosurcing and Offshore India

Software outsourcing to India has continued to grow in last few years. This growth is driven by many factors. Cost saving is not the only factor for software outsourcing. But it is the major factor in outsourcing. There are many factors which are contributing to cost savings in India. One of the most important issues is difference in salary of a programmer in Europe or in US and a programmer in India. Indian programmer gets less then 25% of the salary of a US programmer. This is the main factor which is driving software outsourcing to India.

Offshore India

Software companies belong to knowledge based industry. Unlike traditional brick and mortar industry, here, it is not required to invest heavily upfront and there is no material cost in running production. So majority of the cost is the salary. It contributes anywhere to 60-80% of the total expense of any software company. So when a company hire programmers in US, cost of software development shoots up to 60-70%. That is why 'Offshroe India' is more preferred. Many companies prefer to offshore their development works to nearshore destinations like Canada instead of offshoring to India. But that offshore outsourcing generally reduce their cost saving to nearly 50%. Asian countries are considered preferred destination for offshore outsourcing. While Eastern European and Latin American countries and Canada is considered good for Nearshore operations. In future, high-end services will move to nearshore or onshore while low end services will be done at offshore and specially in India.

In India, developer doing offshore software development generally gets 15 to 25% salary rise now a day depending on his importance in projects. While in US, a programmer gets yearly 3% increment approximately. Although, salary rise in India is very high, difference between salary of Indian programmer and a programmer in US is such a wide that, cost saving will continue to be a major factor in software outsourcing.

Software Outsourcing and India

There are many opposing offshore software outsourcing. But every company should consider software outsourcing. Because Software Outsourcing is mega trend and it is changing how business is performed. Cost difference is such a low that, developing countries which can offer highly skilled but low cost educated software programmers can reduce software development cost very low and can provide faster time to market. This offshore software outsourcing is not just for big companies which have millions of dollar turnover but it can benefit small companies too. So, it is myth that, only large corporations can only benefit from software outsourcing.

Why software outsourcing India

India has very large education system which produces above 3 million graduates every year. Apart from that, India has highest number of English speaking people after United States which is a key factor in the growth of Indian outsourcing market. Offshore outsourcing started in India way back in 90's and since then it has grown and matured the outsourcing process to match standards like CMM Level. Many big companies like General Electric and British airways were the first to start business processing center in India before many years to reduce the cost. Although, at present, there is oppose on offshore outsourcing, many giant US companies have shifted their important back office work to India. That gives geopolitical stability as US will prefer to avoid tension with India on this issue. So, also there is some risk, actual risk compare to benefits is negligible.