software outsourcing

A blog related to software development company and offshore software outsourcing

Thursday, June 23, 2005

Software Outsourcing and India

Why software outsourcing to India

Majority of fortune 500 companies are considering India as their preferred destination for software outsourcing. India has emerged as a 'value-for-money' destination that has both cost advantage and quality that matches the expectation of global multinational companies. Indian universities are producing above 3 million graduates and around 300,000 post graduates every year. Software outsourcing industry is the highest paying industry in India. So large percentage of these students choose offshore software development company as their destination. But India is not just about number of graduates. Every CEO or CIO wants maximum return on his investment and reduce the cost. So more and more companies in developed countries are sending their software development requirements to low cost software outsourcing companies in India. Although, India has not remained as the lowest cost offshore outsourcing provider, it has based itself on quality of offshore software development at right cost.

Other reasons for software outsourcing to India

Many global consulting companies and other organizations have studied factors which should be considered while choosing any software outsourcing destination. And all studies show that, there are two main criteria which should be considered while choosing any software outsourcing provider. One is local attractiveness of software outsourcing industry and second is the capability of workers. In India, software industry is the high paying industry and that itself makes it most attractive industry. While software outsourcing was started in way back 90's, it has grown and matured now to provide quality software development as per any standards. And Indian companies are very much interested in maintaining their quality. Highest numbers of CMMi Level 5 companies are in India at present. On the other hand, other countries are not matching above criteria.

China has better infrastructure then India and produces more graduates then India. So it has bigger work force and can beat India in billing rates. But it's IT industry is less attractive locally and worker capability is also low. Other hand, China is what India was before 10 year. So software development has yet not matured to meet the quality standards. Other countries like Philippines and Mexico has better English speaking manpower for software outsourcing business. But their manpower pool is small and more attracted towards call centers. Smaller countries like Singapore and Hong Kong have both, locally attractive software industry and capability of workers. But they have very small manpower.

Advantage India has achieved in software outsourcing is not overnight. Offshore Outsourcing has grown and matured with time. In 90's, companies like GE, Citibank and British Airways started outsourcing to India and till then it has gone through many phases to compete with the best. After Initial phase, companies like Nortel and Lucent started to outsource product development to speed it up and market faster. During this time, Indian majors like Wipro and Infosys also started. In the second phase Y2K bug gave lot of work to Indian companies and gave them enough finance to grow. And with that, they started in service provider section as well as in enterprise application development. Next wave was of BPO Industry which is till going on and supply is not meeting the demand. And along with these, software outsourcing is increasing continuously. According to McKinsey, software outsourcing will increase 30-40% every year for next five years. According to Forrester research, around 3.3 million white collar jobs will be outsourced by 2015. And according to Deloitte research, two million financial sector jobs will be outsourced by 2009. And major chunk of this software outsourcing and other jobs are coming to India. According to Paul Saffo, as told to business week magazine, "Indians have a reputation of being a brilliant educated class and now they are taking a lead in colonizing cyberspace."