Towards offshoring 3.0 — Software innovation offshoring

Introduction

Either the corporates have learned to turn a deaf ear to the decades old argument, ‘offshoring doesn’t work’, or they have found a workable model to produce the expected results of software offshoring; either way, today corporations in developed economies have accepted the norm of offshoring their software projects. By 2016, the statistics show that the global IT outsourcing industry was worth $76.9 billion USD. It’s widely known that corporates expect to save an average of 15% — 20% costs by offshoring either software needs. However, there is very little literature available to determine exactly how much cost savings is achieved through such software offshoring engagements.

Since the inception of the offshoring industry, almost three decades ago, several contextual factors — availability of high speed Internet, decreasing cost of telecommunications, and also globalisation and standardisation of computer education — have all positively impacted its viability.

In the global industry itself, offshoring needs, concepts, models, key drives and value definitions have all evolved and changed over the three decades. Likewise, the offshore development companies (large-scale businesses and medium-scale businesses alike) have been challenged to change their processes, business models, concepts, principles and even organisation cultures to align with industry trends and new demands in the developed economies.

When analysing the major stages of evolution in the software offshoring industry, we can look at it in 3 key phases.

Offshoring 1.0 — Specs offshoring. Key drive to win: Rigid process excellence
Offshoring 2.0 — Agility in offshoring. Key drive to win: Lightweight process, high onshore-offshore collaboration
Offshoring 3.0 — Innovation offshoring: Key drive to win: Business value addition via technology innovation