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Considering the Offshore Option

IT executives and development managers have traditionally grappled with the "make vs. buy" software decision.

By Paul Schmidt, OffshoreDev.com
May 27, 2002
IT executives and development managers have traditionally grappled with the "make vs. buy" software decision. ROI models, strategic assets, core competencies, and staffing considerations have, among other factors, helped drive the decision on outsourcing certain IT functions. However, a significant component of the decision to "buy", or "outsource", has not been considered by many organizations. The offshore development model has traditionally been the domain of large, multi-national corporations and the largest global IT services firms. Traditional thinking in this arena has suggested that only organizations with significant capital, both in terms of people and investment, can effectively utilize offshore development strategies. As the world continues to shrink - especially the intertwined global economy - companies of all sizes need to explicitly evaluate the offshore option. Indeed, future competitiveness of most businesses partially depends upon the most successful employment of technology, no matter the geography.

Because of increasingly sophisticated offshore businesses and the evolving model of "offshore development/onshore delivery", the domain of global software development is no longer restricted to the large corporations. Many traditional impediments to the use of offshore providers have been marginalized, if not eliminated, by advances in technology, emphasis on processes, and the continued cultural globalization of emerging countries. While it would be naive to argue that offshore business activities do not require unique considerations for the buyer, it would be equally unimaginative to rule out an IT strategy with the potential to save 30-50% in total project costs.

What IT buyers at the mid- and small-company size require is a framework for exploring this new model and evaluating the impact on their current and future needs. It is also incumbent upon offshore vendors to actively participate in this process as a self-serving vehicle for growth. After all, communicating value does not stop at national borders. Taken in all, a classic case of "market development" is needed to deliver the value of offshore development activities to all participants.

Fortunately, the seeds of this "market development" need are beginning to take root. Offshore developers increasingly realize they can no longer "take orders" from clients because of crippling technical labor shortages in the United States. Similarly, buyers cannot simply do "business as usual" in an austere and fluid business environment. As with most markets, however, new businesses are emerging to help bridge the market gap. These new organizations add education, transparency, and formalization to this emerging market resulting in decreased risk and significant cost reductions for the buyer and increased revenue and profits for the seller - the true "win-win" for any emerging market.

The Offshore Development Group is one such organization engaged in market development activities. We are actively engaging IT buyers through education, editorials, white papers, capabilities surveys, consulting services and our RFP engine. We are also assisting offshore companies by developing "go to market" strategies, providing a dynamic directory service, and unique research on this market. As we reach critical mass, both buyers and providers will achieve the necessary "win-win" benefits of a stable, long-term developing market.

Paul Schmidt - Offshore Development Group, Founder & CEO