Outsourcing Software Development Success Factors

Are you thinking about outsourcing your software development work? Compare the benefits and risks involved in outsourcing software development work to offshore companies.

Software Development Outsourcing Continues as a Lucrative Industry

While the trend of outsourcing information technology services is not new, the outsourcing of software development has become more popular. The Santa Clara Business University Index predicted the increase in offshore software development in 2003, according to an article on InternetNews.com. True to these forecasts, overseas R&D became a globalized industry with firms in India, Ireland, Canada and Israel taking the lead. With the right conditions continuing in many parts of the world, the future looks promisingly lucrative for companies specializing in the outsourcing of software R&D.

Factors Impacting the Industry

In the late 1990s, several factors contributed to the growth of offshore technology processing. At that time, the U.S. tech industry claimed that there was a major shortage of science, engineering and technology graduates from American colleges. The federal H1-B visa program had been established in 1990, allowing the arrival of highly skilled tech workers from India and other nations. In addition, the concern over costs and the available domestic pool of skilled tech workers also fueled the trend of sending software development functions overseas.

The effects of both outsourcing and skilled immigrants in the U.S. labor market are still being hotly debated. A January 2014 post on the Harvard Business School blog argued that American engineers, analysts and developers are not being negatively impacted, citing a 2008 study that only 24 percent of innovation and technology jobs were held by non-native professionals. Meanwhile, outsourcing software development remains a premier area for growth and profit, with new tech hubs established in countries such as the Ukraine, Portugal, Morocco, Chile, Vietnam and the Philippines.

Some Transnational Firms Rise to the Top

Companies in the United States and Canada have plenty of work for these R&D teams as they strive to keep offering innovative products and services. Some businesses specializing in outsourcing software development are transnational entities, strategically placed to take advantage of presences in both United States and in other areas around the world. Their ability to interface with clients in both America and worldwide, along with access to a global pool of skilled software development talent, gives these firms a competitive edge.

One example of a multinational business positioned for ongoing success is Redwerk. With offices in the United States, Germany and the Ukraine, it offers high-quality development services at reasonable rates. For the last 12 years, they've crafted innovative solutions such as YouTown, a project for the Seattle company DotGov, Inc. For each municipality using the YouTown app, data is collected from a variety of sources such as job postings, licensing and fees, maps of local points of interest, events and meetings, calendar and recent news. This information is then available for its citizens through the easy-to-use central mobile interface.

Offshore R&D Success Factors

Firms such as Redwerk serve as proof that a multinational entity focused on outsourcing software development can thrive. Clear communication, a cohesive team and steady growth are the reasons why the Ukrainian-founded company has enjoyed success for more than a decade. CEO Konstantin Klyagin began with a team of five developers, including himself, in 2005. Over the next 12 years, the company would expand to encompass four offices worldwide and over 40 software developers, testers and business analysts. Clients frequently report that these teams meet or exceed budget and deadline expectations.

Successes like these also prove that a company needn’t be large to gain a substantial market share. The latest Global IT Outsourcing Market 2015-2019 report from Research and Markets projected a compound annual growth rate of 5.84 percent between 2015 and 2019 for the global IT industry. The Ukrainian IT industry alone reached revenues of $2.5 billion in 2015, and its current skilled tech force of around 90,000 workers is anticipated to rise to 200,000 by the year 2020. With these promising figures, firms like Redwerk will likely see consistent access to talent as well as continued potential profits

Market Conditions and Smart Business Practices Lead to Success

Current trends that have led to the growth in tech worker hubs around the world, as well as improved technologies that make global collaboration easier, translate to continued promise for software development outsourcing firms. Sound business practices along with a commitment to meeting time and budget constraints are key factors for success. Those with smart strategies and plans for steady growth will be able to take advantage of the market.

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