While outsourcing is almost as old as the computing profession itself (in the early days, corporations didn’t always have their own development staffs), the nature of outsourcing has changed. With today’s enterprise apps penetrating the core of the business far more thoroughly than yesteryear’s general ledger, outsourcing has had to morph into a more dynamic, collaborative process. And obviously, with the Internet, the business has globalized, enabling any region with the right infrastructure and expertise to play.
The conventional wisdom is that offshore is becoming mainstream because it’s the only way that enterprises or software vendors can afford the cost of development. However, if price is the sole criterion, the customer will only get what they pay for. What’s more interesting is looking at the levels of collaboration that are emerging in some of the more advanced engagements.
For instance, mortgage broker Ameriquest used personal connections to gradually evolve relationships at the staff level as it and Tavant Technologies (the outsourcing provider) ended up seeding each other’s organizations. Another interesting angle: because the firm was aggressively doing custom development (prompted by a booming refinance market), no internal jobs were lost to outsourcing.
SpikeSource, an open source software testing vendor, added yet another angle. According to CEO Kim Polese, the firm works with its outsourcer, Cognizant, jointly interviewing job applicants for the offshore team.
Then there are outsourcing providers who specialize, not on corporate clients, but vendors, who add another angle to collaboration. Providers like Sonata Software take VAR approaches because they target many of the same ISVs whom they previously represented as local sales and integration channel. That means not taking engagements from client rivals, to ensure that intellectual property is protected. But there’s another angle. Extending the outsource relationship, one of Sonata’s ISV clients testified that the outsourcer wasn’t simply taking orders for developing new product features, but was also suggesting them.
These cases – especially Ameriquest’s – aren’t necessarily typical. But the emergence of collaborative outsourcing points to a principal too often overlooked by organizations sourcing development as if they were shopping at Wal-Mart: even if your development team is 12 time zones away, software is not an arm’s length business. As one software CEO remarked, even if you can source offshore for 30% less, it’s hardly a bargain if the project takes twice the time.
There’s a more powerful reason to collaborate. With today’s most successful businesses competing on their ability to collaborate (because they know their limits and focus on their secret sauce), why should software development be any different?
There’s a lesson for outsourcing providers as well. If all you do is deliver traditional staff augmentation body shop approaches, you’re eventually going to hit a wall when your rivals provide tangible evidence that they are helping their customers, not only save money, but grow more competitive.