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Outsource magazine: thought-leadership and outsourcing strategy | September 21, 2017

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Software firms carry on offshoring

Outsource Magazine

Offshoring work at software companies continues to rise, according to the results of a new online survey by the Software & Information Industry Association (SIIA).

Executives from 114 companies responded to the survey. Of those 114 companies, 68 have offshore operations.

Around 48 percent had started “global software development initiatives” within the past one to three years, compared with 19 percent that began projects within the past three to five years and 18 percent more than five years ago.

About half the offshore outsourcing companies used an offshore provider, while about one third operated through a subsidiary and a quarter used both.

Some 57 percent of software companies that have offshore operations said they increased offshoring work significantly within the past 18 months.

Of the companies that looked overseas, 84 percent said growth was one of the most important drivers for offshoring; productivity and “increase speed to market” were the next most cited.

India was the country that respondents listed most often, at 65 percent, as a current or potential offshore partner. That was followed by Eastern Europe/Russia at 29 percent and China at 21 percent.

But profit gains tend to be in the 10 percent to 20 percent range due to higher than expected salary costs, turnover rates and infrastructure costs.

David Thomas, executive director of the software division for SIIA, said:  “The real drivers in terms of people moving to a multishore model are speed to market, not necessarily cost savings anymore,” said Thomas.

“There’s a lot of negative talk,” particularly within politics, about offshoring costing Americans jobs,” said Thomas. “That’s not really the case,” argued. It was used almost entirely as a form of expansion, not as a replacement.”

One of the main reasons given by companies that stopped offshoring was a loss of control over their teams because of the time differences and challenges of managing people remotely.

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