software engineering Software engineering is a systematic engineering approach to software development. A software engineer is a person who applies the principles of software engineering to design, develop, maintain, test, and evaluate computer software. The term '' ...

, offshore custom software development consists in

offshoring Offshoring is the relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Usually this refers to a company business, although state gover ...

the

software development process In software engineering, a software development process is a process of dividing software development work into smaller, parallel, or sequential steps or sub-processes to improve design, product management. It is also known as a software devel ...

in a country where production costs are lower, thus decreasing budget spending.

Background

Early days

Since the 1960s and the early days of the

Silicon Valley Silicon Valley is a region in Northern California that serves as a global center for high technology and innovation. Located in the southern part of the San Francisco Bay Area, it corresponds roughly to the geographical areas San Mateo County ...

, technology pioneers developed offshoring centers in the state of

Jalisco Jalisco (, , ; Nahuatl: Xalixco), officially the Free and Sovereign State of Jalisco ( es, Estado Libre y Soberano de Jalisco ; Nahuatl: Tlahtohcayotl Xalixco), is one of the 31 states which, along with Mexico City, comprise the 32 Federal En ...

Mexico Mexico (Spanish: México), officially the United Mexican States, is a country in the southern portion of North America. It is bordered to the north by the United States; to the south and west by the Pacific Ocean; to the southeast by Guatema ...

. In 1996,

General Electric General Electric Company (GE) is an American multinational conglomerate founded in 1892, and incorporated in New York state and headquartered in Boston. The company operated in sectors including healthcare, aviation, power, renewable energ ...

offshored its IT for the first time when it opened its own center in India. Given the rapid growth of this sector, several companies have started to use offshore development in China, India and other countries with a lower cost per developer model. In the early 2000s, the leading countries in offshore custom software development were

Russia Russia (, , ), or the Russian Federation, is a List of transcontinental countries, transcontinental country spanning Eastern Europe and North Asia, Northern Asia. It is the List of countries and dependencies by area, largest country in the ...

India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the so ...

Ukraine Ukraine ( uk, Україна, Ukraïna, ) is a country in Eastern Europe. It is the second-largest European country after Russia, which it borders to the east and northeast. Ukraine covers approximately . Prior to the ongoing Russian inv ...

and

China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...

. The time difference when working with India and China for the Western world allowed work to be done round the clock adding a competitive advantage.

2008 Recession

During the

Great Recession The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...

, offshore software development spending lowered. During his 2008 presidential campaign,

Barack Obama Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the U ...

stated «I will stop giving tax breaks to companies that ship job overseas and I will start giving them to companies that create good jobs right here in America.» This led to a $3,000 tax break for US companies per hire onshore instead of offshore. In 2010, the market picked up again. In 2011,

, whose CEO had a seat at the President's Council on Jobs and Competitiveness, announced the creation of 11,000 onshore IT jobs.

Globalization

By the mid-2010s, the debate onshore/offshore was becoming irrelevant, as all major software outsourcing providers had shifted to worldwide operations and integrated offshoring into a seamless offer for their clients. New

agile Agile may refer to: * Agile, an entity that possesses agility Project management * Agile software development, a development method * Agile construction, iterative and incremental construction method * Agile learning, the application of incremen ...

and DevOps development models called for a tighter relation between the client and the offshoring provider, making major long-distance offshoring destinations (Russia, India, China) unfit for the job. Nearshoring, offshoring to a very nearby country, has gained increasing popularity among the CIO and CTO community. The USA is increasing its IT shopping in

Latin America Latin America or * french: Amérique Latine, link=no * ht, Amerik Latin, link=no * pt, América Latina, link=no, name=a, sometimes referred to as LatAm is a large cultural region in the Americas where Romance languages — languages derived f ...

n countries, and Europe in

Poland Poland, officially the Republic of Poland, is a country in Central Europe. It is divided into 16 administrative provinces called voivodeships, covering an area of . Poland has a population of over 38 million and is the fifth-most populous ...

and other small Eastern European countries such as

Lithuania Lithuania (; lt, Lietuva ), officially the Republic of Lithuania ( lt, Lietuvos Respublika, links=no ), is a country in the Baltic region of Europe. It is one of three Baltic states and lies on the eastern shore of the Baltic Sea. Lithuania ...

North Korea North Korea, officially the Democratic People's Republic of Korea (DPRK), is a country in East Asia. It constitutes the northern half of the Korea, Korean Peninsula and shares borders with China and Russia to the north, at the Yalu River, Y ...

appeared on the map of IT offshoring destinations, having great engineering resources and an excellent price/quality ratio. By 2010, India started to consider China as a threatening competitor. In September 2010, the French company Capgemini bought the Brazilian software developer CPM Braxis for $330 million to significantly grow its offshore capacity. In November 2010,

Hewlett-Packard The Hewlett-Packard Company, commonly shortened to Hewlett-Packard ( ) or HP, was an American multinational information technology company headquartered in Palo Alto, California. HP developed and provided a wide variety of hardware components ...

confirmed a $1 billion investment to develop 6 major offshore centers in

Bulgaria Bulgaria (; bg, България, Bǎlgariya), officially the Republic of Bulgaria,, ) is a country in Southeast Europe. It is situated on the eastern flank of the Balkans, and is bordered by Romania to the north, Serbia and North Macedon ...

Costa Rica Costa Rica (, ; ; literally "Rich Coast"), officially the Republic of Costa Rica ( es, República de Costa Rica), is a country in the Central American region of North America, bordered by Nicaragua to the north, the Caribbean Sea to the no ...

Malaysia Malaysia ( ; ) is a country in Southeast Asia. The federation, federal constitutional monarchy consists of States and federal territories of Malaysia, thirteen states and three federal territories, separated by the South China Sea into two r ...

and the

Philippines The Philippines (; fil, Pilipinas, links=no), officially the Republic of the Philippines ( fil, Republika ng Pilipinas, links=no), * bik, Republika kan Filipinas * ceb, Republika sa Pilipinas * cbk, República de Filipinas * hil, Republ ...

. In 2013, China's offshore software market reached $5.05 billion. By 2015, India was considering repatriating most of its outsourcing activities to move to a new generation of automated software development. In February 2016,

Apple Inc. Apple Inc. is an American multinational technology company headquartered in Cupertino, California, United States. Apple is the largest technology company by revenue (totaling in 2021) and, as of June 2022, is the world's biggest company b ...

opened its first offshore software development center in

Description

, offshore custom software development consists in

the

in a country where production costs are lower, thus decreasing budget spending. Offshore software development can include following services: product design and architecture, coding and testing; develops

SaaS Software as a service (SaaS ) is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. SaaS is also known as "on-demand software" and Web-based/Web-hosted software. SaaS is cons ...

Internet The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, pub ...

Intranet An intranet is a computer network for sharing information, easier communication, collaboration tools, operational systems, and other computing services within an organization, usually to the exclusion of access by outsiders. The term is used in c ...

solutions, e-commerce, CRM, project management and other special web-services (including Web 2.0 solutions). Several new Web 2.0 platforms and sites are developed offshore while the entrepreneurs and management is located in Western countries such as US, UK and EU. The advantages mostly revolve around better cost-control over the process, which means that there is lower cash-outflow (often the biggest struggle for startups).

Industry

International consulting firms include

Accenture Accenture plc is an Irish-American professional services company based in Dublin, specializing in information technology (IT) services and consulting. A ''Fortune'' Global 500 company, it reported revenues of $61.6 billion in 2022. Accentur ...

, Atos, Capgemini, Cognizant, IBM Global Services,

Infosys Infosys Limited is an Indian Multinational corporation, multinational information technology company that provides business consulting, information technology and outsourcing services. The company was founded in Pune and is headquartered in Ba ...

and Tata Consultancy Services.

References

{{DEFAULTSORT:Offshore Custom Software Development Software project management Offshoring Custom software projects