software engineering Software engineering is a branch of both computer science and engineering focused on designing, developing, testing, and maintaining Application software, software applications. It involves applying engineering design process, engineering principl ...

, 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 or software development life cycle (SDLC) is a process of planning and managing software development. It typically involves dividing software development work into smaller, parallel, or s ...

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 is 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 area of the Santa Clara Valley ...

, technology pioneers developed offshoring centers in the state of

Jalisco Jalisco, officially the Free and Sovereign State of Jalisco, is one of the 31 states which, along with Mexico City, comprise the 32 Political divisions of Mexico, Federal Entities of Mexico. It is located in western Mexico and is bordered by s ...

Mexico Mexico, officially the United Mexican States, is a country in North America. It is the northernmost country in Latin America, and borders the United States to the north, and Guatemala and Belize to the southeast; while having maritime boundar ...

. In 1996,

General Electric General Electric Company (GE) was an American Multinational corporation, multinational Conglomerate (company), conglomerate founded in 1892, incorporated in the New York (state), state of New York and headquartered in Boston. Over the year ...

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 country spanning Eastern Europe and North Asia. It is the list of countries and dependencies by area, largest country in the world, and extends across Time in Russia, eleven time zones, sharing Borders ...

India India, officially the Republic of India, is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area; the List of countries by population (United Nations), most populous country since ...

Ukraine Ukraine is a country in Eastern Europe. It is the List of European countries by area, second-largest country in Europe after Russia, which Russia–Ukraine border, borders it to the east and northeast. Ukraine also borders Belarus to the nor ...

and

China China, officially the People's Republic of China (PRC), is a country in East Asia. With population of China, a population exceeding 1.4 billion, it is the list of countries by population (United Nations), second-most populous country after ...

. 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 market decline in economies around the world that occurred from late 2007 to mid-2009.

, 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 was the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, he was the first African American president in American history. O ...

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 The President's Council on Jobs and Competitiveness, originally the President's Economic Recovery Advisory Board (PERAB), was an ad hoc panel of non-governmental experts from business, labor, academia and elsewhere that President of the United State ...

, 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 and

DevOps DevOps is the integration and automation of the software development and information technology operations. DevOps encompasses necessary tasks of software development and can lead to shortening development time and improving the development life ...

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 Nearshoring is the outsourcing of business processes, especially information technology processes, to companies in a nearby country, often sharing a border with the target country. Both parties expect to benefit from one or more of the following di ...

, 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 is the cultural region of the Americas where Romance languages are predominantly spoken, primarily Spanish language, Spanish and Portuguese language, Portuguese. Latin America is defined according to cultural identity, not geogr ...

n countries, and Europe in

Poland Poland, officially the Republic of Poland, is a country in Central Europe. It extends from the Baltic Sea in the north to the Sudetes and Carpathian Mountains in the south, bordered by Lithuania and Russia to the northeast, Belarus and Ukrai ...

and other small Eastern European countries such as

Lithuania Lithuania, officially the Republic of Lithuania, 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, bordered by Latvia to the north, Belarus to the east and south, P ...

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 borders China and Russia to the north at the Yalu River, Yalu (Amnok) an ...

appeared on the map of IT offshoring destinations, having great engineering resources and an excellent price/quality ratio. By 2010, India started to regard China as a threatening competitor. In September 2010, the French company

Capgemini Capgemini SE is a French Multinational corporation, multinational information technology (IT) services and consulting company, headquartered in Paris, France. History Capgemini was founded by Serge Kampf in 1967 as an enterprise management and d ...

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. It was founded by Bill Hewlett and David Packard in 1939 in a one-car garage in Palo Alto, California ...

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

Bulgaria Bulgaria, officially the Republic of Bulgaria, is a country in Southeast Europe. It is situated on the eastern portion of the Balkans directly south of the Danube river and west of the Black Sea. Bulgaria is bordered by Greece and Turkey t ...

Costa Rica Costa Rica, officially the Republic of Costa Rica, is a country in Central America. It borders Nicaragua to the north, the Caribbean Sea to the northeast, Panama to the southeast, and the Pacific Ocean to the southwest, as well as Maritime bo ...

Malaysia Malaysia is a country in Southeast Asia. Featuring the Tanjung Piai, southernmost point of continental Eurasia, it is a federation, federal constitutional monarchy consisting of States and federal territories of Malaysia, 13 states and thre ...

and the

Philippines The Philippines, officially the Republic of the Philippines, is an Archipelagic state, archipelagic country in Southeast Asia. Located in the western Pacific Ocean, it consists of List of islands of the Philippines, 7,641 islands, with a tot ...

. 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 corporation and technology company headquartered in Cupertino, California, in Silicon Valley. It is best known for its consumer electronics, software, and services. Founded in 1976 as Apple Comput ...

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 means transferring a project such as a fully or partially mobile app development of your company to a third-party software development service. However, if you intend to outsource the entire workflow, you should definitely hire a software development company, not a freelancer. Even though a freelancer may be an expert in one related field or more, you need at least a team of experienced designers, QA engineers, and software developers for a project like mobile app development. Offshore software development can include following services: product design and architecture, coding and testing; develops

SaaS Software as a service (SaaS ) is a cloud computing service model where the provider offers use of application software to a client and manages all needed physical and software resources. SaaS is usually accessed via a web application. Unlike oth ...

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

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 ...

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). However , the most recent technological developments to access remote connectivity throughout the world has increased the scope of small business owners to consider offshoring their

business requirements Business requirements (BR), also known as stakeholder requirements specifications (StRS), describe the characteristics of a proposed system from the viewpoint of the system's end user like a CONOPS. Products, systems, software, and processes ...

. It has become very convenient to set up a remote offshoring centre in any corner of the world . This way , even a reasonably medium sized firm can hire and collaborate with the most suitable talent and save up on resources required to hire and nurture internal employees.

Industry

International consulting firms include

Accenture Accenture plc is a global multinational professional services company originating in the United States and headquartered in Dublin, Ireland, that specializes in information technology (IT) services and management consulting. It was founded in 1 ...

Cognizant Cognizant Technology Solutions Corporation is an American Multinational corporation, multinational information technology consulting and outsourcing company originally founded in India. It is headquartered in Teaneck, New Jersey, United States. Co ...

HCLTech HCL Technologies Limited ( d/b/a HCLTech) is an Indian multinational information technology (IT) consulting company headquartered in Noida. Founded by Shiv Nadar, it was spun out in 1991 when HCL entered into the software services business. T ...

, IBM Consulting,

Infosys Infosys Limited is an Indian multinational corporation, multinational technology company that offers business consulting, information technology, and outsourcing services. Founded in 1981 in Pune, the company is headquartered in Bengaluru. On ...

and

Tata Consultancy Services Tata Consultancy Services (TCS) is an Indian Multinational corporation, multinational technology company specializing in information technology services and consulting. Headquartered in Mumbai, it is a part of the Tata Group and operates in 150 ...

References

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