History of outsourcing, how it all began and why it has grown to become a viable model of business processing.

Technology , Posted by on 2019/03/12 0     Comments
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It is common now-a-days for businesses to outsource their software developmental activities to professional software vendors whose core business activity is the area of software development.

This helps business organisations in availing the service of dedicated professionals who are experts at the latest technologies and have the necessary domain expertise required to execute projects successfully.

History of software development outsourcing:

The process of software development outsourcing started with the idea that your work could be executed elsewhere and it was not at all necessary that it had to be executed in-house at your own organisation.

Well, just to enlighten you, there is no perfect date which can be pinpointed to be the one when software development outsourcing began. But, the general consensus is that it was in the 1980s that IT outsourcing officially began.

The credit for this goes to Eastman Kodak as in the year 1989 Eastman Kodak approached IBM to set up a data center. Kodak people asked IBM to design and build a data center for Kodak which was to be managed by IBM itself.

As, you are aware that Kodak was in the business of photography and building a data center was not in their area of core competency. So, it made perfect business sense. During the process, Kodak is said to have shifted many staff members to IBM’s campus so that the process is smoothly executed.

This was seen as a turning point in corporate circles as till then it was unbelievable that a company would ask another business organisation to manage its own services. The general trend was for business units to have home grown talent to manage their own needs, so you can very well understand that this singular event changed the dynamics of the whole software development outsourcing process.

This event had a cascading effect on other businesses. When someone as big as Kodak does something like this, it is bound to make others take notice. As a result many more companies started following the same path and it was only a matter of time for IBM to become the dominant IT service provider, which it did in the late 80’s and 90’s.

Another early pioneer in this area was Electronic Data Systems. Their approach was different from IBM in the sense that they offered business solutions using the route of

software development outsourcing, instead of offering services which were linked to certain products.

Outsourcing history of India:

The IT industry has been in existence in India since the early part of 1980’s but it was during the beginning of the 90’s that the process of software development outsourcing started. The first break was made by some global airlines company who began to offload their back office work to India. This was a pathbreaker for the IT companies who started following on this route taken. Soon enough American Express, British Airways, Texas Instruments and General Electric started their India based units. What followed was a standardisation of the same software development outsourcing business model which was later adapted by many business organisations.

Types of software development outsourcing:

Well, software development outsourcing has been broadly classified into the following three types depending on their locational parameters.

  • Local software development outsourcing: This is the most simplest type, if you happen to hire a software vendor situated in your own country it can be defined as a case of local outsourcing. There are some advantages associated with this. Your local team will be speaking the same language as yours, have the same time zones, probably have the same mentality and you shall be able to reach them at the earliest in case of any contingency. But, there are some disadvantages also, the main being that it is not at all cost effective for long term engagements.
  • Nearshore software development outsourcing: If you happen to outsource your software needs to a company in a country which is not very far from yours, it is an example of nearshore outsourcing. This might appear lucrative but again is not a workable option from business point of view as the rates of hiring professional programmers are almost at par with the local rates in your country.  
  • Offshore software development outsourcing: If the company chosen by you for offloading your software work happens to be located in another continent or far away country, it happens to fall in the category of offshore outsourcing. Countries in Asia, for eg. India are the best examples of what offshore software development outsourcing has come to signify. The costs of hiring Indian software professionals are simply the cheapest in the world and along with it comes the quality of the work which is without doubt the best in the world. Business wise it makes perfect sense as it gives the best returns on your valuable investment.

This blogpost might interest you as it consists of a list of checkpoints which should help you as you choose a outsourcing software company for your developmental needs.

Advantages of software development outsourcing:

There are many advantages of software development outsourcing. We shall briefly touch upon these here, as they need to be explained in details and this shall be taken up in another blogpost in future.

  • Access the best skills.
  • Hit the market in the right time with your product.
  • Focus on your core business area.
  • Get the team with the right domain knowledge.
  • Match expectations of customer.
  • Get support for installed software systems.
  • Avail of the latest in technology.
  • Hire from the best in the world.
  • Cost reduction.

Advantages of software development outsourcing to India:

  • Availability of huge talent:

India has the largest workforce of skilled technicians in the world. This is in fact incomparable with assets which other countries can boast of. You just name it, whether it is analytics, data science, cloud computing, artificial intelligence, whatever area you choose, you shall get the best available resource here.

  • Economies of scale:

It gives the best return on your investments as the operational costs are much less when compared to other economies like UK, USA or any other European country.

  • Time Zone advantage:

As there is a difference in almost 7 to 12 hours between the Indian time zone and the prevailing time zone in UK/USA it means that you get 24/7 support for all your projects that are handled from India.

  • English language:

India has a vast population who can speak the English language very fluently. This adds to the fact that there is no gap in any form of client communication when it comes to understanding requirements and delivering solutions.

Well, I think we have covered quite a bit today, on how software development outsourcing, if you are still curious you can read more on how to Outsourced Software Development Projects.

began in general, how it is advantageous and how India is the best destination for software development outsourcing services.

If it is such that you have any requirements which necessitate the development of software you can get in touch with us with your specific needs. Our team of experts shall get in touch with you and devise solutions which take care of your need.

If there are any feedback or suggestions from your end feel free to drop a mail below.