The offshore debate continues to rage, but where are the facts? Software Development fields its second outsourcing survey, seeking to discover what work is really being sent offshore and whether the work results in improved ROI.

March 01, 2006
URL:http://www.drdobbs.com/architecture-and-design/cheapers-not-always-better/184415486

Software Development

Offshore outsourcing—no other topic has ever generated as much debate in these pages. Indeed, since Software Development began covering the offshore phenomenon in the late '90s, the U.S. economy has surged and sunk and begun to recover—and the software development industry has been intimately involved in these fluctuations. The battle lines are clearly drawn: On one side, we have those who believe, as Thomas Friedman recently asserted in his aptly named tome, that the "world is flat." Lined up on the other side are those who believe that we're exporting our livelihood.

Offshoring has graced the pages of almost every technical, business or news magazine. Proponents and opponents have squared off on nightly news shows, in webcasts and on the radio. Despite the frequency and fury of the debate, questions remain, and for that reason, Software Development has fielded a second survey of its readers, seeking to discover which kinds of projects are being outsourced and gather the necessary data to analyze offshoring trends. Our readers were surveyed between Nov. 16, 2005 and Dec. 20, 2005, with 204 respondents responding yes to the initial screening question: "Do you manage or develop software for a U.S.-based project that has been partially or completely outsourced?"

[click for larger image] Outsourcing data by task.

The Quality Question

One could quibble with the methodology of surveying a self-selected population, but, as in our first offshore survey in Oct. 2003 ("Offshore by the Numbers"), the information provided valuable insight. As in 2003, a large percentage of respondents rated the quality of work done by the offshore team as worse than in-house efforts. In fact, 46% of respondents considered the work of the offshore teams to be of poor quality, and an additional 14% reported that their offshore team's work was "unusable or a setback to progress." This increase in poor-quality work represents a disturbing trend, when combined with the fact that this year's survey also revealed an up-tick in the number of business-critical projects being outsourced: 51% of respondents reported that their current or most recently outsourced project was critical to daily operations, representing a 34% increase from 2003.

Despite the reports of poor quality, 93% disclosed that their company plans to keep using their offshore vendor. Such a dichotomy indicates that those surveyed have little influence over their organization's offshoring decisions: In fact, 88% of respondents had at least some involvement with the offshore team, an increase from 74% in 2003. Fifty percent of those surveyed act as the technical point of contact, and 23% manage the team directly.

Forty-six percent of those surveyed in 2005 work for organizations with an approximate annual revenue of $1 billion or more; only 38% of respondents in 2003 worked for companies of similar size. The number of respondents who work for companies that make $100 million or less per year also declined from 37% in 2003 to 26% in 2005. Could these results correspond with the recent trend of market consolidation? Certainly, companies in nearly all industries continue to merge, resulting in ever-larger corporations, with fewer competitors.

More Experience/Abstraction

There's little doubt that more companies are sending projects offshore than ever before: 21% of this year's respondents work for companies that have been offshoring projects for more than five years. In 2003, only 13% of respondents' companies had a similar experience, and nearly 30% of organizations were brand-new to the offshore game.

But what types of development activities are being sent offshore? Does the argument that the higher-level activities will remain onshore hold water? As we found in 2003, no area of the development lifecycle is immune to outsourcing. In-house teams still do the majority of higher-abstraction activities, such as project management, requirements gathering, architecture, design, modeling, R&D and deployment. However, offshore teams aren't simply being tasked with writing code. While coding still tops the list of outsourced activities at 96%, most of the higher-level activities were outsourced at a similar rate to 2003, with R&D seeing a 42% increase.

As in 2003, the largest percentage of our respondents (83%) reported working with an offshore team in India. India's market share has decreased slightly from 2003's 86%, but nearly all of the countries that appeared in our original survey experienced slight declines. Indeed, one could wonder if the increase in outsourced business-critical applications and higher-level software development activities correlates with the maturation of India's developer community. The sticking point, however, is the question of quality. Until that's answered, we'll never know if companies are chasing the promise of lower costs, without truly receiving improved ROI.

[click for larger image]	[click for larger image]
Survey results.

Tamara Carter ([email protected]) is the conference manager for SD Events (www.sdexpo.com) and former managing editor of Software Development.

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