Leveling the Developer FieldBy Michael Vizard | Posted 2008-11-26 Email Print
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We are going to see a more nuanced approach to developing software on a global scale. It may cost less to develop software locally, but that does not mean there will be a movement of software development back to the U.S. Competitive factors such as total project cost, domain expertise and the quality of software will be the driving forces in software projects regardless of location.
As our collective economic circumstances continue to change worldwide, it’s interesting to note that many senior IT executives have come to the conclusion that it actually costs less to develop software in a local market than it does to manage the process of creating software halfway around the globe. But that does not mean we should expect to see a wholesale movement of application development projects back to the United States and other local markets anytime soon. Instead, we are going to see the continued emergence of a more nuanced approach to developing software on a global scale.
One thing we’re seeing is that the cost of hiring developers in countries such as India is getting more expensive. On an hourly basis, they are still less expensive on average than developers in this country. But when you factor in the cost of managing the projects from the United States, the cost of any given offshored project starts to exceed the cost of developing the software in the local market in the first place.
To get around this issue, many companies have created business units in India to manage their software development projects. But not every company has the resources to create a business unit in another country. Even when they do create that business unit, the subsidiary in, let’s say, India, will find itself competing for work against contract development firms that are also based in India.
Corey Eaves, the CIO of Misys, which makes application software for the financial services and health care sectors, has software development teams in the United States, the United Kingdom, India, Romania and the Philippines. But Misys also contracts out work to HCL Technologies and Symphony Services, two software development houses based in India. The internal and external development teams compete on projects, which are then assigned based on cost and competency.
Eaves says that Misys’ software development teams, especially in India, are almost always less expensive than hiring outside contractors. But what has happened over the years is that software development contractors in India have developed best practices that usually result in them delivering software that is of higher quality than what the internal teams can develop.
He says teams around the world are becoming more cost-competitive with their developers in India. In some cases, they have domain area expertise that makes it practical to give the work to those teams. Overall, however, the need for high-quality software still makes the outside contractors competitive.
This new software development reality cuts to the heart of why changing economic conditions might not result in more software development work returning to local markets. The simple fact is that Indian firms have taken advantage of their lower-cost model to invest in developing best practices around software development that allow them to claim a higher standard of quality.
In many ways, this trend reflects what we have seen in other industries. For years, Japanese automobile manufacturers have focused on economy cars in order to leverage that experience to create lines of luxury cars that today challenge the best that anything Detroit or Europe has to offer.
No doubt, many developers will resent this turn of events. Many assume that a falling dollar, combined with a higher sensitivity to cost, is going to drive more development work back to the United States. But the fact is that globalization is here to stay, regardless of the economic climate.
The good news is that developers in local markets will be a lot more competitive. But if they want to win a project, they need to do a lot of work in the best practices area in order to match the quality process that Indian contractors have developed over the last half-dozen years.
That, of course, is not an impossible feat. But it’s not the kind of thing that happens overnight, either. A level economic playing field creates the opportunity to get in the game, but that should not be confused with having the necessary skills to win.
That’s particularly important to remember as we enter a new era of software development in the enterprise—an era that will be characterized by parallelization of software running on multicore processors and the advent of complex event-processing systems that are going to be accessed via Web 2.0-type interfaces. No matter what its costs are, the developer team that produces the highest-quality software using these technologies will ultimately win the day.