Strategy clinic: Is all software development going offshore?

Is the IT market going the same way as the toy market? If every toy is "made in China", in a few years will all software be "made...

We all benefit if production moves to the cheapest area
Roger Marshall, Elite

India has already captured a significant proportion of the software market, but this is hardly surprising given the relatively low pay levels, a highly educated workforce and a familiarity with the English language.

It is a basic fact of economic life that we all benefit if production moves to areas able to produce goods more cheaply, be that toys or software.

India's dominance in certain types of software production should not alarm those who have made their career as software writers in the UKand other Western countries. If there have been problems in the UK recently, this has more to do with the dotcom bust than any shift of work to the developing world.

However, as with any such change, it is wise to track the trend, recognise that demands for skills in the UK will change, and hone any skills accordingly.

Offshore software production works best where requirement specifications are written to a high standard and are not subject to frequent changes, which is not the situation found in a typical user environment. Sitting with the customer and prototyping with them is far more typical.

The job of the in-house system developer may change to being an assembler of components manufactured elsewhere, rather than a crafter of elegant solutions from scratch.

A global economy is driven by consumers
Robin Laidlaw, President, CW500 Club

Most audio and visual equipment is from Asia; cars are from just about anywhere except the UK; designer clothes are manufactured for rock bottom wages in developing countries; and the year-round availability of food is only possible because it is not all produced in the UK.

We are now a global economy - products and services are delivered from the point at which it is economic to do so - and this is so often driven by consumers themselves.

So yes, if the quality, reliability of delivery, performance and cost means that much will be "made in India", then so be it. Of course, macroeconomics have a way of redefining what is cheap: as the economies of countries who have successfully competed with the "traditional" West gets stronger, they find themselves in competition with other, less developed, countries.

Developers must decide if they can pay UK costs
David Hughes, Deloitte and Touche

Consider why China is so prevalent in toy manufacturing, and you can start to see areas of commonality and contrast with the software market.

Typically, costs and profitability determine the success or failure of a business. In the toy industry, Asia has historically provided a low-cost environment for the manufacture of often quite simple products using inexpensive resources and available skill levels.

While this model has supported the toy market and may be the preferred option for the software market, could it appropriately support the technical nature of today's applications and the costs associated with the development and production of complex software products?

There is a need for software developers to consider this model and ascertain whether the industry can cope with the high costs of developing software in the UK, whether it will be forced to do research and development in a less costly environment.

While cost and profitability are key, quality and customers' perception of the products remains paramount.

In order to achieve customer expectations, suitable skills must be sourced when manufacturing software. The development and production of software is a matter of skill, and not related to the quantity of the available workforce.

Ultimately, cost, quality, resources, distribution methods, customer perception, product evolution and industrial trends will, in due course, steer the evolution of the IT market. In terms of the "made in India" concept, that remains to be seen.

Software quality is the issue, not its location
Roger Rawlinson, NCC Group

Any organisation that makes something needs to be competitive in innovation and price. Commercial companies will look to maximise the innovation of their products and keep costs competitive.

If they fail in either of these two areas they run the risk of decline and ultimate closure.

As far as the software end-user goes, their main concern is that the software performs, is well supported, has a future and represents good value. If all these criteria are met they will be happy - the source of the software is not an issue.

To answer your question, I do not think all software will be "made in India" (and not all toys are "made in China"). Software will be written where it is most appropriate for a commercial company to source this service from.

For example, if a highly specialised software house needed software developers close to its customer base, that is where they should be located. On the other hand, if the code was heavily modularised and could be managed in one country and coded more efficiently in India, this would also be a good business proposition.

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