80% of Companies Achieve Expected Goals in Offshore Software Development: Study

Some 80% of companies are achieving their expected goals with half reaching 100% of their savings goals in offshore software development, according to a latest survey by The Software & Information Industry Association, on the trends and current state of global software development. 

Respondents claim to be achieving 80-100% of their cost savings goals, and about 73% of respondents reported a positive impact on profits. Additionally, fully two-thirds of companies who work offshore claim the quality of work is above average, with 25% rating the quality as “excellent” or “outstanding.”

According to a recent McKinsey study "The Emerging Global Labor Market, June 2006", up to half of global software employment could theoretically be conducted offshore. Up to 76% R&D could potentially be sent to offshore locations, along with 65% of support and services. By 2008, it is expected that about 18% of this employment will be send to offshore locations.

Executives from 114 firms, including 68 companies that operate offshore and 46 companies who do not currently have offshore operations responded to the survey, conducted by Symphony Services for SIIA.

Survey Highlights:

  • While cost advantages remain the most “critical” factor for 85% of the respondents in the decision to globally develop software, other drivers including speed to market, productivity gains, and growth strategy carry almost as much weight in the decision to offshore.

  • Nearly 65% of the respondents either currently or plan to offshore software development to India, while 20% said the same of China. 

  • Nearly 50% of respondents are currently using an offshore provider, while 30% use a subsidiary or a captive unit.

  • 60% of the respondents were targeting over 25% savings by going offshore for software development, with over 75% reporting that they have achieved at least 75% of their cost  saving goals.  

Some of the most common challenges faced by software companies in offshore initiatives seem to challenges in staffing and recruitment, attrition, communications problems, and cultural challenges differences.  

“Global software development is in the process of transforming the nature of the US software industry,” said Ken Wasch, SIIA President. “Our survey covers many of the influences on and results of this sea change.”

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