Survey: Offshoring does not cost developer jobs

Group says software companies are increasing offshore software development efforts, but they aren't looking to displace American workers

Offshoring of software development by software companies is not costing Americans jobs, according to a recent report by the Software & Information Industry Association.

The SIIA released its Global Software Development Survey Report (available to nonmembers for $395), which surveyed 114 U.S.-based software companies last year. In a conclusion that stateside developers probably would not find surprising, the SIIA found that software companies are increasing offshore software development efforts. However, companies are not looking to displace American workers, said David Thomas, executive director of the SIIA.

"[Offshoring] was used almost entirely as a form of expansion, not as a replacement," Thomas said.

"There's a lot of negative talk," particularly within politics, about offshoring costing Americans jobs, Thomas said. "That's not really the case," argued.

The biggest challenge software companies faced was that they could not build development teams fast enough in the U.S. because of a shortage of both engineers and H-1B visas, Thomas said. Offshoring provided a way to leverage existing developer teams, he said.

The SIIA found that 57% of offshore participants have significantly increased offshore work in the past 18 months. Many plan to continue to do so.

Sixty-eight of the companies surveyed had offshore operations, while 46 did not.

Growth was cited as an important or critical driver for 84% of respondents doing offshoring; increasing speed to market and productivity were the next most important drivers.

According to the SIIA, the survey respondents claimed to be meeting 80% to 100% of their cost-saving goals. But gains in productivity appeared to be less than expected.

Seventy-three percent of respondents reported a positive impact on profits, and two-thirds claimed that the quality of work has been above average compared with that of onshore staff. Twenty-five percent rated the quality as excellent or outstanding.

The research found that some companies underestimate what is needed to succeed and how much effort is necessary for adaptation. This situation is exacerbated by a tendency to think in the short term, focusing on goals such as cost-cutting.

No single business model was cited as being optimum for offshore development. About half of respondents said they were working with an offshore provider, while a third were operating a subsidiary or captive. A quarter were using a hybrid model of both approaches, the SIIA said.

Companies not doing offshore development cited concerns such as lower product quality, loss of control, fear for intellectual property and negative impact on internal staff morale. Some 91% of those not offshoring said loss of control was somewhat important or very important in their decision to not take the offshore route.

The SIIA is a trade association for the software and digital content industry.

This story, "Survey: Offshoring does not cost developer jobs" was originally published by InfoWorld.

Copyright © 2007 IDG Communications, Inc.

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