Outsourcing 2.0: Collaborative Development

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Corporate IT is in the middle of a huge sea change. The Internet has made it possible to cut IT costs by 50% or more by employing outsourcers in jurisdictions with low labor costs. What's the next wave, and what are the implications for corporate IT departments?

The answer is complicated, but the implications are clear: We're moving toward a new model for IT outsourcing, which I call Outsourcing 2.0. At the center of this model are new tools that enable global collaborative development.

In a few short years, corporations are going to be paying big money for IT professionals who can fill a hot new job title: collaborative development manager. This manager will marshal development teams dispersed over the globe and tie them together with peer-to-peer (P2P) tools to create great software. The result will be cost savings that exceed the offshore model.

The tools, which are critical connecting points, are here now. The open-source community has built and leveraged P2P developer tools for years. Now Microsoft developers can, too. The company is hosting an application service provider version of SourceSafe on www.GotDotNet.com.

Microsoft has also announced collaboration features in the upcoming Whidbey version of Visual Studio. These features will enable developer collaboration worldwide and signal that collaborative development is a trend -- and not merely a fad. This is confirmed by Mike Werner, director of Microsoft's emerging business team in Boston. "Developer collaboration is promoting community at all levels of the software-development ecosystem," he says. "We recognize that one size doesn't fit all, and we have to be flexible in how we build tools and programs for this dynamic segment." Translation: Developer collaboration is a big, Web-enabled deal that can't be ignored.

What's driving the collaboration trend, and what does it mean for U.S. corporations? First, the wage disparity. Offshore compensation will rise, U.S. compensation will fall, or some combination of the two will occur. Direct collaborative development between U.S. IT managers and freelance offshore developers will drive this trend further.

John Wilson

Second, specialized service firms such as Assembla are catering to small companies with bare-bones budgets. Over time, these firms will target midsize U.S. corporations. Larger businesses, valuing predictability equally with cost savings, are content with traditional offshore outsourcing. But that will change as some use a mixed model and explore the use of collaborative P2P development tools.

The key to this is that IT shops stateside will need truly talented IT pros to pull it all together. Skills needed will include four to six years' IT experience, project management skills and solid business knowledge. I expect U.S. IT shops to start looking seriously at training IT managers to handle these collaborative project tasks. Already, the most confident foreign developers and the most cost-motivated small software start-ups are doing just that.

Astute IT pros with the requisite skills will immediately get aligned with these forces and create a new job in U.S. IT -- the collaborative development manager. U.S. companies that have large IT shops might begin looking at the Microsoft tools, experimenting with training and deploying IT managers to explore the potential. As the trend gains momentum, a mass of latecomers will join the game.

One aspect corporations will have to manage is the close working relationships between IT managers and developers dispersed throughout the world that will develop with the help of daily e-mail. If improperly managed, there could be problems in these relationships if and when an IT manager departs for greener pastures. Expect IT pros with a proven track record in this area to become targets of bidding wars.

The IT megatrend toward collaboration and P2P technologies is accelerating worldwide. Corporations that experiment now by finding the right people to make the new collaborative model work will enjoy cost savings not available by any other method.

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