Reality Check | Ephraim Schwartz » R&D sets sail for offshore

September 11, 2007 | Comments: (0)

R&D sets sail for offshore

TAGS: Outsourcing

A rising tide of software development service providers have more ISVs outsourcing core components

Outsourcing and offshoring are not just for IT services and business processes anymore. A small but growing niche of providers targeting R&D for application development is coming to the fore.

I'm not sure which came first, the demand for software development services or the service providers themselves, but my guess is that, like all trends, it is probably a case of the need for something new perfectly timed with the technology that makes it possible.

The concept itself has been around for a while. Companies such as General Motors were among the first to employ what the manufacturing industry calls contract manufacturers. As part of the model, GM enlists other companies to manufacture almost all of its cars' components, which are then delivered to GM for assembly. The major PC manufacturers do this as well. In fact, PC manufacturers even leave the assembly to OEMs.

The software industry, however, has been slow to adopt this model. But now, thanks in part to SOA outsourcers' ability to deliver components to ISVs, software companies are beginning to catch on to this development strategy -- one that engineering companies such as Ford, Boeing, and Nortel practice routinely.

Software development outsourcers work with the CTO rather than the CIO, says Peter Harrison, CEO of GlobalLogic, one such service provider.

Typically, an ODM (original design manufacturer) will work with a customer to create the design. As with hardware, software contract manufacturers then take on anywhere from 10 percent to 100 percent of product development. In many cases, especially with startups, says Harrison, a company comes to GlobalLogic with just an idea, and GlobalLogic helps give the idea shape and texture.

Within the past three years, the concept of code libraries and reusable code and processes has taken on a new meaning, says Bob Kramich, vice president of business development at DarwinSuzsoft, an outsource service provider based in the United States and China.

Reusable processes are key to contract software manufacturing. What an outsourcer has developed for one customer can now be repackaged for another, reducing development time and cost. For example, in mobile software development, memory utilization is a big issue that when solved can be used many times over. And then there is all the back-end synchronization with the hub. Such challenges are common to most mobile development endeavors, says Kramich, and they can be solved rather quickly by outsourcers who have done it for customers many times over.

Other recurring components include security and data encryption, plus the need for performance testing and optimization. All these things are consistent across every application.

Part of what is driving this trend is the nature of today's startups, which are more likely to be launched by business-oriented investors than technologists. To these individuals, the idea of outsourcing the design and development of software at a lower cost than building an in-house infrastructure is very appealing.

As this trend grows, development will accelerate, and the cost of software will go down. There will also be more competition, as the bar is lowered for buying into the creation of a new product.

GlobalLogic's Harrison believes the model will also result in more user-friendly applications tailored to business users. As opposed to SAP, for example, which built everything but the operating system, including the application server, the message queue, and the whole stack, these days there is a greater willingness among software vendors to adopt third-party processes and components. After all, it frees them to focus on the differentiating aspects of their solutions, rather than having to create every possible layer.

Harrison, however, believes that even companies' crown jewels will eventually go this route.

"The days of the three- to four-year Vista product lifecycles are coming to an end," Harrison says.

Of course, as predicted here numerous times, eventually these software service providers will create their own application solutions and sell them back to the enterprise, thus bringing the trend full circle.

Posted by Ephraim Schwartz on September 11, 2007 03:00 AM

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