The Industrial Revolution was a turning point in the manufacturing industry. The production and manufacturing process in the West was severely hit by either the unavailability of a workforce or expensive labour. By the mid-1900s, companies began thinking outside the box, looking at any solutions to boost their production process to increase profits and grow their market share. Because this was also the time when software development had gained momentum, software companies were also looking for ways to leverage their business.
This led to the birth of outsourcing - a model where they could send their requirements to an external vendor who would help them build software. However, the problems associated with outsourcing such as delivery of substandard software, lack of customer focus by the engineers and overhead costs made companies look into a better strategy - offshoring.
Offshoring compensated for all the drawbacks of outsourcing. By going offshore, companies could build their own offshore team - an extension of their business. It also gave them access to a large, cost-effective talent pool so that they could scale their business efficiently. Today, the offshoring industry has grown leaps and bounds and continues to do here.
Here are 5 reasons behind the rapid growth of offshore software development services
1. An acute talent shortage
With more and more companies in countries like the US and Europe finding it extremely difficult to fill jobs in engineering and IT, the talent shortage is like never before. This massive talent shortage means that companies have to look elsewhere to source engineers, making offshoring all the more popular. By offshoring, companies can select skilled and passionate engineers from a large pool of talent.
2. The need to build innovative products
Given the rapidly changing market scenario, if a software development company cannot build new and creative products for its consumer base, it can quickly run out of business. By offshoring their R&D activities, companies can not just come up with innovative products but can also find the workforce who can execute it to increase productivity.
3. Cost-effective labour
The cost of recruiting engineers directly depends on the availability of IT talent. In countries like the US and Europe where talent is scarce, the cost of labour is quite high. On the contrary, offshoring to countries like India and Ukraine where there is surplus talent available means significantly lower costs. Offshoring software development to these countries also helps a company scale down on operational costs - infrastructure, utilities & administration.
4. Difficulty in juggling the core & support business functions
Large firms find it hard to devote undivided attention, time and energy to its core business matters while simultaneously taking care of the software development processes. If they can build an offshore team who can build software for them and deliver it on time, then they can focus on their core business.
5. An opportunity to scale their business
By building an offshore team in another country, the company is essentially establishing remote centres in different parts of the world. This acts as a great marketing opportunity for the company to scale its business, taking on clients and supporting their requirements irrespective of their geographical location.
In the near future, the concept of offshoring is only set to become more popular. Though there are a few challenges in building remote teams, if you can overcome them, the end result will give you the much-needed competitive edge for your business.