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Outsourcing programmers works when the software developed isn't a key part of the pipeline of innovation for products a company actually sells. For example, when website design or back-office software such as payroll or inventory control is outsourced, that can be good because it improves operational effectiveness.
But writing innovative software cannot be done on an assembly line. It requires hard-to-find development and design skills. Farming out development to legions of programmers overseas will not create a differentiation advantage. When a technology company outsources software development, that company loses its capacity to innovate and its competitive advantage.
This isn’t the first time companies have tried to commoditize software development. In the eighties, Japanese companies unsuccessfully attempted to set up software factories to manufacture programs. They discovered that just throwing a lot of programmers together doesn’t create innovative software.
Outsourced programmers- be they in India/China/ Eastern Europe - wherever - are creative, intelligent and a generally a product of a very competitive local education and work enviornment.
You should see the number of R&D centers (GE, TI, Cisco, Microsoft,SAP, etc..) being opened in India, that will give you an idea of the kind of work happening in India. These companies are building these innovation centers because of - yes, cost advantage initially; and then the realization that they are getting high quality and the productivity out of the Indian software programmers. Multinationals come-in thinking only of cost, subsequently - they expand due to quality, productivity and real local talent. India is giving companies sustainable competitive advantage.
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The Pitfalls of Outsourcing Programmers
In Staff Articles
Clothing and toys are manufactured overseas. So why not make software there too, where labor is cheaper?
Many U.S. technology companies have outsourced their software development to India. Last year Hewlett-Packard became India's largest multinational IT employer , with more than 10,000 employees.
The enthusiasm for overseas outsourcing and offshoring, mirrors the enthusiasm for Internet companies in the Nineties. In a recent article, Ravi Chiruvolu, a partner at Charter Venture Capital wrote that "Venture Capitalists decided that because of cheap engineering talent in countries like India it would be more cost effective to outsource software development. If Nike could outsource sneaker manufacturing, we could do the same with code." Following similar logic, Oracle has announced it will more than double the number of software engineers it employs in India to 6,000.
Although the offshoring trend has resulted in a net transfer of jobs outside of the US, this article isn't about job losses in the United States. We live in a global economy and people in India deserve jobs as much as people in the United States or anywhere else. It's worrisome when companies are criticized solely because they have hired people overseas.
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