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The Next Trend: Offshore Product Engineering

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Software engineers who build high-end products may believe that their jobs are safe from offshoring. That belief is mistaken.
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Recently, we heard a software engineer state, "I build high-end software products, so I'm relatively immune to the whole offshoring trend. I think it's primarily going to affect corporate IT guys in application development, maintenance, and QA."

We set out to investigate whether his statement rang true. It didn't. What we discovered was that companies are still searching for ways to streamline and lower the cost of software development. Sending product engineering offshore is one of those ways.

The Changing Economics of Software Product Engineering

The software industry depends on new versions, features, and products. We found that companies competing in this tough sector are undergoing a metamorphosis as they attempt to balance the twin challenges of reducing development costs and bringing products to market quickly.

Developing new software is complex, expensive, and labor-intensive—so much so that it has led companies such as Autodesk, SAP, Cadence, Google, Oracle, and Microsoft to offshore parts of the product engineering process and to concentrate on high-level requirements-gathering, marketing, selling, and ongoing project management.

When the practice of outsourcing IT work to lower-cost countries first picked up speed in the 1990s, such companies were hesitant to assign vendors or in-house development teams based offshore to anything other than well-defined projects requiring basic technical skills—for example, Y2K, euro conversion, and PeopleSoft customization projects. But once offshore organizations proved they could handle these initial projects, software companies began offering them opportunities in areas such as system design, application development and maintenance, quality assurance, infrastructure and support services, implementation services, and new product engineering. The last of these processes, new product engineering, is the one that we'd like to discuss.

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