The Global Software Industry

By McManus, John; Floyd, David | Management Services, Summer 2005 | Go to article overview
Save to active project

The Global Software Industry

McManus, John, Floyd, David, Management Services

John McManus and David Floyd compare the offshore market strategies of the US, India and China.

Companies in the US more openly admit the growth of offshore outsourcing to countries like India and China now that the presidential election is over. The rise of India and China as potentially high technology software competitors and important participants in the world's software industry seems to have come as a surprise to foreign observers. The surprise is often accompanied either by overestimations or underestimations of these countries' actual capabilities, rather like foreign reactions to Japan in the 1980s.

While there are many important distinctions to be made between the Indian and Chinese cases, they are similar in that the development of software and technological capabilities in both countries has long been a goal of political, administrative and industrial elites, and both countries have records of policy intent, planning, and resource commitments for meeting that goal. This paper examines some of their competitive strengths and weaknesses and the future market challenges faced by India and China in the next decade.

Global perspective

The world software industry and associated markets are estimated to be worth US$1300 billion and 90 per cent of the world's exports in software is from the US and Europe. Evidence also suggests that outside the US, UK, Germany and Japan, the new and emerging countries within the software industry are India and China, and to a lesser extent Singapore and Malaysia.1 Although figures vary, these emerging markets account for around six per cent of global export markets.

While 'lower cost' is the most commonly cited reason for offshore offshoring, intense global competition in an environment of slower growth and low inflation demands constant vigilance over costs. Due to the low costs and high quality, using offshore resources in selected countries makes good economic sense. Beyond the cost incentive, global sourcing provides several other practical benefits, including the ability of multinational organisations to efficiently stage 24/7 operations; the opportunity to customise products and services to meet local needs; and the means of geographically deploying workers and facilities to succeed in globally dispersed, highly competitive markets.2

A key driver in the US pursuit of offshoring is cost savings. For example, Global Insight predicts that total savings from the use of offshoring are estimated to grow from $6.7 billion to $20.9 billion between 2003 and 2008. In corporations with annual turnovers in excess of $100 million the decision to use internal or external resources is determined by a mixture of both the hard dollar (quantitative) and the soft dollar (qualitative) costs.3 Key reasons for perusing offshoring arrangements include:

* The ability to leverage value from its IT operations and add dollars to the bottom line;

* The ability to gain access to technology, skills and knowledge not internally available;

* The ability to improve business processes and enable organisational change;

* The ability to provide needed short-term services without adding to ongoing operational costs;

* The ability to focus internal IT resources on core strategic plans and projects.

In high technology markets significant benefits can be realised from prioritisation and determination of success criteria, as the firm is able to identify a complete and comparable set of costs and benefits regarding investment choices." For example, resource limitations, in-house skill sets and knowledge, and expected performance and outcome measures are important factors that must be analysed in making the decision to offshore. Establishing and analysing quantitative and qualitative criteria provides a bottom-line total that indicates which investment decision is most effective and states the reasoning used in reaching that decision.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

The Global Software Industry


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?