Survey: Offshoring does not cost developer jobs

Offshoring of software development by software companies is not costing Americans jobs, according to a report being announced Thursday by the Software & Information Industry Association (SIIA).

The association is releasing its Global Software Development Survey Report, which surveyed 114 American-based software companies last year. In a conclusion that stateside developers probably would not find surprising, SIIA found that software companies are increasing offshore software development efforts. However, companies are not looking to displace American workers, said David Thomas, executive director of SIIA.

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“[Offshoring] was used almost entirely as a form of expansion, not as a replacement,” Thomas said.

“There’s a lot of negative talk,” that is particularly political, about offshoring costing American jobs, Thomas said. “That’s not really the case.”

The biggest challenge for software companies was they could not build development teams fast enough in the United States because of a shortage of both engineers and H-1B visas, Thomas said. Offshoring provided a way to leverage existing developer teams, he said.

SIIA found that 57 percent of offshore participants have significantly increased offshore work in the past 18 months. Many plan to continue to do so. 

Sixty-eight of the companies surveyed had offshore operations while 46 did not.

Growth was cited as an important or critical driver for 84 percent of respondents doing offshoring; increasing speed to market and productivity were the next most important drivers.

SIIA said respondents claim to be meeting 80 percent to 100 percent of cost-saving goals. But gains in productivity appear to be less-than-expected.

Seventy-three percent of respondents report a positive impact on profits and two-thirds claim the quality of work is above average compared to the onshore staff. Twenty-five percent rate the quality as excellent or outstanding.

The research found that some companies underestimate what is needed to succeed and how much effort is necessary for adaptation. This situation is exacerbated by a tendency to think in the short term, focusing on goals such as cost-cutting.

No single business model was cited as being optimum for offshore development. About half of respondents worked with an offshore provider while a third operated a subsidiary or captive. A quarter utilized a hybrid model of both approaches, SIIA said.

Companies not doing offshore development cite concerns including product quality, loss of control, fear for intellectual property and impact on internal staff morale. Some 91 percent of those not offshoring said loss of control was somewhat important or very important in their decision to not take the offshore route.

SIIA is a trade association for the software and digital content industry.