RE: [bcm] Economic Importance of BCM to offshore sourcing

["Neil Wasserman" <nwasserman@adaptiveservices.com>]

Yes, David, I agree that this trend is hugely important. 

 

The outsourcing process is a classic example of a disruptive technology in the Clayton Christensen concept, only here we don't have a technology but a change the process of software production.  The huge reduction in labor costs through outsourcing will, in my view, both change the economics of the software industry and the nature of what we mean by software application.  As described by Christensen, a disruptive technology enters at the low end of the technology food chain and then moves up.  For example, transistor radios at first captured the teenage market which didn't mind having a poor quality radio because there was no alternative low-cost solution.  The same with rebar steel.  Then the offshore industries moved up to higher value markets with high-quality stereos and steel. 

 

A similar process is occurring with software outsourcing.  The first target was low-cost standard programming.  Now the offshore companies (with the help of onshore partners like IBM, EDS, Accenture ...) are moving up to compete with higher priced application development and business process outsourcing. 

 

All of our efforts on standardizing the interfaces among user environments and between service encapsulated software components accelerates the outsourcing trend.  Standardized interfaces and bridges among communities of interest make it easier for companies in India or elsewhere to take a spec, produce software, and have confidence that it will run in the customer's environment.  It also becomes easier for the outsourcing company to contract out. 

 

Now what really gets interesting is the impact of deflation in software development costs on the nature of the application or service itself.  Components become commoditized because building them for reuse is less expensive.  But customization also becomes cheaper.  This may mean that higher level business services, whose integration with software service components requires customization, can also be supported with outsourcing.  Business service orchestration will not have to wait for the automated tools to support it.  Outsourcing will mix with the integration tools to bring the costs down and make things economically possible that weren't possible before. 

 

The question is: will the effect be like that of the washing machine, reducing the number of hours spent on drudgery and leaving more time for more rewarding pursuits like Saturday soccer, shopping, commuting?  Or will it be like the steam engine, throwing who communities out of work and transforming the society?  Few deep changes are benign.  How will we manage this one?

 

One VC executive told me that "technology used to matter, but it doesn't anymore."  What he meant was that technology development had gotten so good and so cheap, that the VC thinks of it not as a special value for the entrepreneur, but as a given.  What is left is business value, domain knowledge, management skills and the like.  Perhaps it's the same with low-cost software production.  That  will be the given.  What will be left?  That's the interesting question. 

 

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Note: I think I'll put a little time aside this vacation to write an article about this interesting subject.  If any of you have any suggested comments or references, I would appreciate them. 

 

Neil

 

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From: David RR Webber [mailto:david@drrw.info]
Sent: Wednesday, December 24, 2003 12:05 AM
To: BCM OASIS
Cc: eGov OASIS
Subject: [bcm] Economic Importance of BCM to offshore sourcing

I believe we need to seriously understand this.

 

Technology that allows you to treat lowcost

application deployment solutions as a commodity -

because they conform to open standards - and

therefore the control mechanisms that drive them

are fully open and enable on-shore workers to

configure and manage the solutions are essential.

 

BCM's role here will become critical within 6 months

to a year as this trend accelerates.

 

Otherwise its like owning a tool - that you can only

change what its doing when someone 6,000 miles

away pushes a button to allow you to...

 

 http://money.excite.com/ht/nw/bus/20031223/hle_bus-n16213240.html

 

DW.