Paymon Khamooshi discusses how the rise of new IT technologies including the development of automation applications is set to revamp the onshoring services industries.
In a recent blog post for Sourcing Focus I eluded to new technologies that will soon make onshore IT outsourcing as competitive as its offshore competition. Programming technology, especially web application design, is on the verge of a revolution in automation which will have far reaching consequences for the outsourcing industry. These developments are in the very early stages, and are little understood by the wider industry, but change is definitely coming. IT outsourcing will soon be a very different environment than it is today.
Offshore outsourcing’s major competitive advantage has always been its lower labour costs. Cheaper manpower, especially in India and China, has created opportunities for enormous savings, especially in the IT sector. This savings has not come without trade-offs, though. The internet may have killed distance for some aspects of IT work, but managing a team of people from thousands of miles away in different time zones with different business customs still creates plenty of headaches. The vastly lower cost normally makes these challenges worth tackling, but automation in the IT sector will soon be rebalancing this equation in favour of high-value onshore IT providers.
The reason why labour costs are still such an important factor in IT development is the continued reliance on third generation programming languages like C# and Java. Third generation methods date back half a century, require extensive manual coding, and are therefore vulnerable to human error. Fourth generation programming languages, which attempted to overcome these problems, failed to live up to expectations and were never widely adopted. The result is that software coding is still a largely manual profession, dependent on large numbers of junior programmers to carry out necessary but repetitive tasks.
After a long wait, breakthroughs that bring the benefits of automation to IT without the loss in quality and flexibility have finally started to appear. New hybrid languages that combine the best aspects of third and fourth generation technologies are set to dramatically change the programming landscape. Monotonous, repetitive tasks can now be automated, but without sacrificing any flexibility or control over the final product.
One example of this new hybrid language is called M#. M# creates .NET web applications, but automates 90% of the coding, effectively cutting production time by nearly three quarters. The remaining 10% of the project requires the attention of an experienced senior programmer, but this is the area where onshore outsourcing normally has a competitive advantage over its offshore rivals. The time-consuming elements of coding, which favour outsourcing to markets with lower labour costs, have been eliminated. Without its pricing advantage, the argument for offshore outsourcing is significantly diminished.
These developments in IT should come to a surprise to no one. In the last half century almost every facet of our daily life has been changed by software as it has automated one time-consuming activity after another. It was only a matter of time before software engineers found a way to automate the development of software itself.
It will take time for these new developments to spread through the IT sector and for new working practices to be developed. IT designers located offshore may have little to fear in the very short term. The clock is ticking for labour-intensive programming, though. The clever business manager should be expecting new technologies such as M# to make onshore outsourcing the most competitive option before long.
For increased security, consider moving outsourcing onshore