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

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.  

 

-----------------------

 

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

 

From: David RR Webber [mailto:] 

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.