A recent research reported that “Australian organisations are set to continue outsourcing more of their technology infrastructure and software applications“. The annual study by ITNewcom interviewed 60 executives at top IT spenders in Australia about their software outsourcing intentions and it found that 75% of organisations already outsource some of their applications, while 85% outsource some of their infrastructure.
I’m in receipt of inquiries from Australian companies interested to collaborate on development projects. The demand to outsource is strong, with the hope that the benefits of a successful partnership can be achieved. “Australia has long been considered a mature information and communication technology market for outsourcing,” and benefits such as cost efficiencies,scalability (access to experience and skills), and flexibility(ability to bring in new development trends or approach) are main reasons chief information officers and business leaders decide to outsource software development.
“Most Aussie businesses would prefer to have their staff sitting in their office, but with the high cost of living in Australia — it’s no longer feasible. I’d also much prefer to have a team of coders in my office where I could walk in, discuss, whiteboard, plan and interact with directly – especially for a startup – but that’s just not really possible any more,” said Damian Grace, Co-Founder of PhriendlyPhishing, an Australian-based startup that provides SCAM protection for businesses.
“The main reason we want to outsource is that our business model states that we are not developers. We take a code agnostic approach to digital, do a lot of new product development for our clients, and as such we are always required to innovate new ways of developing. This can become a costly exercise in the local market,” said Ben Norman of New Republique, creative agency servicing the Australian marketplace.
Gartner analyst Rolf Jester agreed outsourcing was growing at a rate far greater than insourcing – in other words bringing responsibility for IT back into the company. General Motors’ decision to bring its IT capabilities in house is a rare example of a company reversing the outsourcing trend. In Australia, there have been few large-scale moves to bring things back in house.
“The reality is that insourcing gets more share of noise and interest, than it really can justify,” said Phil Hassey founder of IT research firm CapioIT. “It is certainly not an overwhelming strategy. It does work for some organisations, of course. It does prove that there is no one definitive model for the delivery of core business requirements. IT is no different to HR, or Finance in that regard. Typically it is driven by either a change in organizational philosophy away from outsourcing, eg as a result of leadership change, or straight out bad experience with a traditional outsourcing contract. It is typically a costly and disruptive step … so the decision is not taken lightly, particularly in a Capex-shy business environment.”
ITNewcom’s study found while the Australia businesses’ outsourcing intent was strongest, some organisations did intend to insource some of their IT services over the next two years. 21% of private sector organisations intend to insource more of their applications service, and 17% more of their IT infrastructure.
Charles Zingler, Principal Consultant at Zingler and Associates, a company involved in the export of technology and outsourcing of system integration and software customization, thinks that cloud computing and SaaS offer an alternative approach and shares that software development outsourcing is definitely something that will grow in the next years.
Other companies from Australia I’ve talked to shares that the, “Philippines has a tremendous advantage in terms of the way its people communicate,” and it doesn’t just mean the way Filipinos can speak very proficient English, but more of the way Filipinos interact and collaborate in general.
In a related note, recently in CEBIT Australia, Exist had set up a good number of meetings with organizations looking to utilize software development capability in the Philippines. The annual Philippines Australia ICT forum was a success with its high attendee turnout and keen interest to strengthen business development between the two countries.