Reasons Behind the Booming Software Development in India

Offshore software development and software development outsourcing are often cited as main reasons behind the rapid growth of software development in India. Nevertheless more fundamental factors influence this trend, while the global shift toward software outsourcing only highlights how basic principles of economics work. Outsourcing software development to third-party developers and software vendors in India is not an exotic option but a matter of lowering costs and gaining competitive advantage for a fair number of enterprises based in Europe and the United States, where local software developers are able to provide cutting-edge yet expensive solutions.

Selected countries in Asia, Latin America and Eastern Europe that invested wisely into their high school and tertiary educational systems during the past decades, now can enjoy flourishing software development industries, with global demand for software applications growing, while costs of developing software in the West is rising. Thus, software development outsourcing emerged as a solution in a very natural way, with enterprises across the world seeking less expensive yet reliable software solutions abroad.

India's strategic location in Asia, growing economy, and high educational standards allowed for creation of numerous local enterprises providing software development, IT management, and IT consulting services to business all over the world. Although Latin America and Eastern Europe are emerging as strong competitors in the field of offshore software research, development, and consulting services, India leads the pack with nearly half of all global software outsourcing contracts heading for this country. Such an unrivaled position is partially due to the huge number of local software developing companies that compete not only with software vendors abroad but tend to push prices down to the very limit, forced by the fierce local competition.

Payroll costs and labor efficiency in the West are among the hottest topics amidst ongoing economic downturn, while India does not seem to experience such problems. Local software vendors are able to provide extremely competitive pricing for high-quality services performed by well-educated specialists, which results in a constant flow of contracts from both local and international business customers. Thus, local software developers can focus on enhancing their service whereas their Western counterparts are forced to increase their marketing efforts and invest in marketing campaigns that have no immediate positive effect on their core service (a costly marketing campaign may boost sales but it does not help a company in developing better software products).

According to reports by the Indian government, India's software export is growing at the tremendous rate of 30 percent a year, urging the United States and the European Union to adopt protectionist measures to curb outsourcing of software research and development to third-party countries like India. Although such measures are welcomed in certain business circles and among white collar workers engaged in the software industry, governments in the West have to face the inevitable: enterprises will continue to look for cheaper high-quality software products and services abroad until software vendors in Europe and the United States are able to cut costs and adopt more reasonable pricing for goods and services they offer.

On the other hand, Silicon Valley companies are still in possession of cutting-edge technologies and face no serious challenge neither from European nor Asian peers. Therefore, India-based software vendors are more orientated toward IT servicing and consulting, and software development in India is still in the stage of providing supportive services to large-scale corporations based overseas.

Custom Application Development vs Ready to Use Solutions

Mainly large multinational corporations invest in custom application development, which is considered as more expensive than implementation of ready to use solutions widely utilized by small and medium sized enterprises. Nevertheless, small and medium sized businesses also take advantage of custom-made software, mainly dealing with enterprise-specific business processes and procedures that are not incorporated as best practices in ready to implement software products.

Usually, an enterprise resource planning (ERP) system would feature built-in best practices applied within the respective industry; however, a ready to use solution is not expected to cover procedures and business processes that are utilized only within a particular enterprise. The same applies, largely, also to customer relationship management (CRM) systems that are widespread among businesses within a variety of industries. In contrast, home users usually rely on software applications that are product of generic software product development.

Therefore, a large part of business require custom software at a certain stage of their development, which is now a more affordable option due to the growing reliability of products developed through outsourcing, mainly in India and other countries in Asia. Eastern Europe is also emerging as an offshoring center for software development along with a number of countries in Central and South America.

On the other hand, contemporary business software solutions are highly configurable, or, in other words, business software can fit a wide range of needs and requirements. Nevertheless, configurability does not provide a universal solution, thus customization is largely used when ready to use software is not applicable. Software vendors in developing nations like India gradually matured and are now able to offer fully functional business software at extremely competitive prices. Those countries produce large number of well-educated software experts experienced not only in managing software development but also able to tailor software to produce a best fit.

Actually, custom applications are used everywhere, replacing old-fashioned spreadsheet solutions that have been widespread for decades. Both generic and custom-made software, however, are undergoing a process of massive transformation caused by the emergence of new technologies, utilizing to the utmost the online capabilities of modern hardware and software.

Software-as- a-service (SaaS), platform-as-a-service (PaaS), and infrastructure-as-a-service (IaaS) are relatively new phenomena but all of them rapidly gain market share, especially in fields where the matter in question is how to lower the costs related to software licensing and maintenance, like in ERP systems, for example. Although those services offer a cheaper alternative to classic software solutions, only a few of them are customizable to an extent to satisfy the needs of large corporations and medium sized businesses.
In fact, they are not developed with customizability in mind but are designed to be utilized as ready to use solutions, deployed on remote servers. In addition, large and medium sized enterprises often voice concerns that applications run on remote servers do not offer the level of security and privacy required by internal corporate standards, allowing third parties to access, in theory, their company information.

Therefore, custom application development is enjoying stable growth, with numerous organizations taking advantage of tailored software in a competitive environment, where development of complex solutions can be outsourced easily.