Evolution of Offshore Software Development: From Outsourcing to Cosourcing

123 In the last several years, offshore outsourcing of software development has grown considerably. As just 1 Jeanne Ross was the accepting Senior Editor for this article. 2 The authors would like to thank the staff of the companies who participated in the research for their generous time and insight into the uncharted territory of offshore software development. We would especially like to thank the Vice President of Information Systems who facilitated entrée, spent countless hours, read many drafts, and offered expertise as a coauthor would. The comments of Jack Rockart, Jeanne Ross, and anonymous reviewers helped develop this article and are greatly appreciated. 3 The data for this article is based mainly on structured interviews with 13 IT executives in both firms, enhanced by a document and literature review. The interviews included Offsource staff who have spent years onsite at FISC and FISC IT staff who spent months in India. Some participants were interviewed multiple times over a 15-month period. one example, Accenture has tripled its staff in India in the last two years. 4 The current 20% annual growth rate in offshore IT work is expected to continue, if not increase, 5 propelled by managerial needs to cut costs, stories in the popular press, and the upcoming presidential election in the U.S. All executives need to explore offshore outsourcing. Competitors' use, or perceived use, makes evaluation inevitable. Even IT organizations that choose not to use offshore companies must be able to convince their senior management that they have carefully considered the option. Those who do choose to outsource need to decide how they want to work with an off-(FISC) (a pseudonym) is a major U.S. financial services company with thousands of representatives across the country. " Offsource " (a pseudonym) is a leading India-based company providing consulting and IT services to clients globally. This paper tells how their eight-year alliance has evolved. The relationship began as a simple pilot of offshore application development outsourcing, aimed at reducing development costs and supplementing in-house IT staff knowledge. It has evolved into a vastly more complex " cosourcing " model, where work is shared. To achieve cosourcing, the two firms had to resolve two major issues. The first was how to keep IT skills and knowledge from draining from FISC. This issue has been resolved by formally linking career development to project assignments and to outsourcer-to-client mentoring. The second issue is …