Industry Articles
Overview:
The Farmshore
Opportunity
According to McKinsey, in 2002
North American firms spent $114
billion on in-house software
development, contracting and
purchases. During that same period,
McKinsey noted, 52% of F500
companies had already outsourced
some work to offshore service
providers.
In today's business environment,
outsourcing initiatives are no longer
exclusively the province of the F500
companies who were the early
adopters - middle-market firms are
also evaluating ways in which
expenses can be significantly reduced
by moving portions of projects to
outsourced service providers, and a
new generation of service providers
has emerged to meet that growing
demand.
McKinsey states that two out of five
Fortune500 companies currently
outsource some software
development.
Over the past decade, the model for
outsourcing has evolved significantly.
In the first major wave of outsourcing
activity during the 1990s, the benefits
were generally limited to the larger
F500 firms who had the resources,
deep pockets and staying power to
develop offshore relationships for
cost savings over the long term. The
vast majority of middle-market
companies were not in a position to
invest the considerable time and effort
required to master the learning curve
of managing offshore partnerships.
Consequently, as the offshore
outsourcing market evolved and
service delivery grew more
sophisticated, there emerged what is
now known as the Farmshore model.
In which, an onshore firm taking
advantage of lower economic climates
in other regions of the US, are able to
compete and surpass offshoring in
terms of efficiency and overall costs.
