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January 23, 2004

Muddle through

Peter Burris making good point while using political science term "muddling through" to explain the unforeseen consequences of Offshoring, Outsourcing, Open source, and productivity gains -

Citing general stats -
10% of IT work has been "offshored";
quality software development labor in emerging markets costs 90% less than in the U.S., but has been and continues to rise at a rate of 25% per annum compounded;
labor accounts for roughly 80% of the costs of solution development, but only 40% of the costs of solution operations;
software accounts for roughly 10% of the costs of solution development, and considerably less than that for solution operations;
solution development fails 60% of the time.

Economic analysis of this trend is worth exploring -

falling implementation failure rates;
professional service firms (and, by extension, BPO outfits) really passing the savings from offshoring to their customers, and not just expanding gross margins;
open source software organizations sustaining themselves economically;
a rapprochement in the relationship between the open source and Microsoft communities, neither of which are going away or are going to "win";
user efforts to keep enterprise software support fees flat;
the emergence and adoption of development methods that focus on collaboration throughout the life cycle and not just during the analysis/requirements phase.

January 23, 2004 in Economics of IT | Permalink


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