Software Outsourcing Industry

With the advent of the information society, the global structure of information industry is transformed from hardware-oriented to service-oriented; the industry of software and information services has become the largest domain of the world in 21st century. In recent years, keeping the pace of rapid development of international corporations on its strategy adjustment and information technology such as system, network, storage, the market of software outsourcing is on fast track and becomes one of the most promising domains of the industry of software and information services. Take India and Ireland for example,enterprises of these two countries provided software outsourcing services in Europe and America, not only for the unprecedented streak of profits, but also the chance to lift itself from nation poverty, and the golden opportunity to become international center of software outsourcing and the global power on the industry of software and information services. At present, the transfer of industry is accelerating all over the world. By means of effective, convenient infrastructure, ample, talented human capital and stable investment environment, China gradually turns into the first choice of international companies. At the same time, the deficiency exists in software outsourcing industry of our nation compared with India and Ireland, either the scale of industry or policy promotions. Industry of software outsourcing in China is now confronted with severe challenges. As a result, the question of how to facilitate the development of this industry cries out for solutions.The development of nation industry largely depends on the elevation of international competitiveness of the estate. From this point of view, the research of how to facilitate is the research of finding out the key factors that take essential effects on international competitiveness, and fundamental approaches to lift, formulating an integrated theory of development of industry of software outsourcing.The generally accepted explanation of this question is Porter's Diamond model which argues that the four important factors of demand conditions, element conditions, supporting industries and enterprise strategic structure govern its international competitiveness. The factors of Governmental action and chance influence less. Yet Porter's Diamond Model is apt to explain the issues of industrial international competitiveness on condition that happened in developed countries. But for developing countries, the quotation is of limitation. Chinese scholars have done some researches on the key factors of development of software industry in developing countries. One of the representative standpoints considers human capital, fee, overseas association, immigration, government policy, industry cluster as the essential elements lead to the development of software industry in China. Still, the conclusion of taking software outsourcing industry as a branch of software is too broad to focus. Hence on the basis of the research production discarding the dross and selecting the essential is good for growth of software outsourcing industry theoretically and practically.Based on the theory of Porter's and related research findings, accounting for characteristics of software outsourcing industry, this paper rectifies Porter's six factors in order to meet the actual demands of software outsourcing industry in developing countries. Through detailed investigations and explanations, the conclusion made by is that a country, especially developing country, has to focus on five aspects to make good winning in the international competition of software outsourcing market. These five aspects are as follows: the first element is demand conditions, namely, how software products and service is needed in both domestic and international market. The second one is trust conditions which mean the social capital enterprises own. The third one is factors of production that represents the performance related to production aspect. The forth one is national software outsourcing strategy which is related to the mid-term and long-term policies favors software outsourcing industry in market competition. The last but not the least, enterprise cluster is a kind of competition form that all corporations related are assemble.Generally speaking, the development of software outsourcing industry is a systematic project. It can not be achieved by any single factor. The performance of functions of each element is closely correlated with others. In other words, all key factors that can influence industrial competitiveness join a dynamic system. Each part of the system acts or reacts on each other. Industrial competitiveness rests with resultant force of the system. The research suggests that among these five key aspects, the influential factors of demand conditions are: risk of enterprise outsourcing and market demand which based on the composition of factors of production; the cultivation of critical clients are due to industry cluster in full strength; scientific strategy on software outsourcing of the nation guide demands of domestic perception and market segments; trust is essential to internationalization of home market. The influential factors of trust conditions are: the inner cooperation of industry cluster enhances the trust between them; demand features of software outsourcing advance the trust between them. The influential factors of trust conditions are: internal competitive industry cluster activates the innovation of factors of production; demand conditions work on priority of investment on factors of production; national software outsourcing strategy conduct the structure and proportion of investment on factors of production. The relationship between software outsourcing strategy and other key factors is that demand of market perception is the precondition of generating strategy while factors of production are the basis. As for relationship between industry cluster and other key factors, trust enhances the competitiveness of enterprises in it; internationalization promotes upgrading of industry cluster; knowledge sharing drives innovation of industry cluster; breaking lock of industry cluster, national software outsourcing strategy boosts upgrading of industry cluster. Synthesizing the correlation of factors, this paper proposes a model of five factors about the development of software outsourcing to make guidance.According to the correlation of factors in five factors model, this paper figures the fundamental approach and solution to strengthen and upgrade the development of software outsourcing as follows: reducing risk of software outsourcing to increase demand; enhancing relation management, quality control of software outsourcing, taking advantage of immigration resources, software guild, strengthening protection of intellectual property rights, building and maintaining the trust among enterprises; creating advanced factors of production the enterprise needs by means of cultivation on human capital, infrastructure and cost input; generating national software outsourcing strategy conducive to long-term competition based on balancing many-sided factors; promoting upgrading and development of software outsourcing industry cluster by means of administration on global value chain ,network and foundation of interactive learning mechanism in cluster.By now, these three parts, including five key factors, five key factors model which represents the correlation of them, and fundamental approach of enhancement, consist of a framework of analysis formulating a relatively integrated theory of software outsourcing industry.As the major software outsourcing contractor in the world, India and Ireland are analyzed under framework mentioned above. On one hand, their experience strongly proves the theory; on the other hand, their limitation and challenges can also be a beneficial supplement.With analytical framework to review software outsourcing industry in China at present, we find that, the industry itself faces a lot of problems such as limitation of integration, irrationality of personnel structure, lag of investment environment, lack of intellectual property protection, hypo function of guild, deterioration of service ability, rubber check of industrial supporting policy and so on. To all of the problems, this paper advises that the whole nation should generate niche strategy, build training and introducing model combining universities, professional training organization and corporation, enhance function of guild on cluster management to increase trust among enterprises. Besides, there are three ways to promote upgrading of industry cluster which are break of cluster lock by taking advantage of global financial crisis to hasten upgrading; integrity of knowledge sharing mechanism to step up the learning abilities of industry cluster; enhancement of bargaining power to heighten value chain upgrading in software outsourcing industry.