ISVs Who Multisource to Nearshore, Offshore Locations Rate Service Providers Higher than ISVs who Outsource Only Domestically, According to Luxoft’s “2007 US ISV Market Report: Key Factors in Outsourcing”

Results to be Revealed at SDForum Roundtable “IT Outsourcing Today: What Matters the Most,” October 2

San Jose, October 2, 2007 – Luxoft, Russia’s largest provider of high-end IT outsourcing services and product development to clients such as Deutsche Bank, IBM, UBS, T-Mobile and Ping Identity, today announced results from the “2007 US ISV Market Report: Key Factors in Outsourcing” survey that included the surprising finding that ISV companies employing a multisourcing strategy ranked their overall perception of performance higher than those outsourcing their development work only to domestic providers .
 
The difference is statistically significant – and consistent – across the 10 key business decision factors, including workforce experience and education, supplier domain expertise, supplier attrition rate, and cost savings, and particularly in the areas like quality and security which were identified as most important to ISV clients. In fact, on a scale of 1 to 7, only 31 percent of ISVs that have stayed domestic-only rated providers a 6 or 7 on the performance scale versus 39 percent of ISVs with multishore and multisource experience.

Additionally the survey, which gathered data through in-depth interviews with 213 decision-makers at US-based independent software vendors (ISVs) with greater than $10M in annual revenue, found that median budget size was larger for companies that multisource ($150,000) than for those that outsource domestically ($100,000). The likelihood of future outsourcing varies significantly between these two groups as well. Companies that multisource/multishore have greater plans of outsourcing in the future (74 percent very likely) vs. companies that use domestic-only service providers (39 percent very likely).

Co-sponsored by the SDForum, Silicon Valley’s leading source of information and education in the technology community, the “2007 US ISV Market Report” was designed to better understand the state of outsourcing, including when, where and why ISVs choose to outsource software development as well as to identify best practices that would ease and guide ISVs through various stages of their outsourcing engagement cycle.  Ninety-four percent of ISVs have outsourced some or all software developments projects in the last 12 months.  Multisourcing is clearly more popular, with 64 percent of respondents indicating they multisource.

“The ISV community is a grown and important sector of the ITO market. At Luxoft, we want to get a better handle on ISVs’ needs and priorities. Part of doing this research was to better understand the most important variables to our ISV clients so that we can focus and improve on areas that are of a most priority,” said Michael Vax, CEO Luxoft Canada. 

Outsourcing Success Factors
The “2007 US ISV Market Report” also found that cost is ranked 3-4 times less important than quality as a driver in the decision of vendor selection when outsourcing IT development.

In line with industry trends and challenges, the survey also found that 41 percent of respondents said hiring talent was either difficult or extremely difficult – a significant factor in turning to outsourcing providers when needing developers (61 percent), testers (48) and project managers (40).

Vendor location and security were other important factors when selecting an outsourcing vendor. From a nearshore perspective, US ISVs said they were more likely to outsource to providers in Vancouver (56 percent), Toronto (52) and Montreal (52); 42 percent said it was unlikely they would outsource to Mexico City.

“As the outsourcing market has evolved, there has been an increasing demand from customers for high end outsourcing services that aim to reinvent core business and technical processes,” Vax said. “In this type of sophisticated engagement, vendor quality, deep domain knowledge and a strong global resource and management pool become more critical than cost savings alone.  With this survey the ISV community is also confirming that they consider many of the same attributes important for success.”

The survey participants’ basic resource needs were reflected in the type of work they cited as most commonly outsourced, including software development (53 percent), software maintenance (46), quality assurance (43), performance testing (35) and software architecture (32).

Luxoft will unveil the details of the “2007 US ISV Market Report” at an SDForum roundtable, “IT Outsourcing Today: What Matters the Most,” to be held 8:00 am on Oct. 2nd at the Pillsbury Winthrop Shaw Pittman LLP office in Palo Alto. The roundtable will feature executive panelists from neoIT, Everest Research Institute and Luxoft Canada and be moderated by Rusty Weston, Founder & Chief Blogger, My Global Career.

The event is $20 for SDForum members and $30 for non-SDForum members. Visit SDForum’s website at www.SDForum.org to register or view the complete agenda.

For those unable to attend, the survey report is available for free at www.luxoft.com/isvresearch/prdownload.html.

About Luxoft
Luxoft, founded in 2000, is Russia’s largest provider of high-end IT outsourcing services with operations in the US, Canada, UK, Ukraine and the world’s largest delivery capabilities in Russia and CIS.

Luxoft works with global enterprises and independent software vendors (ISVs) enjoying long-term relationships with industry leaders such as Deutsche Bank, IBM, UBS, T-Mobile and Dell.

Luxoft's software development processes meet the highest quality standards, and the company was the first in Europe to achieve Level 5 CMMI quality certification. Luxoft runs research and development centers in Moscow, St. Petersburg, Dubna and Omsk in Russia as well as centers in Kiev, Dnepropetrovsk, and Odessa, Ukraine, and Vancouver, Canada.

Luxoft is the recipient of the 2007 Frost & Sullivan Global Outsourcing Growth Excellence & Customer Value Leadership Award and was named a finalist for the 2007 Outsourcing Excellence Award sponsored by Everest Group and Forbes Magazine. In addition, Luxoft was dubbed a Rising Star in the 2007 Global Outsourcing 100 from IAOP and was ranked the world's #1 IT Outsourcing Product Engineering Vendor in the 2006 Black Book of Outsourcing.