In the 1990s, two powerful trends emerged that changed the way software is built today: Open source software (OSS) and IT outsourcing (ITO). As Linux served as the torchbearer for OSS, and the Y2K threat resulted in mainstream adoption of ITO, both models have grown significantly in the past decade.

Although these trends have evolved independently, there are several ways in which open source and outsourcing are working together to present new prospects for the industry. Here's how software businesses can derive maximum value from these investments while minimizing their risks.

The Similarities Between Open Source and Offshoring
A recent report by The Standish Group states that adoption of open source software models has resulted in savings of about $60 billion to consumers every year. McKinsey predicts that the global software outsourcing business is expected to hit $1.6 trillion by 2010.

As the world moves towards SaaS and Cloud Computing, both OSS and ITO are facing several opportunities and threats. Some industry observers have predicted that the commercial vendors will be the saviors of OSS. Other pundits expect a downfall in outsourcing as we know now, in the face of rapid adoption of cloud models.

While these two phenomena have evolved somewhat independently, there are also many shared similarities. Consider the following characteristics:

Freedom
OSS is free in the way it gives philosophical and technical "freedom" for developers to use, study, modify and re-distribute it. The use of such software has helped reduce vendor "lock-in" in an industry dominated by many powerful megavendors.

Similarly, ITO frees up an organization to focus on its core competencies and outsource the non-core work. For example, while Apple conceptualized/designed/marketed the iPod, it outsourced the manufacturing work to Asia. Similarly, an ISV (independent software vendor) can choose to focus on product management and marketing, and engage an Outsourced Product Development (OPD) vendor to handle the engineering work.

Strategic Advantage
Since OSS provides access to the source code, the user is free to enhance and/or change the software to suit organizational needs. It is much easier to custom-build on top of the pre-packaged foundational and plumbing components of the OSS. This helps avoid the Proverbial re-invention of the wheel, thus creating high quality software in reduced timeframes.

In a similar vein, ITO can significantly increase competitiveness if it is clearly understood and implemented, for example if sound decisions are made about when and what to outsource and to whom to outsource it to.

Quality
During the initial days of the OSS era, the world was just not ready to accept that a bunch of developers from across the world can produce commercial-grade software. However, the popular trend has been that a commercial organization adopts and nurtures an open source project to drive the overall strategy and direction of the project. This has resulted in reduced chaos and an increased ability to manage complexities. Projects like Apache and Mozilla have silenced the critics by producing excellent output.

Moreover, the proprietary software vendors (with teams drawing huge paychecks) have unwittingly contributed by frequently unleashing buggy software on unsuspecting users (thus, driving users to different products).

While fixing Y2K issues was routine and menial, the outsourcing industry soon morphed itself in to a powerhouse delivering mission-critical software from across Asia, Eastern Europe, and Latin America. In fact, the transformation of the capabilities of these nations has made such an impact that U.S. President Obama recently announced that he is laying the foundation of an education system that would help America compete effectively with China and India.

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