IT Manager's Journal - March 29, 2006 - Bruce Byfield
At first, outsourcing and free and open source software (FOSS) seem opposing trends. While many of its proponents see FOSS as humanizing the way that business is done by encouraging collaborative efforts, they often see outsourcing as the epitome of traditional business methods, destroying local jobs and exploiting developing areas of the world. However, Balazs Fejes, CTO of EPAM, a rapidly growing outsourcing agency in central and eastern Europe, has a different view. While Fejes acknowledges that the FOSS communities may sometimes provide an alternative to companies like EPAM, he also suggests that the growing popularity of FOSS provides a new opportunity for outsourcers, and helps to make their business more acceptable.
Founded in 1993, EPAM has headquarters in Princeton, New Jersey, and Budapest, and operates mainly in Russia, Belarus, Ukraine, and Hungary. According to Fejes, EPAM's goal is to become one of the major outsourcing companies in central and eastern Europe. If acclaim in the outsourcing industry is any indication, the company seems well on its way to realizing its goal. Global Services, a magazine and Web site for outsourcing companies, has listed EPAM at the top of its list of the Top 5 To Watch in Central and Eastern Europe for both 2005 and 2006, and ninth on its Global Services 100 list for 2006. Its services cover the complete software development cycle, including product design, testing, component design and integration, documentation, and localization.
Fejes declines to mention EPAM's clients, citing non-disclosure agreements. However, he describes EPAM's customer base as being about two-thirds North American and one-third from western European countries such as Denmark, Germany, Norway, and the United Kingdom. He adds that outsourcing is particularly increasing in Germany and the United Kingdom.
So far, Fejes says, outsourcing in central and eastern Europe is smaller business than it is in Asia. He even admits that outsourcing to India is often cheaper for large-scale projects. However, central and eastern Europe are closer for clients in the European Union – hence the industry term "nearsourcing." In addition, Fejes describes the regions where EPAM operates as having "huge untapped resource potentials." He cites the fact that Russia produces 200,000 science and IT graduates per year – as many as India – despite having one-fifth the population. In the future, he sees a trend to consolidation of the outsourcing firms in the area, and the emergence of one or two large companies that can compete on their own terms with outsourcing companies in Asia.
How FOSS affects outsourcing
The increasing popularity of FOSS brings a variety of challenges to the outsourcing industry, according to Fejes. On the one hand, FOSS threatens to outcompete companies that provide outsourcing services. After all, if companies can find the software components that they need for free, they are less likely to turn to outsourcers for assistance. This simple fact "increases the pressure on outsourcing [companies] to deliver solutions cheaper and faster." The end result, although Fejes does not mention it, may be a decrease in the wages of those hired by outsourcing companies – one of the major concerns of many who object to the practice.
On the other hand, Fejes points out that, even when FOSS alternatives are available, integrating them into existing software or adapting them for specialized purposes is not always easy. Despite the increased awareness of FOSS, many companies are relatively unequipped to deal with it. For this reason, companies interested in working with FOSS may still turn to outsourcing companies for assistance.
Similarly, although some companies have been experimenting with creating FOSS community around their software as an alternative to outsourcing, in practice such efforts may still require outside expertise. From a corporate viewpoint, Fejes says, "once you have volunteers joining the project, controlling the scope can be rather difficult."
Other clients of outsourcers, uncertain about the implications of free licenses, may want guarantees that the solutions they receive from outsourcing companies do not contain FOSS elements. Specifically, they often want assurances that they will not be obligated by a license such as the GNU General Public License to make their intellectual property free for the asking. Others, while open to FOSS, may be concerned about conflicting obligations when free licenses or free and proprietary licenses interact.
In either case, Fejes says, the requested assurances "can be rather tricky to ensure, due to the already widespread use of open source software in commercial or even industry standard platforms." In order to satisfy both groups of clients, EPAM has "to employ rather sophisticated release and scanning processes to ensure compliance." These processes include analyzing licenses during the design phase and comparing them to the clients' proprietary licenses, and checking them repeatedly during the entire development cycle.
No matter what the concerns, companies like EPAM are increasingly being forced to understand FOSS in order to stay in business. "In some cases, Fejes says, "the project is won or lost depending on our familiarity with a given open source project." In these circumstances, FOSS programmers in countries such as Russia and Ukraine may find increased opportunities with companies that provide outsourcing services.
Despite the possibility of FOSS providing an alternative to outsourcing, Fejes believes that the two are less at odds than they are usually considered. Both, he suggests, are build on distributed development, in which the participants in projects do not necessarily meet face to face. He points out that FOSS either built or provides versions of much of the technology that makes distributed development possible, including email, IRC, VoIP, and online collaboration and version control tools. Moreover, he sees the FOSS development model, in which components of a project are frequently worked on separately, as providing proof that outsourcing parts of projects does not necessarily prevent high-quality results.
For these reasons, Fejes sees FOSS-based companies as potentially more open to outsourcing than most. "By their nature they are prepared and even enthusiastic about distributed development," he says. "These companies are familiar with the required infrastructure, the communication methods, the challenges with cultural differences and time differences." They are also more likely than proprietary companies to be familiar with many of the technologies used in outsourcing, such as build farms, unit tests, and peer reviews.
In fact, Fejes notes that some outsourcing companies are FOSS-based. However, he considers this a minor trend, undermined by the focus on the community in FOSS. He suggests that such companies will probably move increasingly away from FOSS methodologies to conventional outsourcing ones because "the volunteers' base doesn't grow that fast any more."
Most of all, Fejes sees the international nature of FOSS as helping to breakdown the widespread, sometimes nationalistic hostility to outsourcing. "With all these projects going on, and engineers using components from left and right, the 'not invented here' syndrome, which was bogging down every collaborative development project before is disappearing." If he is right, then, far from being a business trend that threatens outsourcing, FOSS can be both an opportunity for outsourcing, and a means of legitimizing it. This message isn't one that many of us in the open source community like to hear, but it may be a fact of doing business, all the same.
Bruce Byfield is a course designer and instructor, and a computer journalist who writes regularly for NewsForge, Linux.com and IT Manager's Journal.
For further information, please contact: firstname.lastname@example.org