The IT industry is developing an international supply chain for software development. Although hardware manufacturing and assembly have been done offshore for years, moving software development to other countries in large amounts is a relatively new phenomenon. Most offshore development is moving to India, but it is also going to countries such as Bulgaria, China, Rumania, Russia, and Vietnam.

U.S. software firms are setting up captive development shops offshore. Smaller companies have done this for some time and Bigger firms have joined the trend.

A programmer in Bangalore costs an American firm about one-quarter of what it would pay for comparable skills in the United States. Even when the extra infrastructure and telecommunications costs are added, savings from moving development offshore are still in excess of 30 percent. Technology, of course, makes it all possible. High-speed networks and collaboration software tools have made it cheaper and easier for geographically dispersed teams to function effectively.

Firms that develop software programs to facilitate such collaboration are among the offshore pioneers. Agile is one example; CollabNet is another. CollabNet offers a Web-based service that allows teams of programmers to coordinate their work.