In early years of this decade, companies had started realising the benefits of outsourcing the activities to the experts that provides them competitive advantage. With more and more companies outsourcing their software activities, the global market for offshored IT services and business processes has nearly tripled since 2001. In bid to take advantage of this fact, players are now diving in this industry.

Offshore software development has now become the battlefield with cutthroat competition. The existing players are making it difficult for new players to enter in custom software development market and new players, like new IT ventures and contries, are trying hard to get themselves identified as software service providers. In attempt to increase the market share, companies are shifting their focus towards local opportunities. To sustain current growth, the seasoned players are sorting out the options in new upcoming technologies like mobile.

As far as the two major software development countries in outsourcing, India and China, has the most of the global IT market share and cover the larger pie of offshore development market. Both these countries have thousands of IT companies that are offering many different types of development and other IT services. In both these countries the growth of Information Technology industry is remarkable. And both countries are competing closely with each other.

The software development market is becoming exceptionally competitive. Even though, India and China are considered as the competitive software service providers considering the quality of the service they provide, the new countries like Philippines, Russia and Nigeria are also preparing to make a dent in this market. The countries are making deliberate efforts to gain edge over English as deliverable.

The current market can not be dictated by lower prices alone but quality and service is forming the core in software development. The winner of the deal is now decided on the total offerings- cost, quality and service. To address the quality related issues more and more companies are turning towards ISO and CMMI to get certified themselves as quality providers.

The profit margin and profit earnings have made this market lucrative to enter and hence very competitive. Survey suggests that around 30% of the software companies do cover their investment and start earning profits within two years from commencement. Moreover, 40% to 45% of the companies are gaining higher than their investment withing short period. Still their are number of companies who have failed due to lower quality development services. Despite of this the market is moving upward with India becoming the hotspot for software development services.

Increased competition worldwide for IT services has made it tough for the companies to sustain their position and creating an entry barrier for the new entrants in offshore software development market.