Software engineering education in developing countries - responding to the outsourcing challenges

IT outsourcing is a great chance for technological and economical growth of developing countries. Natural outsourcing vendors are small and medium enterprises. To obtain higher competitiveness in that sector, skilled engineers are required. Academic environment doesn't provide students with enough experience with real-life problems. We discuss the state of students' knowledge in Croatia as demonstrated on the software engineering course which tries to place students in an environment similar to an industrial one.