This paper presents the results of a research project, in which the situation of local software organizations operating with global industrial customers were examined. The prospects of locally operating software organizations have been lately dimmed by the processes of globalization, IT outsourcing, and offshore software development. The current situation of local software organizations is analyzed, and also trends and challenges that they face in the future are described. In the study, qualitative analysis with grounded theory was used as the research method. The analysis identified three types of local software organizations.Using business processes, technologies, and types of customer relationships and cooperation as the basis, these types can be labelled as Anticipator, Specializer and Collector. Local software organizations had recognized their inability to compete with globally operating software enterprises and they had difficulties in coping with changes in competition caused by outsourcing, mergers, and offshore development. The analysis of future trends produced three possible models of cooperation between asymmetrical partners, tailored solutions provider, software producer, and capacity provider.