Tremendous interest has been generated amongst organizations with the initiatives in outsourcing software development to offshore centers, such as, India, China, and Russia. It has brought in large controversies across the IT world. The business philosophy of outsourcing of jobs and its core competencies have brought in interest, and heated disagreements as well at all levels of the society.
There are uncertainties surrounding these debates, and yet business executives are routinely labeled as interested in the offshore philosophy simply because they want to save money. Organizations are under pressure to deliver software development with cost savings and return on investments, with qualifying increase in profitability and shareholder value. Though there is no denial that technology has played a great part in the success of the majority of the business initiatives, there is a tendency of viewing IT resources as commodities. This tendency is drawn to the offshore philosophy by the sheer rock-bottom development rates, with the hourly offshore rates standing at one-third to one-half of the domestic rates. From this standpoint, offshore looks to be a brighter prospect.
As offshore takes a leap, the IT leaders are slowly learning the cost of trusting and the risks involved with offshore software development.
Any step taken towards offshore software development should be viewed as a major commitment of time and money. Going for offshore partnering is a serious enough proposition. It should be analyzed in the same way as one would do while going for an acquisition of an overseas company.
Practically, the offshore concept lets you acquire the foreign IT firm that would form an essential integral part of your company for years to come. Any company in the US wanting to acquire a firm in India, China, or Belarus would do so after a deep analysis and understanding of many complex business issues.
It is not quite a straight forward process in carrying out an offshore partnership. It requires the understanding of many aspects of the project, including establishing the relationship between the onsite and offshore companies, industry, value proposition, products and services, competitors, processes, organizational structure, and much more to enable offshore partnership to produce results.
While it is costly to set up an IT development center in the US, and the same is true for the offshore establishments, many of the offshore firms have their infrastructure in place, barring few upgrades, additional hardware, and unique software packages for the project to be developed.
The basic communication and project management administrative tools, such as the phone systems, VPN, email, Instant Messenger, audio and video conferencing equipment, etc. need to be addressed, without which significant risk in implementation of the project will not be accounted for in the plan.
There is a vital risk matter that needs to be considered in offshore project development tasks. There are much macro-level issues that cannot be ignored when proposing an offshore software development project. In proposing such matters, you would need to look into the legal issues in the offshore country. There will be political and regulatory laws to be concerned with, and intellectual property risks and natural disasters need to be taken into account.
As you prepare to analyze the proposal for offshore your project you would need to ask yourself questions not found in domestic software development outsourcing:
“What is the potential impact on your project and your business of a material change in the political, regulatory or legal environment in your offshore vendor’s country?”
“How will the labor cost estimates swing if there is a significant change in the value of the US dollar abroad?”
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- Challenges in Offshore Software Development
- New British Law Might Soften Offshore Outsourcing Demand
- Small Business Opportunities in Offshore Software Development
- Thinking Offshore Web Design? Think Again!
- Offshore Software Development Dynamics
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