subject: Advantage and Disadvantage of Offshore Software Development Service [print this page] Advantage and Disadvantage of Offshore Software Development Service
Offshore is a provision of software development services by an external supplier positioned in a country that is geographically remote from the client enterprise; the main reason behind the companies to use offshore software development services is the higher development cost of the local service providers.
Offshore Software Development has emerged as one of the most successful business strategies in today's world. It facilitates the companies to focus on their core activities while at the same time providing them with a means of fulfilling their business requirements and that too in a cost effective manner. It has thus, become a necessary strategic tool for companies to gain the competitive advantage by staying ahead in their own market in ways different than their competitors.
Offshore development has become a trend in the technology sector owing to an array of its multi-dimensional advantages ie;
Cost Savings: Offshore development helps the companies curb the ever-rising costs in the technology sector. Offshore helps the companies cut costs significantly, while getting their projects completed successfully alternatively.
Global Talent: Offshore development expose customers to a pool of global talent where companies get a chance to work coordinately with talented and experienced professionals.
Quality Software: Outsourcing scores more than in-house software development in terms of quality. Offshore development focuses on software development process and let you focus on your core competencies peacefully.
Competitive Edge: The companies that outsource their projects are in a better position to find appropriate talent for their projects which apart from giving them a competitive edge enhance company portfolio.
Focus on Business Processes: Outsourcing software projects allows the companies to shift focus on other important business processes.
Enough Time-to-Market: The companies get enough Time-to-Market and formulate effective marketing strategies apart from implementing new concepts and ideas related to their products by outsourcing their software development burden.
Reduces Costs & Investment: Offshore development help the companies reduce their costs to hire new talent and train them, infrastructure costs, management costs and other such important costs.
Risk Mitigation: Offshore development shares the risk factors of a software development process. Outsourcing projects sublet's down the risk factors as the offshore projects are handled by experts who are engaged to solely concentrate upon such projects.
Offshore development's disadvantage:
Loss of Managerial Control: The service provider is a separately managed entity .The contract between the service provider and the client may overlook certain factors, which could result in a total mismatch of policies of both parties. It may be much easier for the client to get the job done by its own employees rather than someone else over whom he has no control.
Communication Gap: The communication gap between the country where the service is being outsourced and the company that required the service can also negatively impact the business.
Hidden Costs: The very idea of outsourcing is that it would help enhance the profit margin of the client company. However, very little attention is paid to the costs involved while engaging a vendor.
Often a client seeks the services of a consultant (who has to be paid a handsome amount in return) to help hire a vendor. If, on the other hand, the company takes it upon itself to hire a vendor it would mean waste of precious time and labor.
Contracts have to drawn between the vendor and outsourcer, and old ones may have to be renewed from time to time. Coordination between the two sides has to very high to avoid the legal costs cut into the profit. The expectations on both sides are often unrealistic.
The employees of the vendor company may require training to sharpen their skills and make them more competitive.
Threat to Security and Confidentiality: Some matters are by nature meant to be confidential. For example, vendors dealing with salaries, bank accounts and financial matters have to maintain high levels of confidentiality and secrecy. They are engaged in good faith. Any breach in the security and confidentiality can result in irreparable damage to the reputation of the service provider. Both the outsourcer and the vendor have to guard against frauds. Employees of vendors have to be screened properly for this reason. Outsourcers have to be clear whether they want to outsource a particular task at all considering the risk they may be putting themselves to.
Inflexibility creeps in: Another great disadvantage that outsourcing can cause is that the outsourcing partner may turn out to be inflexible to changes in business environment. The focus on the consumer is lost as also the need for sharing the cost savings.
Political, cultural and Language problems: With offshore outsourcing, there is greater risk of the outsourcer being entwined in the politics of the vendor nation or of at least be affected by the political instability in the region. Thus, smooth functioning could be hindered.
Cultural differences are also greater in case of off shore outsourcing. Misunderstandings can occur due to differences in language.
Other Barriers:
Quality Problems:
Tied to the Financial Well-Being of another Company
To avoid offshore development's disadvantage company should have pay attention while select right service provider:
Do's and Don'ts to select a right service provider:
We Should Do (Do's)
Pick established partners. Check them out. Talk to their existing customers
Familiarize with the services providers' way of doing business
Target service providers with relevant experience
Be aware of the benefits new technology can bring
Be sure you get what you pay for. What you are aiming to find is a company that will generate a good quality result
We Should Not Do (Dont's)
Never ever trust an unknown company
Failing to talk to a provider's current and former clients
Failing to consider the long-term relationship dynamics
Think before you run for cheaper services
Not to use old business models and superimpose new technology on them. New technologies demand new business models.
