Outsourcing software development projects to offshore destinations is a success story for large and medium sized enterprises today. Earlier, the offshore model was preferred for its cost benefits and used for non-core operations only, but today it is used for complete project lifecycles. Offshore providers have now become strategic partners of organizations, where the latter gain in terms of cost without compromising on quality.

True, offshore software developmentmeans lower costs but that happens only over a longer timeframe. The initial stages are not without expenses. One of the pocket burners is the selection process. Selecting the right provider takes time and money but it is worth it. A hurried selection can lead to a lot of grief along the way! There has to be sufficient effort made to ensure that the offshore company has the technical expertise and manpower to do what is needed. Another expensive exercise is the transition stage. It can take up to a year to completely hand over a project to an offshore provider, with significant effort involved in knowledge transfer.

Advantages - The picture is not all bleak, as the advantages far outweigh the negatives:

Cost benefits - The manpower requirements and related expenses go down. Further, costs related to equipment and system upgrades can be reduced. Signing a contract with a vendor ensures price stability, allowing the company to budget other expenses more accurately.

Focus on core business - The outsourcing company can now focus on furthering the business rather than worrying about software bugs.

Quality of service and technology - For the offshoring partner, the desire not to lose a client often makes them more willing to take on new challenges than the client's in-house resources. This is like a guarantee of quality and up-to-date technology.

Challenges of Offshore Software Development The challenges of managing this business model cannot be ignored. The problems of managing a global team sometimes make companies rethink their outsourcing plans. The challenges can be listed under three heads:

Vendor related - The vendor's security practices must be understood to avoid loss of confidential information. Both parties must agree on communication and reporting methods. Offshoring requires both parties to understand international protocols so as to tackle any disputes in future.

Country related - The vendor country's political, economic and IT policies must be understood well to minimize future risks. Infrastructure problems such as power, real estate, bandwidth scalability, etc. should not be a major hurdle for the vendor. Sometimes just the destination may be a challenge - time zone difference, distance, and possibility of natural disasters.

Personnel related - Both the vendor and outsourcer's personnel must be able to work together, making it crucial that all communication and cultural differences be sorted out in advance. Both parties must agree on technical and management skills required to continue the relationship. The vendor's hiring, training and retention methods must be evaluated to avoid future delays in case of high attrition rates.

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