Offshore Software Development: Is the Benefit Worth the Risk?

The offshore information services market is estimated to be valued at $30 billion to $40 billion, with a large portion of that being in the software development area. Much of the justification for going offshore for software development services is purported to be a demand for skills that exceeds the current supply. While there is evidence of this, the current literature cites the primary motivation as cost reduction. Recent reports of U.S. companies outsourcing software development to offshore companies, while simultaneously laying off U.S. workers, appear to add credence to this assertion. This papers looks at the benefits versus the risk of foreign outsourcing for software development, and develops a set of critical success factors, which lead to a series of recommendations for companies considering foreign outsourcing.