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Many companies choose outsourcing and offshoring of their software development to cut their costs. Although there is nothing wrong with the idea, it is rarely executed correctly to realize the expected results.

After listening to well-delivered sales spiels, some managers tend to look at the offshore costs and come to some interesting conclusions. “Hmmm! I could have four software developers for the cost of one”“ or even ““Cheaper, better and faster!”“

All true, however, this gain is not fully realizable as there are several costly and time-consuming obstacles that need to be overcome. For a small flavor, here are a few examples -

1. Ramp-up time or knowledge transfer time – it often takes projects weeks or even months to be able to teach a newcomer the details of a system.

2. Management and the offshoring overhead – outsourcing often needs an intermediate level of management or coordination that may not have been required in your classic organization.

3. Proximity – there is an overhead that is generated when teams are not working face to face.

4. Time zones – working with people in different time zones can add on a set of constraints to a working environment. The time window for collaboration is often very small and simple issues might require multiple days to resolve.

5. Travel costs – travel to and from the offshore location can be both costly and very time consuming.

6. Process changes – Bridging the process gap between organizations is not a trivial task. Outsourcing is process intensive by nature.

7. Cultural changes – often seen as a minor adaptation; nevertheless, requires time to be able to work with another culture.

Outsourcing should be seen as a strategic long-term investment; where the investment period itself could span several years. Then, it could be several years before the investment on outsourcing actually starts to pay off.

Offshoring for the short-term gain could end up costing more than conventional in-house development. Those who choose outsourcing need to have a clear strategic plan. My book “IT, Software and Services: Outsourcing and Offshoring” is aimed at helping you develop a tailored strategic plan for your organization.