Software Outsourcing

By: Santanu Ghosh

Software outsourcing is a job contract awarded by a contracting party from a country to a company having a team of human resource with a definite skill set sitting in another country. On completion of the proposed job the software is shipped to the client’s organization.

The need to rapidly complete large development projects has cause many organizations in recent years to consider outsourcing work rather than perform development in-house. A major reason for doing this is the reduction in costs that can be achieved, compared to those incurred if the work is executed in their own IT department. Development time can also be shortened, especially if the company does not already have the skills required to undertake the project. Thus offshore software development has seen tremendous growth in the last few years. Offshore outsourcing provides the ability to hold skilled overseas staff at a small part of the human resource cost which is elating to several entrepreneurs.

But there is a flipside of the story. Corporate executives can see software development and support, and the whole of Information Technology as a cost, and not as a strength, nor a differentiator. So they start thinking of it as something they can subcontract, just like security guards. Thus huge cost savings, time optimization and talented technicians in a negligible risk environment are often accompanied by some challenges such as communication gaps, decreased visibility to project status, hidden costs, difference in work culture, communication styles, and time zones. Moreover there lies a long term safety and security concerns of giving everything to a foreign country, and a foreign jurisdiction.

So the key to success of a offshore software project is the smooth flow of communication between the offshore vendor and the onshore client. Continuous constructive dialogue between the two sides is not limited to verbal communication, but is aggressively pursued in writing, meetings and conferences. So local presence of the offshore vendor can be a huge advantage for the client – though it might cost the client more.

The client should be very careful about the project budget. Proper budget forecast includes vendor rates, risk involvement, scope of change in the project specification and vendor resource matrix. The financial terms should also be decided and agreed upon beforehand. Both the parties should maintain adequate transparency in order to achieve successful completion of the work.

But after all these effort certain issues can reap up at any point or at the end of the project. There is always a chance of a mismatch between expectations and deliverables. Further, offshore development requires a methodology quite different from local development. For example, an onsite development team can resolve critical issues by meeting in a conference room. When teams are diverse, you have to create a process that automatically keeps everyone in the loop.

So many companies are gradually setting up their own offshore development centers. Though it is not always a feasible solution to small or medium enterprises. They can consider the option is of taking a stake (in the form of equity partnership or acquisition or merger) in an existing offshore company with an impressive employee retention rate and a stellar track record, ensuring quality management and a loyal workforce.

Provided you adhere to process and ensure accurate and prompt completion of projects, there is a significant savings from moving work offshore. The hardest part to quantify is the ability to get something done quickly and getting it to market ahead of your competition. For others with the time to learn the culture and establish relationships, the need to have at their bidding a full-fledged offshore team, and the money to invest, starting their own offshore center makes sense.

About The Author A native Calcuttan, Santanu Ghosh is a man on a mission. This 38 years old man is the founder of a successful software development company, Simplesot Technologies. This Indian company boasts clients across the globe with its quality services. Santanu is in the field of Information Technology for last 15 years. He was the head of an IT company before he started Simplesoft. According to Santanu “To be successful, you have to stay focused, and be extremely good at what you do. There will always be setbacks – and I’ve had my share – but you have to get back on your feet, and keep thinking big." Much of his success, he believes, is largely due to his ability to build extensive networks Fun and frivolity aside, he also understands the need to invest in the future, and ploughs the bulk of the company’s profits back into R simplesoftindia.com sghosh@simplesoftindia.com

This article was posted on January 24, 2006

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