While businesses have been outsourcing IT workloads for decades, the internet age has witnessed a marked surge in the number of organizations looking to form development agreements with outside partners. Advancing countries throughout Asia and Eastern Europe have become prime destinations for American companies allured by cheap software development labor. India, in particular, has emerged as a global leader. Other top offshoring locales include China, Ukraine, and Vietnam.

Blinded by attractive rates, some clients rush into these relationships without first grasping the significant disadvantages that can arise with utilizing overseas development. Analysts estimate that “50% of offshore outsourcing contracts signed by North American companies fail to meet their expectations. Through their offshore journeys, companies often realize that expected cost savings are much smaller, and problems are more difficult to address in comparison with co-located development.”



The number one reason companies choose to offshore development is usually “cost savings.” According to PayScale, American software developers earn an average of $70,000 per year, a whopping $63,000 more than a typical developer in India who makes just $6,700 annually. But what is the true cost of offshore development?


Outsourcing – Weighing Opportunity and Project Costs

Simply put, outsourcing is the process by which one firm hires a third-party to fulfill one or more of its business needs. In the world of software development, outsourcing is on the rise. As you’d imagine, the right vendor can provide an enormous advantage to your company. However, choosing a development partner that fits your organization isn’t a simple, straight-forward process.

For example, there are factors such as offshore versus onshore, costs versus expertise, outsourcing versus outstaffing, and many pros/cons upper management should weigh before a final decision is made.