Software Development Outsourcing and Offshoring Risks and Rewards

Archived Published: 21 February 2006 ID: G00203178


Not a Gartner Client?

Want more research like this?
Learn the benefits of becoming a Gartner client.

contact us online


Today, focusing on core competencies rewards organizations with profitability and marketplace differentiation. When software development is not deemed core, it is often outsourced, while critical but costly efforts may be distributed to offshore captives. Rewards, including cost savings, agility, decreased time to market, and domain expertise, may accrue, but only with effective outsourcing and offshoring execution. Otherwise, actualized risks wipe out potential rewards. In this overview, Burton Group Senior Analyst Stuart Selip discusses the risks and rewards, and the do's and don'ts, of offshore software development.

Table of Contents

  • Synopsis
  • Analysis
    • IT Offshoring Is a Part of the Trend to Globalization
    • What Are the Rewards of Outsourcing and Offshoring?
      • Cost Savings
      • Agility—Flexible Scaling to Suit Development Demand
      • Proximity to International Business Locations
      • Locale-Specific Software Adaptation
    • What Are the Risks of Offshoring and Outsourcing?
      • Risks Stem from Distributed Development Challenges
      • Risk: Loss of Intellectual Property
      • Risk: Late to Market
      • Risk: Wrong or Missing Functionality
      • Risk: Low-Quality Software Is Expensive, Now and Forever
      • Risk: High Turnover Means Lost Experience and Knowledge
      • Risk: “Lou Dobbs” Effect
    • What Are the Risks of Not Participating in Offshoring and Outsourcing?
      • Risk: Slow Response to Changing Market Demand for SDT
      • Risk: Opportunity Cost in High-Priced Domestic Markets
    • Recommendations
      • Have a Global Strategy for Outsourcing, Nearshoring, and Offshoring
      • Assess Organizational Readiness for Offshore Outsourcing
      • Use Governance for Outsourcing, Nearshoring, and Offshoring
      • Manage Nearshoring and Offshoring Vendors Using Common Sense and Service Level Agreements
      • Manage Long-Distance Project Teams with Collaboration Strategies
      • Manage SDLC Processes with Transparency
      • Manage Security Proactively
  • The Details
    • Definitions and Impact of Outsourcing and Offshoring
      • Defining Outsourcing, Nearshoring, and Offshoring
      • IT Is Following the Globalization Trend
      • “Prediction Is Difficult, Especially About the Future”—Yogi Berra
    • The Outsourcing, Nearshoring, and Offshoring Landscape
      • Cost
      • Culture
      • In-Country Infrastructure
      • Outsourcer Process Maturity
      • Size of Outsourcer
      • Service Level Agreements
      • Staffing Models for SDT
      • Work Permits
    • Collaboration and Transparency
      • Cautionary Tale
      • Collaboration
      • Transparency
  • Conclusion
  • Notes
© 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartners research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

Free Research

Discover what 12,000 CIOs and Senior IT leaders already know.

Free Access

Why Gartner

Gartner delivers the technology-related insight you need to make the right decisions, every day.

Find out more

Call +1 855-515-4486 or contact us

to become a Gartner client.