According to Info-Tech Research Group, outsourcing application development can save an average of 20% on development costs. Larger organizations tend to be more successful at realizing savings from outsourcing, while smaller organizations have a difficult time finding savings. The primary reasons for outsourcing are to drive costs out of IT or to deliver more value to the business.
When to Offshore Application Development
Outsourcing application development has a better payoff if the following conditions exist:
- The application being outsourced is complex and not an urgent core business need. If it is urgent and strategic to the business, then the risk of offshoring to a new partner is higher.
- The project has a long-term strategic direction, aligned with the company's initiative.
- The project is at least a 2-3 year venture and has a cyclical development process. Short-term or one-off projects can work if they are high need but cannot be developed in-house if the focus is not on cost savings.
- Development turnaround time needs to be improved.
- The operations involved are stable, well-defined, and fine tuned.
