What is Offshore Software Outsourcing?

Harriette Halepis
Harriette Halepis
Woman doing a handstand with a computer
Woman doing a handstand with a computer

The term "offshore software outsourcing" refers to the subcontracting of software to third party software contractors overseas. Most of these contractors reside in India, Ireland, Canada, and Israel — four countries that are capable of producing excellent software products that live up to a customer's standards. There are many advantages and disadvantages to this type of outsourcing, and all points are frequently argued.

Software subcontractors have the responsibility to develop software, test software, or to perform both tasks. Major cities within certain countries are often classified as Tier I, Tier II, or Tier III cities. Cities that have a larger infrastructure, more people, and better global connectivity are often classified as Tier I cities. These cities tend to receive the most amount of work from foreign customers.

Since software companies are under immense pressure to produce new software on a regular basis, offshore software outsourcing is a viable solution to this problem. Aside from the fact that offshore software outsourcing can drastically reduce a company's costs, this type of subcontracting can also help a company in a number of other ways. Frequently, companies that outsource are looking for ways to further develop core business. By outsourcing to overseas companies that specialize in software testing or developing, a company can produce a better quality product. In addition, certain countries, such as the ones mentioned above, are home to thousands of skilled software testers.

Even though there are many benefits to offshore software outsourcing, there are also a number of drawbacks. One of the most important drawbacks of offshore software outsourcing is quality control. It is not uncommon for a company to experience communication issues with an outsourced contracting company. Some of these contractors will deliberately reduce quality, while still remaining within a company's guidelines, in order to increase profit margins. This is done by either purchasing sub-par materials, or replacing skilled contractors with people who are less skilled; this helps to reduce salary costs.

Offshore outsourcing is attractive to companies for a number of reasons, though this practice is often hotly debated. By outsourcing, companies may be taking work away from local markets. Many believe that these companies should be hiring local employees instead of searching for overseas contractors. There are two sides to this dilemma, however, and many companies greatly benefit from hiring overseas contractors.

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