Low IT Cost and Capital Expense: By offshore development resources, you can make a tactical investment in a project team focused on specific deliverables rather then a strategic investment in full time. In addition to lower labor cost, a number of countries offer tax advantages and other economic incentives to business. A side benefit of using external labor is a reduction in turnover and increased retention of your onshore staff – you can provide them with more motivating, stimulating projects, allocating routine development projects to your offshore resources.

Ability to Focus on Core Competencies: By handling over non core activities to a trusted third party, a company can concentrate on activities central to its values propositions and increase its competitive positioning.

Access to New Skills and Technology: Outsourcing gives company access to resources not available internally, such as modern, up-to-date technology and skilled human capital.

Faster and High Quality Services and Improved Efficiency: vendor’s economics of scale, combined with service level guarantees, translate into increased operational efficiency for a company.

Greater Flexibility: The flexibility gained through outsourcing helps a company to react quickly to changing market conditions, fluctuating demands cycles, and increased competition. Outsourcing Organizations provide management with flexible and scalable services to meet their customers' changing requirements, and to support company moves, consolidations, and acquisitions.

Improved Predictability of Costs: Outsourcing provides a company with a predictable yearly cost for the management of all or part of the IS infrastructure.

Improve Level of Support Offered to the End User: Outsourced desktop support provides faster services and improved end user support and can reduce the overall operating and managing costs.

Achieve World-Class Standards/Benchmarks: Outsourcing Organizations reengineer business processes to incorporate the best-in-class practices of the world's leading companies, and use performance measures and benchmarking to improve performance and costs.

Loss of Innovative Capacity: The client loses the ability to critically assess the Selective Outsource Partner's practices, and the in-house capacity to drive meaningful improvements to contract staffing business practices.

Lack of Organizational Knowledge: The client becomes too detached from contract staffing failing to remain current with industry trends, benchmarks, and developments. As a result, the client becomes operationally and strategically reliant on the Selective Outsource Partner.

Weak Vendor Management: The Selective Outsource Partner lacks the innovative capacity and management skills to sustain the business advantage an outsourcing program should provide.

Outdated Methods and Tools: The Selective Outsource Partner fails to update its methods, practices and business tools in response to changes in the job market, the client's business requirements, and to industry, management, and technological developments.

Weak Vendor Staff: The Selective Outsource Partner's staff lacks the appropriate knowledge, skills, abilities, and/or experience to effectively manage the client's transactions, and to optimize outsourcing results.

Legal Challenges: There are many issues in general, which anyone consider doing IT outsourcing from European countries. These include intellectual property rights, export and import, taxation, labor and currency laws, company accounts.

The original objectives and proposed solutions

Organization and method of the project

Comparison of estimates and actual results

Successful aspects of the software application

Problems involved and suggestions to avoid them in future

Due Diligence exercise: A key to success- when selecting an outsourcing provider, it is important to be rigorous during the due diligence, the customer should leverage various means like industry connection, referrals, and prior-experiences, perform a prototype or pilot stage is possible, visit vendor premises at India.

Right Pricing: Arriving at a comprehensive pricing scheme and establishing service level agreement (SLA - A service-level agreement is a contract that defines the technical support or business parameters that an application service provider or other IT outsourcing firm will provide its clients. The agreement typically spells out measures for performance and consequences for failure) and metrics to measure performance are also critical to success. The SLA should include factors like productivity expectations, online availability, and uptime and response time for production support.

Setting expectations correct: Another key to a successful outsourcing engagement is to clearly define the scope and requirements of the work.

Where to outsource: Outsourcing arrangements can be onsite, near site and offshore. More outsourcing is moving to offer all the options. However, the best advantage is when most of the activities move offshore. The majority of outsourcing takes place in India, the attraction being language, due to which communication barriers are not quite significant as they are in other parts of the world. Other reasons in India’s favor are time zone, ready availability of skilled IT professionals etc.

Process and quality: Part of the selection criteria may be an outsourcer’s expertise in the ISO, industry/technology standards and adherence, use of standard process tools etc.

Country Related: Some companies have recounted their horrifying experiences working with offshore firms. Cultural differences between the local country and the offshore country may cause teething problems. Such issues typically pertain to language, names, accents and even work ethic.

How does one overcome this problem?

Firm Related: Many firms claim to have experience in various technologies but ultimately turn out to be bogus. To overcome this problem – consider evaluating programming skills, project management skills, or command of written English, there's no substitute for looking at actual work products. A development organization in any country ought to be proud to show prospective customers samples of their work and internal methodology. Also the outsourcing company does not have direct control over the offshore team. Hence constant monitoring of work will not be possible as opposed to internal development. To overcome the problems appoint an executive for all aspects of outsourcing. Building a long lasting relationship with the vendor is extremely important in offshore outsourcing. The level of trust increases if there is a single point of contact within the organization.

Team Related: There may be a lack of understanding of specifications on part of the offshore employees. To overcome this problem - Having an onsite coordinator facilitates easier communication between the customer and the offshore team. The onsite coordinator ensures that the offshore team has clearly understood the requirements as specified by the customer. He helps in bridging any communication or cultural gap that may arise due to geographical distance. Again when you're dealing with people whose native language is not English, you risk misunderstandings in both directions as well as poor documentation. English is an official language in India, Ireland, and some other prominent offshore countries. There you can safely depend on a solid grasp of idiomatic English. Elsewhere, you need to ensure that there exists some common language of communication.