Offshore Software development economic benefits

Offshore software development means to perform the software development services from remote location for e.g. the software development project of a US based company is executed at offshore software development company in India. With cost effective and advanced telecommunication services and digitization of business services has given rise to the trend of offshore software outsourcing. Due to these two facilities it has become easy, speedy and cost efficient to provide services to companies regardless to its location.

The primary reason which took the offshore software development industry to a peak is the reduced labor costs. Through offshore software outsourcing in India companies in USA can hire highly skilled employees at extremely low wages, whereas if they recruit in their own country they will end up paying almost 70% higher wages. Talking about software development, to hire a software engineer in USA can cost $60 to $80 per hour, whereas company can hire a software engineer with similar qualification and skill set for $6 to $10 per hour if they choose an offshore software development company in India. This way USA based companies are saving substantial amount of costs through offshore software outsourcing.

Offshore outsourcing is not limited to software development, but even the processes of telemarketing, customer support, data entry, accounting, legal process, recruitment, medical transcription, back end management, etc. are been outsourced to developing countries like India, Philippines, Russia and China. These jobs are kind that are not so preferably and levied heavy costs if operated locally. While outsourcing can save the US based companies from costly human resource, they can hire willing employees by paying low salary in India. Moreover outsourcing companies in India have well established infrastructure to do the operations, so companies are not required to spend time and effort in establishing the required infrastructure. The differences in wages paid and the operational cost savings majorly contributes to the economic benefits.

Apart from cost savings the offshore software development outsourcing is also benefitting the customers in terms of increased productivity. The client company can now utilize the saved cost as in company’s core business expansion. The savings accumulated or the profit generated can be ploughed back in to the business to produce better quality products, service more customers and building company brand. They can have all their time and effort invested into the core business which ultimately leads to better productivity and increased revenues.

Though there is significant cost savings, the offshore software development requires costs for telecommunications, up gradation of IT infrastructure to suite the project requirements and managing the business process at offshore center. Even if you calculate these costs it still allows the savings of atleast 50% to 55%. Offshore software development has proved to be the best option to reduce the domestic investments by leverage the high skilled software developers at low pays to increase the productivity. Offshore software development industry has been growing 30% to 40% every year and is been successful in creating win-win businesses in terms of economic benefits.