Many factors made offshore software development a popular trend among many companies both in European and American Countries. For an example, the value of the IT outsourcing in the North America in 2001 was 59 billion dollar. Key drivers in growth of offshore software development (OSD) increased revenue potential, selling capabilities to external users, increased process effectiveness, freeing up internal resources, company philosophy of outsourcing non-core activities, lack of suitable skill set, control of costs, and gaining access to world-class capabilities. Software companies significantly increase their income by entering the OSD contracts in addition to the production software for market. With signing a contract, clients can avoid unnecessary expenditure on setting up their own in-house software development infrastructure. Many OSD companies offer custom web development services with intention of offering most cost effective solutions.
OSD offers increased process effectiveness for clients. All processes such as development as well as maintenance and other part of the software life-cycle are run by professionals that are specialized in this type of work. This allows avoiding many of organizational, marketing and managerial mistakes which are figured out common most often. This may result in a decrease of the consumer order cycle time. OSD provides ability to free up internal resources where clients can direct enormous resources usually required by the in-house development to other activities. Provider in turn is free to promote and deliver a specific product to the market. This is usually a more difficult process than advertising expansion services as it allows concentrating on the core activities of the software development.
IT function has always been difficult to manage in organizations. Similarly custom web development projects require a deep and up-to-date technical knowledge, which is lacked by the most business managers. Due to this discrepancy a lot of software project are supplied across national boundaries. With mounting popularity of ‘business process outsourcing’, many companies have started accepting to contract out for core activities, concentrating on the primary business processes. Lack of appropriate skill is a factor behind an increasing importance of OSD. In Germany, for instance, the integer of programmer vacancies estimates for during 2001- 2005 was 210 000. With OSD, Client is free of the most of fixed costs of the development. Provider in turn is able to lower cost due to lower wages, corporate tax rate, rent expenses, etc.
The access to the world class capabilities can again be figured out one of the key success factors for OSD. With its help small businesses are able to get a world class quality services according to international standards because development firms tend to offer high quality development due to increased competition, caused by globalization. Worldwide outsourcing of custom web development provides better quality service. Offshore software firms do specialize in detailed services such as Java programming language, web-based development, etc, and also more skilled than the in-house department of services buying firm. Here, outsourcing firm gets an advantage of increasing its capabilities from its practices and experiences, especially in offshore contracts, when client resides in a developed country with a well established base of research and development.