As the global village grows, companies have been discovering ways to do business more profitably. As a result, the trend of offshore software development has also been growing over the past few years. There are advantages and disadvantages in utilizing this method, but the advantages clearly outweigh any disadvantages that exist. Offshore software development can be done in two ways.

One way is the popular method of outsourcing. With this method, there are no infrastructure costs associated and development is done on a contract basis. The offshore company is given instructions and a timeline is agreed upon, at the end of which the fully developed product is delivered to the client. Costs are generally based on the complexity and time or urgency required to complete it. However, the risks here are that the client and supplier are in different countries. Therefore, the amount of control the client has boils down to what was in the contract and how reliable the supplier is.

The other method is where a company sets up a completely new outfit in another country (for example India). Although the set up costs are high compared to outsourcing, it is beneficial as they are infrastructure costs. Once the offshore company is set up, it is only a matter of time before all costs are recovered. This is due to cheap labor in the other country along with lower taxes. In turn, the amount of taxes to in the originating country also ends up being lower. Another hidden benefit is that in case there is litigation against the company in the originating country, all their assets in any other countries are not affected. This in itself is a good enough reason for most companies to set up in another country.

However, there certain issues which have to be dealt with during the set up process and thereafter. Laws have to be understood, an enormous amount of paperwork has to be processed and a clear understanding of the procedure in the other country has to be achieved. However, once you get past these hurdles, the sky is the limit.