Rush to outsource all software development can lead to productivity drop

Compass Management Consulting warns that corporates rushing to outsource their software development to make short term savings risk significant long-term losses in productivity.

Studies of operations where the full lifecycle of application development has been outsourced have shown productivity drops of up to 60 per cent, as poor knowledge of the business function affects efficiency of the development. These losses are particularly high when development is outsourced to an offshore location.

While some of lessons in the rush to offshore applications development have been learnt, Compass states productivity losses in development activity alone can still account for deficits of up to 20 per cent due to staff attrition in offshore locations and other factors.

This means that, while the personnel costs may be 40 per cent lower offshore, the decision to migrate development – when you include additional management control, increased infrastructure spend, employee attrition, language, and cultural issues – can end up costing up to 20 per cent more than current in-house operations.

“In particular the loss of functional expertise – people who understand the business function the software is supporting – has a negative effect on the productivity of application development. With lower productivity in many offshore locations and currency movements that are working against UK buyers, it is important to outsource the right type of development project and ensure that business analysis skills are kept in-house in order to make any savings,” says Compass’s Nigel Hughes.

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