Organizations decide on offshore software development for a variety of reasons. Some of these reasons are strategic, while others are tactical. In the past, offshore software development  (outsourcing) has often been used tactically, as a rapid and frequently short-term solution to a particular need or problem, which does not form part of an overall business strategy.

There is a growing popularity of adopting a strategic approach to offshore software development . This stems from the simple fact that organizations adopting this method, appear to prosper. Strategic offshore software development is only likely to be effective and bring the desired results, if management is prepared to adopt a completely new perspective on management control.

Offshore software development is often seen as a cost, time, and resource-effective approach to system development, offering such significant advantages as:

• More resources for critical functions
• Competitive edge in the market by faster, cheaper development
• Faster response to market changes
• Increased focus on customers and markets
• Supply of the development skills that the customer needs
• More value for money
• Access to a large development workforce.

When considering offshore, however, the hidden overheads should not be ignored, for instance:

• Increased customer management required to coordinate the development resources
• Communication requirements
• Legal and contractual implications
• Cost of travel, fast data links, etc.
• Building duplicate infrastructures
• The ability of the offshore company to deliver
• Software licensing costs.

Organizations are more likely to meet their commercial objectives and maximize their success if they direct management control not so much towards controlling inputs, but rather towards focusing on the finished output. Some of the strategic objectives for pursing offshore software development may be:

• Free resources for mission-critical purposes
• Maintain flexibility
• Accelerate process improvement/re-engineering benefits
• Access current world-class capabilities or technologies
• Avoid technology obsolescence.