Article at a glance:

Programmers abroad: A primer on offshore software development

Labor can account for three-quarters of the cost of developing software in the United States. Little wonder, then, that companies are keen to outsource development to countries such as India, where the quality of the work is high and the cost much lower. But managing offshore software development can prove tricky. One insurance company that gave an offshore company a contract to develop a claims program had to pull out after 18 months of investment because the collaboration had gone badly wrong. (Yet the vendor went ahead anyway and now sells its own claims-management program!)

The take-away

Don't outsource the early phases of a development program, since they require the greatest amount of collaboration. Make sure that you have a strong management plan in place and that your in-house team keeps up to speed technically so it doesn't become totally reliant on the vendor.