Many companies are looking to outsource development and maintenance of their application software. Common reasons that companies outsource application software are to reduce their costs, improve quality, obtain flexible staffing levels, and obtain improved service and support so they can focus on their core competence such as, designing clothes, managing equity portfolios, or running hospitals. Choosing whether to outsource or not is a strategic decision for a company. Once a company has decided to outsource, however, it must still choose an outsourcing approach that best fits it needs. This paper will describe the many different options for application software outsourcing, including the advantages and disadvantages of each alternative.
task, and must write code that matches the specifications. In general, the advantage to the specific project method is that the buyers know exactly how much will be spent for the project and when it will be completed, and this arrangement is ideal for a fixed-fee bid. Estimating risk is transferred to the outsourcer, meaning that the outsourcer may have to absorb the cost of project overruns (or receive the benefit of coming in under budget). However, solution risk is higher for the buyer, meaning that