Offshoring software development: india/china choice a transaction costs perspective

Abstract

The purpose of this paper is to interpret the decision to choose a country to entrust its service providers with the software development activity. Based on transaction cost theory, the cost measurement waxes derived from this theory are used to compare two competing countries in the Offshore market: India and China. Salary, ICT, language, trust and economic and institutional stability are the points of differentiation on which this study is based. By using an exploratory and a comparative study based on secondary data from different statistical sources, the study confirms that according to the TCT, India remains a more appropriate choice than China for client firms seeking to outsource software development activity. This paper is completely original and proposes a new research component that links TCT predictions with the country chosen as a part of Offshore’s strategy.