Many proponents of application development (AD) outsourcing believe external service providers (ESPs) using primarily U.S.-based labor have little chance of competing with ESPs from countries with low labor costs, and resulting low billing rates. However Gartner, Inc. analysts said that isn't always true, because billing rate isn't the only factor.

Gartner has developed an AD sourcing cost model to assist users in making the most cost-effective choices. This model is driven by the total cost of labor adjusted by location-sensitive parameters of communication and effectiveness. Gartner's AD sourcing cost model evaluates a variety of factors to assist in developing an accurate comparison of different staffing approaches to sourcing AD projects.

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