Software outsourcing describes an arrangement where an organization chooses to hire an outside software development agency to effectively perform all tasks of a software development project that could be done in-house. Software outsourcing is a company’s practice of giving control of a specific business process or software development project to a software outsourcing company that can handle the required business tasks.
Outsourcing is a well-known widespread practice among the biggest names in software, with many moving a significant portion of their operations overseas. Now smaller software developers are doing the same, and other companies worldwide notice. Outsourcing can be seen as a service organized by a specific company.
Table of contents
- Onshore software outsourcing
- Offshore software outsourcing
- Why do you need to outsource your software development?
- 5 Things to look out for when outsourcing software development
- Conclusion: How outsourcing software development improves your startup
Software outsourcing provides services under remote operating models that allow client companies to work with the best IT talents worldwide dedicated to working on their software development projects. Software outsourcing services are provided in an integrated manner to cover the customer’s needs entirely. In practice, the focus is often on specific services, such as software development.
However, there are specific ways that companies can outsource their software projects to software outsourcing companies worldwide, where development centers can be located on land, at sea, and near shore. You may consider in detail as follows:
Onshore software outsourcing
Onshore outsourcing means collaborating with client companies with development teams of software companies located in the same country. The advantage of onshore outsourcing is that there are practically no language barriers, which significantly simplifies communication and ultimately makes software outsourcing more effective. Customers may, however, have to pay extra for development expenditures as a result.
Offshore software outsourcing
Working with development teams in other countries is called offshore outsourcing. Due to cheap development costs and online communication channels (e.g., emails, VoIP phones, Zoom video conferencing, etc.) allow you to manage software projects online successfully.
Why do you need to outsource your software development?
Software development outsourcing is a smart choice for established companies for several important reasons. While business owners should consider all scenarios, partnering with outsourcing developers outside of your organization offers a variety of benefits.
Outsourcing software development services and working with a skilled multidisciplinary team can help you complete temporary projects, reduce labor costs, and improve development speed.
Outsourcing software development services and working with a skilled multidisciplinary team can help you complete temporary projects, reduce labor costs, and improve development speed. The following are a few reasons why you need to outsource software development;
The most common reason that drives companies to outsource their development project is drastic savings in development costs; reducing expenses and staying on a budget allows companies to effectively expand and scale their business and keep up with market demand. Outsourcing tasks or projects can save you money associated with hiring, onboarding, training, and housing employees within your organization.
Additionally, you would not need to equip your employees with essential materials to provide software development services. You can add the costs of hiring, training, and housing staff. Whether you need a team of 5 or 1,000 people, outsourcing an entire project is much cheaper than hiring each developer individually and placing developers on in-house teams.
The main goal of offshore software development companies is to offer customers the best possible material handling solution at a reasonable price. In statistics, outsourced work in Eastern Europe can cost 80% less than the same work done in-house in Western Europe or North America, especially for low-level tasks. Also, you don’t need to buy equipment or other consumables required for software development.
Companies that do all aspects of their business in-house inevitably pass these costs on to their customers. By partnering with an IT outsourcing company, companies can save some of these costs to gain a competitive edge over their competitors in terms of pricing. Instead of hiring staff to take care of the IT department, entrusting this task to a specialized IT outsourcer is more profitable.
Access to deep knowledge and experience
It’s no secret that software engineering outsourcing is a great way to make up for the lack of internal resources so you can focus on your core tasks. But that’s just the tip of the iceberg. All you have to do is submit a product idea, and you’ll have immediate access to a full range of consulting, analysis, marketing, design, and development services.
Depending on the product type, project specifications, and budget, you can proceed with development or create a minimum viable product (MVP) to validate your idea and make initial changes if necessary.
In this case, the outsourcing company’s marketing and design experts will help you design the most optimal MVP and then interpret the returned analytics. This is a better way to keep up with the latest technological advances and innovations. You can also learn from your software development partner’s experience working with other customers to avoid potential roadblocks in your project.
Reduced time to market
In fast-paced business environments, innovating quickly is crucial. And being first to market can be a critical success factor. For these reasons, an outsourcing company is a great solution to control the speed of your software development. Rather than having schedules dictated by your available resources, you can quickly scale a remote development team to move much faster.
The IT business is evolving very quickly, and rapid innovation is essential to gain a competitive advantage in the market. Outsourcing is the way to streamline software development processes in your company and be first to market, which can be presented as a success factor for your company.
However, by hiring a services provider, you can deliver the product faster and higher quality. Businesses worldwide have become aware of the need for speed and its utilization to provide a competitive advantage.
With software outsourcing, you don’t have to rely on your available internal resources for product launches. You can dictate the deadlines as per your schedule, and you will be taken care of by a dedicated team who will mentor you accordingly.
Project planning, cost estimation, schematic creation, software development, and outsourcing companies can do it all. And they do it all the time. Thus, they can put together the optimal project plan for each project.
Today’s leadership teams must juggle various roles and responsibilities. Because you don’t spend a lot of time recruiting, hiring, or training employees, you and your employees can focus on the mission-critical tasks needed to run your business and the development process.
Due to that, more money can be spent on sales, marketing, and business development. You also have the option to work on a project basis, so there’s no pressure to keep your developers on the payroll once a product is complete.
5 Things to look out for when outsourcing software development
1. Can you afford it?
This is the most significant aspect of all the questions presented in this section. It’s improbable that you’ll be able to work with a software outsourcing company if you don’t have the money to pay them.
Rarely, though, do corporations agree to an agreement in which they develop their product in exchange for shares. Still, these partnerships can cost you hundreds of thousands of dollars for a fully polished commercial product.
Even a simple product can cost tens of thousands of dollars to develop. Although some entrepreneurs have this type of funding to invest in software outsourcing, finding a co-founder or developing the software yourself is better if you are short on cash.
At least with an MVP, you can generate income and work to pay for the outsourcing. If your startup is already advanced enough that you’re considering hiring an in-house software development team, consider the financial flexibility that outsourcing could offer you.
Working with an outsourcing partner allows you to pay for development only when you need it, rather than paying a team of developers year-round when you don’t think they’re always busy.
2. Do you have technical experts on your team?
Of course, when you start a software company, you need someone with a technical background to lead the development of your product. Whether that knowledge comes from you or a CTO, there has to be someone making informed decisions about how your software is performing.
When working with a third-party service provider, most companies assign a project manager to the team working on your project. This establishes a technical connection between you and the developers.
If you don’t have technical experts on your team, it’s very likely to lead to challenges. In essence, development companies can function as a kind of CTO-as-a-Service. Without a technical expert on your team, project managers can help you translate your vision into a well-planned software design. Remember that even if you plan to work with a software development agency, it helps to have technical leadership on your team.
As you search for a company that is a good fit for your business, technical consultants can help you identify the skills and knowledge needed to complete your project. You may also play a role in communicating requirements and tasks to the project manager or development team in technical language.
3. Is innovative software your company’s core competency?
Whether or not you can trust a custom software development agency to manufacture your software product largely depends on how essential the software is to the success of your business.
Some companies develop software solely as a platform to showcase, sell, or host their core competition. In this case, many companies outsource software development to focus on what makes their business unique.
For example, Uber is an app that allows users to request rides from members of their community with the push of a button. Because Uber’s success depended more on an extensive collection of drivers than quality software, they felt comfortable outsourcing development.
As the company grew and became more interested in developing more sophisticated features, development moved in-house. Outsourcing is not ideal for companies developing new and innovative software technologies.
This can be a complex algorithm, a unique version of artificial intelligence, or even a proprietary database. You don’t want to put your critical competitive advantage in the hands of another company; it’s hazardous, and investors know it.
The new technologies will likely be different from anything that the diverse developers in a studio have ever grappled with. It would be more appropriate to hire in-house developers with specific expertise in your product domain.
When developing innovative software, control over your product’s intellectual property can also be an issue. Even when you’ve negotiated possession of the intellectual property, it’s difficult for prospective developers or team members to feel “owner” of the software.
Future in-house developers will also have difficulty scaling the product if an outside company produces it. Even if a development studio writes top-notch code, identifying and fixing problems caused by someone with little contact with the company is challenging.
Considering your potential intellectual property exposure, you should also consider the option of acquiring third-party developers to work with. Since they can contribute to the technical foundation of your business, it’s an advantage if you can keep them on board for the long term.
Suppose you want to keep the company’s intellectual property in-house but still need outsourcing. In that case, you can even delegate specific tasks or parts of the development to an outside company and leave most of the development to your staff.
4. Is your team being distracted by other business development?
Business development is just as important as software development in the early days of a startup’s growth. Especially when working with a small internal team, employees have to take on a wide variety of roles.
Customer support, security, marketing, and other less essential tasks than business and software development might absorb a significant amount of time if they aren’t your primary concern.
Luckily, many software development companies take care of these concerns for you. If the software is not your company’s core competency, it remains challenging to focus on business development when downsizing an already limited team.
Getting back to Uber, outsourcing software development allowed them to put software development aside and focus on their primary concern, recruiting customers and drivers. Working alongside a software development company can allow you to delegate tedious tasks to focus on growing your business.
5. Are you on a time crunch?
Software outsourcing can be advantageous if you develop a complete and professional software product. Of course, this should only be done after validating the product idea with customers. Some companies rely on getting to the market quickly to be successful. A well-designed product also makes finding investors, a co-founder, a team, and clients easier.
Software development companies can often adjust the size of their teams to accommodate tighter deadlines. This would, of course, increase the hourly rate. Offshore firms, in particular, tend to have excess manpower available due to their low costs, which makes the size of project teams very flexible.
Outsourcing software development also eliminates the time spent on recruiting, onboarding, and building a team.
Outsourcing software development also eliminates the time spent on recruiting, onboarding, and building a team. If you expect to develop your product with an extremely fast “quick and dirty” approach, similar to lean methodology, high-level studies can slow down this process. They often focus on brand strategies, sophisticated planning, and detailed coding, so they’re probably unwilling to bring an immature product to market.
However, many less sophisticated software companies would love to produce a quick MVP that looks a little less professional at a low cost. This is something to consider when choosing a development company that is right for your startup situation.
Conclusion: How outsourcing software development improves your startup
The first step in determining whether or not to outsource software development is to create a plan for the software’s goals and align company demands. Communicate extensively and provide reasonable expectations for the project if you decide to transfer assets to a partner company.
Giving over control of your software development may give you more time to prepare the market for its release and focus on your core business operations.