Software development outsourcing is one of the best approaches when it comes to building a software solution. First, understand its pros and cons to determine if it’s the right choice for your business. Let’s find out in this article.
Outsourcing is one of the most sought-after approaches to maximize business efficiency. It has been around for decades—used by small to large software enterprises to offshore a portion of their business.
In 2020, the global market size of the IT Outsourcing industry is roughly $92.5 billion. And it shows no signs of stopping. So, what motivates a software company to go with outsourcing as a business model?
For one, the huge cost-savings it brings is a huge enough reason for tech companies to outsource. Similarly, software development outsourcing allows founders access to a wide pool of talent that is otherwise not available in-house or within their location.
While outsourcing sounds like a dream, it’s still rough around the edges. For every benefit it brings, some challenges stand out. When outsourcing agreements are not implemented seamlessly, it may lead to poor quality output, loss of trust, and no return on investments.
Before you outsource software operations, you may need to consider the possible benefits and issues you may face. Here are the pros and cons when choosing the path of software outsourcing.
Pros and Cons of Software Development Outsourcing
1. Reduce Costs
This is the number one factor why most startups choose to outsource their business. For a startup to achieve sustainability and growth, it needs to minimize its operational costs.
With software outsourcing, there’s no need to recruit and manage a development team directly. Likewise, it offers cost benefits on payroll taxes, bonuses, training and development, and employee benefit packages. When added together, all these can burn a huge hole on your startup budget.
While outsourcing is not cheap per se, it is still cheaper compared to hiring employees, purchasing equipment, and renting an office space on your own. Essentially, an outsourcing vendor calculates the project’s total cost and divides them into monthly bills.
In this way, there are no hidden surprises and you can pay your monthly and yearly expenses ahead of time.
2.Find top-tier skillset
Software development outsourcing fills the gap caused by the glaring shortage of skilled software developers in the US, Australia, and Europe. As a startup founder, you’ll be building business relationships with software experts who have dedicated their entire careers to technology.
They have solid experience and expertise working with different software applications. In addition, it allows business organizations access to fractional skill sets that they don’t have or may not need to hire on a full-time basis.
3. Focus on core competencies
Do you want to focus your time on sales and marketing? Or does research and development require more of your attention? In this case, outsourcing your software development process helps you to dedicate your energies to other core competencies such as customer service or product distribution.
As a result, you can dedicate your efforts to creating strategic core tasks in the future. For example, you may at some point decide to downscale your business or re-assign to a different business goal.
4. Scale up or down
Any sudden change done while developing an app may prove to be costly for a startup. However, an expert software house can help you manage any changes that may affect your company’s operations.
Scalability is one of the reasons why companies choose to outsource through a third-party software development company. It encourages you to stay flexible for any changes as you go. That being so, scalability allows you to hire more people or add resources if you see a demand for it. All this without creating a huge dent in your budget.
Moreover, an outsourcing vendor will no longer charge you once the project is completed and launched. Unless you decided to remain with the partnership for additional product development and support, then you wouldn’t be charged for any additional costs.
5. Deliver high-quality output
As the demand for software development services soars, outsourcing companies learned to up the ante when it comes to providing their services. They’ll ensure to upgrade their skill sets and train employees regularly. Likewise, they always prepare a stellar portfolio to impress potential clients.
With software development outsourcing, vendors are responsible for meeting the requirements and quality standards of the product. Also, it’s their responsibility to prepare a contract that regulates payments and penalties on both sides.
Other areas of the partner agreement such as intellectual property rights should also be laid out explicitly by the vendor. Doing so will protect the interests of both parties.
1. Communication Barriers
While software development outsourcing has several benefits, it’s not all beds of roses. Chief among its disadvantages is the communication barrier. Time zone delays, video call issues, and cultural differences are just a few of the downsides to expect; especially when communicating with an offshore vendor.
So, before signing that partnership agreement, make sure that they can understand your language. If your in-house team speaks English, then insist that your outsourced team speaks the same language, too. This ensures that they know what needs to be done and can raise any issues and feedback to your team easily.
2. Differences in Business Philosophy
Companies work at their own pace that suits their business. There’s nothing wrong with this but your outsourcing partner may see this as unusual. In contrast, your startup may use certain tools and management styles that would take other companies some time to adapt.
As a client, differences in business approach should bear more weight when deciding to outsource. You want to be able to have some control over the decision-making and management process of the operation.
To avoid any conflicts brought by a differing approach, it’s a must to discuss your ideal business process at the onset of the partnership. This is to ensure that you and your software outsourcing partner will meet its expectations.
3. Data Theft
Software development outsourcing does not come without any risks. The moment you share your ideas and data with an outsourcing provider, they can borrow or innovate these things however they like. Even if your outsourcing team has signed a nondisclosure agreement, who’s to say they’ll keep their end of the bargain?
Hence, you won’t have infinite control over your project. Some nefarious characters can still steal or replicate your ideas for whatever reason. Additionally, if the vendor’s database is leaked, your confidential data and privacy will be vulnerable to hackers.
To avoid this, make sure to read reviews or feedback about each vendor before hiring them. Explain the penalties or legal repercussions involved once this agreement is breached. In addtion, include intellectual property rights in the agreement to safeguard your company against possible copyright infringement cases.
4. Adjustment Period
Depending on the project duration, the adjustment period may take some time. You need to consider how well the requirements are discussed and the level of expertise needed to complete the project.
Keep in mind, the workflow will be something that will improve over time. We recommend that you’ll realistic with your timeline. Ideally, it’s good to be flexible with every phase of the project.
As long as both teams properly communicate their progress, then there’s a great chance that both teams can work seamlessly together.
5. Hidden Fees
There is a risk that you might get hidden fees on top of what you already paid for. This is especially true if you offshore your software operation in another country.
These hidden costs can come in a form of additional consultations, travel, and phone call expenses. When these hidden costs pile up, you’re in too deep to back out from the project.
Always ask for a transparency report on all costs involved so there will be no unwelcome surprises in the end. Use tracking apps to monitor the tasks and the time spent on each task.
Minimize the Risks
Choosing to outsource your software development process will require some careful planning and research. Here are some tips you can follow to make the outsourcing process easier for you.
1. Cheapest may not always be the best
While your goal as a company is to minimize costs to increase profitability, choosing the cheapest you can find might not translate to better quality output.
Check out reviews and company ratings and get as many recommendations as you can from within your industry. Choose an outsourcing company with a great reputation for quality and one that offers a reasonable price in the market.
2. Be Proactive
When everything seems to work out well, it can be tempting to completely trust in the process and go with the flow. Trust is invaluable in this type of transaction. However, it is important to always keep your finger in the pulse.
Be present during video conferences and meetings. Always update yourself with the latest changes or developments in the project. No need to micromanage. Make sure to check if requirements were met in every milestone of the project.
The Road to Software Success
Software outsourcing is an effective approach to focus on your core business, reduce costs, and get access to software experts. It all boils down to the crux of the matter—choosing the best outsourcing vendor. However, it is not free from any risks. Hence, we encourage you to weigh the pros and cons before diving into it.
By learning its advantages and disadvantages, you’re several steps ahead at building your core business with a trusted outsourcing partner. Cost savings should not only be the factor to focus on. It’s also important to have top-notch tech expertise and vendor management at your disposal.
Whether it’s for a one-off or long-term software project, our team at Full Scale is your reliable partner for everything software outsourcing. From recruitment and onboarding of tech experts to forming an offshore team, we help our clients scale their startups for growth. We have junior to senior-level software developers and engineers to work on your web or mobile solution.
Interested? Message us right now to get your FREE consultation.