Software outsourcing is a tempting solution for many companies that are looking to optimize their expenses and get direct access to expertise they lack in-house. The idea of outsourcing has been around for decades but with the development of the Internet - the speed and efficiency of collaboration with external partners has significantly improved.
Companies may want to outsource their software development if the management estimates the project would be too much of a burden for their existing capacities. Another possibility is that the company looking to outsource doesn’t operate in IT at all, so they need guidance and help from an experienced external tech partner.
In the latter case, it’s clear that software outsourcing is the only option to get the job done. But if your company also operates in IT, you might be wondering whether or not it’s smart to expand your team or outsource.
Today, we’ll take a deeper look into software outsourcing and discuss when it is smart to give it a go.
The global market size of IT outsourcing is estimated to be approximately $92 billion, but this number is continuously growing which has a lot to do with the technological advancements. Software developers and engineers are in high demand and it’s highly unlikely that this will change anytime soon.
When you bear in mind that hiring talented software engineers and developers takes approximately 25 days and that there is a solid possibility of the employee being a bad hire, it’s no wonder that many choose to outsource instead.
Outsourcing is perceived as a solution that can help IT companies handle increased workloads and decrease time-to-market. Sometimes it’s about scaling fast while other times - it’s about finding experts that have the knowledge in a field or technology that’s needed for the project.
Moving on, we’ll examine scenarios when it is definitely smart to opt for software outsourcing.
Let’s pause for a moment to examine all the costs you’d have if you choose to hire in-house opposed to opt for software outsourcing.
We already mentioned that the hiring process in IT and tech is lengthy, which means you are losing your most valuable resource - time. This loss is even worse if the person doesn’t fit into your team well and decides to leave the company just months after they became your employee.
Besides the danger of a turnover, there are also many financial benefits you need to take care of: from health insurance, paid time off, and sick days to life insurance, vacation days, and more. Employees also expect to be well taken care of and satisfied with their jobs.
In IT, it can be really hard to retain employees because of the market’s law of demand and supply. High salaries have become the norm, which is why additional perks or the company’s mission can be attractive for professionals looking for a stimulating workplace.
In contrast to this, opting for software outsourcing means that the vendor handles all overhead costs while you, as the client, cover only the agreed price of the provided services (as defined in the contract). It is estimated that you can save between 30% and 40% of combined costs just by outsourcing. And you don’t have to worry about professional development plans for your employees or additional expenses that come with payrolls.
The idea of software outsourcing implies sourcing for talent globally, meaning you not only benefit from labor arbitrage, but also work with exquisite developers who can help you thrive. Outsourcing is especially smart if you need a specific set of skills, but only temporarily - until the project is finished.
Outsourcing companies are there to help you reach a talent pool without any complications that typically emerge when you hire in-house. For instance, you may assemble a team of software developers that proves itself very valuable. Now imagine that one of the members decides to leave their position because they got a better offer. This leaves you with legal costs that come with contract determination and a lengthy process of offboarding.
It doesn’t really matter whether or not this person leaves on good terms. The point is, they leave and it negatively impacts the team dynamic and productivity, which can increase your time-to-market and influence your bottom line.
When you opt for software outsourcing, the risk of a product delay is minimized. You have professionals who are experienced enough to give proper software project estimates, set realistic deadlines and establish procedures so that all expectations are well aligned.
As you can see from everything written above, the key advantage of software outsourcing lies in flexibility. When you organize your budget so that you can have an external team, it’s most likely that you’ll have additional financial resources to allocate to something else. This can be the development of a new product or optimization of your core business operations.
More importantly, software outsourcing can set you apart from your competitors and give you an advantage because of the speed of development.
In a nutshell, by decentralizing your efforts and including an external partner, you are covering multiple bases at the same time. With software outsourcing, here’s what you should expect from your chosen vendor:
… and more.
Of course, whether or not all these points will be covered within the agreement depends on the size of the project, the type of required technologies, security requirements, etc.
Enterprise-level companies usually approach this task meticulously. After they conduct a TCO analysis and collect proposals from several different outsourcing vendors, they assess the capabilities of each outsourcing company. In addition, they look beyond just work methodologies and portfolios. Working in similar time zones matters, as well as having complementary communication styles.
Liabilities, types of contract, responsibilities of each stakeholder, and tech excellence are all things that require a fair amount of thinking before opting for a software outsourcing company.
The success of any outsourcing project is directly tied to the quality of service delivery, the level of vendor’s dedication, the flexibility they show, and more.