Software Development Outsourcing: Scale Your Company Without Hiring
Nowadays, software outsourcing has become a global phenomenon, and within this model there are a lot of companies around the world. This is one of the proven ways to reduce costs and improve efficiency, which becomes a significant competitive advantage in terms of today’s economy and rapidly changing technologies.
Creating a full range of necessary software solutions in house is getting more and more difficult for many companies. The solution to new challenges could be hiring a non-staff developer, which makes it possible to assemble a dream team with the necessary set of skills and without hiring new staff members. This is a great way to reduce operating costs and expand the scope of work.
Why do companies use outsourced team members? There are many powerful arguments in favor of such a work model, which we’ll talk about later in this article. As well as analyzing the possible risks of outsourcing development, we will share with you some tips on how to effectively organize the workflow.
Here Are the Reasons Why Outsourcing Makes Sense
Although it is one of the proven ways of attracting external resources, without excessive liabilities and risks, outsourcing is still not an ideal solution for all cases. Sometimes a more justified step is to create a team in house.
But there are a few scenarios where outsourcing software development is the best solution for your business:
- You have a limited budget. The services of a Ukrainian programmer will cost much less than hiring a developer from the US or EU with a similar skill level.
- You are short of time. If the planned release dates are approaching and the current team obviously lacks people, hiring an outsourced team can solve the problem.
- It requires specialized knowledge and skills. Some projects may need the involvement of experts from various fields at certain stages of development. Hiring all of them as permanent staff is a decision that can hardly be called logical.
- You do not want to get distracted. If your in-house experts are already working at full capacity, some things are better to be outsourced in order to focus on more important things for your business.
- You want to keep it compact. Outsourcing allows companies to retain their compactness, which is very important if you do not want to expand the staff and build a complex corporate structure.
Interesting statistics regarding the reasons why companies choose to outsource are available in the results of the Deloitte’s Global Outsourcing Survey report:
Although budget savings rank first on the list, they are not the only argument. Let’s take a closer look at what other important benefits this working model can provide.
Why Outsourcing Software Development Works: 7 Benefits for Business
1. Expertise, experience and talents. If you do not have enough people with the particular experience and skills, you can outsource them. Outsourcing is a great way to compensate for a lack of internal expertise.
This is especially true if the company is geographically located in a very competitive area, where a large number of players hunt for talented professionals. Limiting the hiring possibilities to only one region is a definitely losing strategy.
By outsourcing staff, the company has access to a huge number of talented professionals. In fact, any person in the world that is able to efficiently solve your problem and has access to the Internet can be hired by your company.
2. Reducing costs. If you can choose between the programmer with a rate of $ 35/hour and the programmer who takes $ 80/hour while receiving identical quality of work output, why not choose the better option? Of course we shouldn’t go to extremes, since in IT you get what you pay for. But the cost of work in Eastern Europe countries, for example, will always be cheaper at comparable quality.
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Greater efficiency and productivity in this case is also combined with the reduction of costs for maintenance and infrastructure. At least you don’t have to pay for the creation of additional jobs and additional office space. Imagine how beneficial this is when it comes to hiring dozens of developers for your project.
3. The speed of working on the project. In the rapidly changing business & technology environment, the appearance of your product on the market first could be a decisive factor for success. Outsourcing development can significantly reduce the time it takes to turn an idea into a working product.
Rather than put a time frame dependent on available human resources within the company, you can quickly increase the volume of work at the expense of the outsourced team to start moving much faster.
4. Opportunity to focus on business. By outsourcing some work you can concentrate your team on what is crucial for business, and what you do best. For most companies who order development of IT-solutions, this segment is not a core competency.
By delegating development tasks to non-staff partners, the saved time can be spent on more important business processes, like what makes them unique in the market and sets them apart from competitors.
5. Scalability. Regardless of the size of your business, sooner or later, the current team stops to cope with new challenges. Then you need either to hire new staff, which is quite a difficult task in terms of time and money, or outsource some IT tasks. These are two main options that allow you to grow and expand.
6. High level of flexibility. By working with a trusted provider of software outsourcing services, you can flexibly change the scope of the project or the team that’s working on it. Also, you can easily attract new employees as soon as they are needed.
7. The latest technology and narrow specialization. If you need to recruit a dedicated specialist, but you can’t load him with the tasks full time, hiring him through outsourcing on a part-time basis can be a good choice.
Also, you do not need to pay for software licenses or purchase specialized equipment/tools, because remote teams usually have everything you need.
Risk Areas for Software Development Outsourcing
If outsourcing was the ideal model, it would already be in use everywhere. But this scheme has a number of shortcomings, which in certain circumstances can cause the business to decide against this working method.
1. Security and privacy risks. In the course of the project you will certainly need to communicate with a team of developers and share different information, as well as provide them with access to important data. That’s why choosing the right partner is so important.
To avoid the possibility of unauthorized data transmission to third parties, you need to sign a non-disclosure agreement and use the services of trusted companies. Proper precautions eliminate the danger.
2. Problems with communication. Poor connection and lack of communication between the customer and developer are a key cause of most problems in software development. When you’re in different countries and time zones, this issue becomes particularly relevant.
3. The lack of total control. Many people get scared by the idea that they will no longer be able to control everything, and their imagination paints an apocalyptic picture of the consequences due to the lack of micromanagement. But, firstly, this is one of the essential features of outsourcing, and secondly – well, you hire these people for them to do their work, not to control their every move.
4. Dependence on developers. Often there is a situation where the agency provides the customer with a code that he can’t independently maintain, and he becomes dependent on developers. This can be avoided by documenting all project development stages, which will help to easily transfer work to other professionals if necessary.
5. Unrealistic expectations. When the actions of one party do not meet the expectations of the other, serious risks to the successful implementation of the project appear. Smart clients and competent developers can reach a compromise, since unrealistic expectations can worsen even good relationships.
Tips and Tricks for Successful IT Outsourcing
We have many years of experience in software development and can form a number of practices based on our experience, the use of which increases efficiency and leads to a successful cooperation.
1. Make sure that your project is suitable for outsourcing. Product development involves a variety of tasks, such as UI/UX design, content creation, testing infrastructure deployment, and so on. It is very important to understand which of these tasks can be delegated to third-party developers. For example, it may be projects that require specific expertise not directly related to your business or requiring the allocation of a large amount of time that you are short of.
2. Use agile work methodologies. This will allow you to move quickly and constantly receive feedback, as well as more quickly adapt to the ever-changing business environment. It’s a great opportunity to save time and money, and ensure greater transparency, as well as get good results in the shortest possible time.
There is a post on our blog, where you can read more about pros and cons of Agile, as well as the recommendations concerning cases in which it’s worth working using this methodology.
3. Do not focus solely on the price. Choosing developers on the principle of “who can do it cheaper” is one of the most common mistakes. In the field of intellectual services you get what you pay for. And if you need high-quality and reliable software – be ready to pay for it.
The hourly rate of the outsourcing company is often a reflection of the skills, experience and quality of its professionals. More experienced people, despite being more expensive, may need much less time to complete the task. And, on top of that, they will do it better.
4. Document all details. Good documentation allows you to easily delegate the maintenance work to the internal project team, after the end of its development by the outsourced experts. This is the key to understanding the functionality and tracking the progress of the project and its importance is often underestimated.
5. Choose the right pricing model. Time and materials, and fixed price – these are two main pricing models that are used in the development of software products.
At first glance, fixed budget seems to be more attractive, but in the end may be more expensive, since the provider can include all the risks to cover possible damage from all sorts of uncertainties.
It is almost impossible to foresee everything, so it is best to use the time and materials model, the essence of which is to ensure that you simply pay for the developers’ time. Such an approach is ultimately beneficial to both sides.
This is a fairly broad topic for discussion, so we recommend a more detailed reading of our article “Time and Materials vs Fixed Price: Which Model is Better for Your Project“, in which we talk about the features of each particular model in more detail, and in what situations they are best used.
6. Keep in touch. Clients often tend to ignore the importance of communication and good relationships with outsourcing partners. Constant communication ensures that both parties are aware of how the work is carried out on the project, and will be able to quickly make any necessary changes.
Consider contractors as members of your team and strategic partners who are interested in a positive result no less than you are. Respect, appreciation and openness to communication will make you a customer who people want to work with.
Software development outsourcing allows even small companies to implement large and complex projects, while maintaining their low costs and attracting specialists from around the world.
Despite the fact that successful work based on the outsourcing model requires patience (there may be a number of obstacles, which is always the case for a business), the potential benefits substantially exceed the potential risks for most companies.
Pay attention to the possibility of cooperation with developers from Ukraine, since the IT-outsourcing market in our country is one of the fastest growing and most promising, and a number of weighty arguments can be made in favor of such cooperation. If you are still not quite sure, or you have any questions about outsourcing, you can write to us and we will help you make the right decision.
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