Software outsourcing can be defined as the process undertaken by some companies to hire a software outsourcing company for a product advancement project, rather than doing it in-house. In 2019, the worldwide outsourcing market was valued at $92.5 billion, with software development as perhaps the most well known outsourcing enterprise. The global IT market is expected to be valued at $98 billion by 2024, as cloud innovation has become standard and open for each business.
These days, innovation is advancing at lightning speed where new technology of this year could most likely get outdated in the next year. It is extremely important for companies to keep up with this dynamic nature and journey of digital innovation. And, for that, software development outsourcing is the most viable option as it is both cost-effective and dynamic.
Models of software outsourcing
There are certain ways for organizations to outsource their product development activities to companies and people across the globe. The development then, can happen on shore, offshore and near shore according to the model of outsourcing employed.
1- Offshore outsourcing
Offshore outsourcing is the kind of outsourcing where a company hires an external organization to take over the technological operations in a country other than where the products or services are actually developed or manufactured.
This is the most effective model of outsourcing if we talk about costs incurred to an organization. Major modes of communication are some online channels in such settings. This type of outsourcing enables organizations to manage projects remotely.
2- Onshore outsourcing
Onshore outsourcing refers to a setting in which client organizations work with development groups of software companies that are situated in a similar country. The benefit of onshore outsourcing is that there are basically no language boundaries which makes communication a lot simpler.
3- Nearshore outsourcing
Nearshore is the kind of outsourcing in which the companies delegate their software development operations to an organization that is located in a neighboring country, usually in a similar time zone. The difference between offshore and nearshore outsourcing is that nearshore outsourcing provides an extended team sharing a similar time zone and geographical proximity.
Why software outsourcing?
1- Practical and cost-effective
The greatest advantage of outsourcing is reduction in the expenses incurred by the outsourcing organization. Being cost-effective doesn’t mean you are not paying what they deserve or hurrying work. The distinction in pay rates across the globe is the sole motivation behind why outsourcing can save you millions, or billions of dollars. Rather than paying somebody $50 each hour in the U.S, you can pay $20 to someone else from another part of the world who can do a similar measure of work, with a similar quality, in a similar time period. Various nations have varied expenses of living, and you are paying your outsourced partner according to their average disposable income, if not higher.
The business is then served with increased opportunities of scaling up and growing. One motivating example can be WhatsApp which has surpassed all its competitors, they outsourced all of their development to a team in Eastern Europe and the rest is history.
2- Flexibility
Since outsourcing is generally contractual, it provides the companies with a lot of operational benefits. It makes all the processes even more flexible. Organizations enjoy this nature of work because they don’t have to look for long-term employees. Also, there is no legal obligation to undertake projects for long term or to provide insurance benefits and funds as they do for permanent employees. In this sense, it is indeed better than hiring an in-house development team because they might not have developmental requirements at all times. And, in case the labor size changes, you don’t have to worry about increasing the team size.
If we particularly talk about the technology industry, it is no longer important for the developers to be in geographical proximity to the organizations they are working for. Due to this pandemic, there has been an increase in offshore employment as well. The increasing use of technology has made it possible for people to work from different corners of the globe.
3- Focused approach
Software development outsourcing makes it simpler for organizations to focus on their core competencies. Once the development is outsourced, the companies have more resources, time and energy to utilize in concentrating on their primary goods and services. It helps in narrowing down the business processes to let the major services be in the focal point at all times.
4- Speed
Outsourcing software development services has turned out to be a boon to companies as it provides increased speed and quick results. How? The companies no longer have to spend time in training people as the workforce is highly experienced already. This improves and augments the speed of project completion. It is the most beneficial to large-scale enterprises as they generally have a long hierarchical structure which have long decision-making and approval processes.
How To strategize software development outsourcing?
Before getting into the strategic part, first, question yourself and be sure if you need software outsourcing services or not. Give it a thought if it is the most optimal option for your business or not. Even if you are a startup, outsourcing can be a good choice for you as appointing an in-house team will require more investments and time.
Here are some steps that will be helpful while outsourcing software development services:
Step 1- Have a clear objective while outsourcing
The first step is to be clear about why you are opting for outsourcing and what you are trying to achieve through the same. Is it because of the funding or you just want to speed up the process? Are you looking for a talented technical team in a short interval of time or you want to focus more on your core competencies? The clarity on your goals will help you choose the right outsourcing model as well.
Step 2- Make a decision on the outsourcing model that suits your business needs
Next, ask yourself if you need to outsource your software development to a single team or multiple teams. See if it is going to be a one-time project or a long term thing. Identify which model of outsourcing will be the best for your business- Should you appoint an offshore team or move ahead with an onshore model?
Step 3- Set realistic expected KPI’s
It is very important to set up some KPIs for the outsourced partner because it makes the process easier. You have to be realistic while setting up these expectations as it avoids clashes and lets the software outsourcing company to plan work accordingly.
Step 4- Execute everything you planned and keep a check
The next step is to kickstart the process and implement everything that you planned. While the outsourced workforce begins with software development, you have to build a framework wherein you get continuous reports on different milestones achieved.
How to do Successful software outsourcing?
All your efforts will go in vain if you don’t do it right. For an effective technological partnership, it is essential for you to apply these practices:
- Have regular meetings with the outsourced partner
- Stay involved with the outsourced workforce
- Maintain transparency while communicating
- Give honest feedbacks
- Organize management meetings with your own internal team about ongoing progress
- Think of the outsourced team as an extension of your in-house team and not aliens
If you follow all these things then, pat your back! Your business is on its way to reach newer heights with the help of your digital transformation partner.
