Prosperity Across the Seas – When do you Choose to Outsource?

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Before you get started with outsourcing, eliminating all confusions and questions around outsourcing costs is a must. Here is a simple yet all-encompassing Outsourcing Costs Guide for you. 

You've started a business, and it's time to focus on web development.

It’s hard to choose between in-house web development and offshore web development. It’s almost like Morpheus holding the proverbial red and blue pills in front of your eyes. Only this critical choice will determine how your business will scale, how flexible your plans will be, and how much further you can extend your foot off the precipice.

But fret not, for you stand at the crossroads that every 21st-century entrepreneur stands. And not everything has to be a bargain with the devil. There are definite benefits that accompany each option.

Read also: 5 Tips for Project Managers to Successfully Outsource to India

Here is a simple guide that illustrates why it’s important to consider the pros and cons of both the possibilities before making a choice.

In-house Development Team

The old-school way of doing things, or as some people put it, 'the real way of doing things,’ is to put every talent you need in one premise and watch the magic unfold.

There are ideas, people, networks, and various idiosyncrasies that build a collective body of work that is your dream. A good team can develop an idea into something much better by adding their inputs from their respective experiences.

Face-to-face communication is always easier. That Bob who secretly enjoys being trolled as 'Bob the Builder' because he is hardworking, that Alice who knows the name of every plant in the workplace, and the Jason who procures the finest of wines, a jolly bunch that hangs out after work every day, the camaraderie that comes with talking to the people you work with is just incredible. It's also easier to back one another up in case of emergencies, weekend work, or any contingency that needs fulfilling.

Many companies have been built this way through history. There is something almost magical in the way an organization starts functioning organically and the many dimensions your ideas acquire.

Prosperity Across the Seas – In-house Development_CI

But there is just one catch. Wait! Not one, but several catches.

To spearhead development within your office requires space, computers, logistics, stationery, coffee machines, employee policies according to hierarchy, and human resource management that caters to the needs of the many rungs in the organization.

Read also:Tips for Start-ups to Outsource Development

The list is not endless though, but to hold all of them together requires strong leadership, a firm vision, and a careful selection of people who believe in your dream.

The cons of such a setup are the same things that enrich it — people's idiosyncrasies can be a double-edged sword. Their ideas and experiences may differ from yours and might compel them to act differently. Training and development form a significant cost to a company, and in an ever-changing market, this takes on another dimension.

People's priorities change, their marital situations vary, their financial situations might alter, prompting them to leave, seek better opportunities or move town completely. In such cases, talent acquisition becomes a challenge.

The time, cost, and effort involved in training a new individual to a pivotal role involves him/her acclimatizing to the new environment, re-establishing connections that the previous person made, and carefully manage stakeholders. This is easier said than done.

What is easier though, is to hire an offshore outsourcing company.

IT Outsourcing

A lot of companies hire offshore developers where development is ‘Bangalored.’ A full team of developers works offshore in a country far away from you. There is talent, business acumen, hands-on experience in implementation, flexibility in terms of needs, and a high desire to please.

Since the early 2000s, IT outsourcing has been a rage.

Prosperity Across the Seas – IT Outsourcing_CI

Many companies create subsidiary companies in the host nation instead of directly hiring an outsourcing product development & services company. MNCs across the world have their own companies that adhere to the law of the outsourced country and yet perform the core functions of the business.

However, this requires significant capital.

If your organization is still a small-scale company, then it is much easier to hire and manage a team of offshore developers. Some companies provide tailor-made services across a broad spectrum ranging from web development, business development, support, and many more.

A significant advantage of IT outsourcing is a direct reduction of operational costs, talent acquisition efforts, and the need for large office space. The IT outsourcing company takes care of all of these things while providing a tailor-made solution as per your requirements.

The access to a large talent pool, especially in countries like India can be leveraged to scale web and product development to unprecedented heights. The exposure these companies have by working with offshore companies across the world sometimes results in great innovation as well.

Flexibility, agility, and mobility have become the hallmarks of efficiency. It is these three factors that can be easily achieved by outsourcing. IT Outsourcing can free up your business to focus on its strengths, allowing your staff to concentrate on their main tasks and on future strategy. There will not be a need for certain roles in your organization all the time. It could be front-end developers, QA engineers, administrative support, and product support. These are tasks that can be handled quite easily by an IT outsourcing services provider with adequate training.

However, there are catches here as well.

Lack of research and due diligence, and getting into deals early on may have long-term adverse effects. Companies indulge in nefarious activities under the banner of outsourcing. Shell companies, laundering services, and other activities occur in many such companies. Fraud detection and analysis is an additional challenge in outsourcing. There is some search cost involved in finding fraud analysis agencies in the outsourced country, and often, it can be hard to find the roots of these companies. Some startups change direction as they would have navigated from the core objectives due to the exit of one of its founders.

An alternative some companies occasionally consider is nearshoring.

Nearshore Web Development

Nearshoring follows the concept of offshoring with a minor difference. Nearshoring involves outsourcing your work to a company in a different country but the same region as yours.

For instance, if you’re based in the United States, you hire offshore developers from a company in Latin America. This form of IT outsourcing too has taken off in recent years.

Nearshore Development_CI

A similar trend is observed in companies in Western Europe considering other companies in the Eastern European region.

The benefits of nearshoring are very similar to outsourcing, but cost remains a challenge. Most nearshoring solutions are quite expensive as it is easier to source work locally.

One key advantage of offshoring is access to a large talent pool, which shrinks every time you center upon a region. A major success factor for outsourcing projects such as software and web development to offshore teams in India as opposed to Latin America is the access to a higher number of talented individuals.

Offshoring vs. Nearshoring vs. In-House Development

A higher number of core competencies, efficiency, and access to a variety of services has made offshoring one of the most lucrative forms of business.

Type Offshoring Nearshoring In-house Development
Cost High efficiency Low efficiency Least efficiency
Management High exposure Low exposure Low exposure
Experience High niche and specialized experience Low niche and specialized experience Low niche and specialized experience
Proximity Far away Relatively closer Closest
Size Huge, flexibility for many new projects and alterations. Relatively smaller, low flexibility. Flexibility solely reliant on specific people, usually low.
Communication Challenging Less challenging Least challenging
Services Large variety Low variety Least variety
Risk High High Low

Tips For A Risk-free Outsourcing

When considering outsourcing, the maximum effort will always go into risk mitigation. This is where in-house development scores well because of the ability to communicate and reiterate points until the desired results are achieved.

The downside though is that scalability, flexibility, and agility are largely restricted to the ability of your in-house talent.

This is why outsourcing shines, for there are several ways you can mitigate risks.

  • Trial Runs: Before hiring offshore developers or outsourcing companies, it is highly imperative that you do adequate research, due diligence, and check the company’s bona fides before you sign any deal with them. Referrals, credentials, and hiring local auditing companies can help fulfill this task easily. If you are looking to hire offshore developers, then a trial agreement where you only provide a part of the assignment will work well.

  • Organize for Time Difference: It is important to organize your working strategy to account for time difference when engaging with web, software or mobile app development outsourcing companies in different time zones. This can provide a much-needed productivity boost when you can start the morning with most of your admin duties completed.

  • A Hybrid of Outsourcing and In-house: This will require significant ideation and decision-making capabilities, but a hybrid of both outsourcing and in-house web development often leads to incredible variations and results. This will still need a firm vision, leadership abilities, and most importantly, the ability to back up another person’s work.

  • Leverage Collaboration Tools: Business communication has changed since the invention of Slack, Trello, Flock, and Web-Ex. Training methods, communications between business verticals, workflow tracking, and milestone-based productivity has reduced the hassle of communication. The days of having a Single Point of Contact (SPOC) are long gone. Having a clear and concise communication strategy from the get-go can mitigate any potential issues with miscommunication and enable feedback-based development approaches.

These risk mitigation strategies combined with the advantages of outsourcing to India can take your business to great heights. ‘Adapt, overcome, and organize’ is the best strategy for outsourcing.

Find the right people, the right outsourcing company, and the right scale and outsourcing will be one of the greatest decisions you would have ever made for the growth of your company’s dreams.

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Last Updated On 17th July 2020

Topics : Outsourcing

Tanya Kumari

Written by Tanya Kumari

Tanya leads the Digital Marketing Team at Classic Informatics, a leading web development company . She is an avid reader, music lover and a technology enthusiast who likes to be up to date with all the latest advancements happening in the techno world. When she is not working on her latest article on agile team dynamics, you can find her by the coffee machine, briefing co-workers on the perks of living a healthy lifestyle and how to achieve it.

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