First initiated by IBM and FDS, outsourcing software development and other IT services has been a strategic approach adopted by product managers, CTOs, and even entrepreneurs to fill in any technology gap.
It's not a new approach. Businesses have been embracing outsourcing since the early 80s.
Over 40 years and still thriving.
In fact, the global IT outsourcing industry is expected to generate a revenue of a whopping 351 billion U.S. dollars in 2021.
But there has to be a reason for this longevity. So many other processes have come in and gone obsolete during the same duration. And at the same time, new processes find their way in.
Think remote working, for this pandemic-hit world.
There are a lot of positives indeed. Not only does outsourcing enable them to embrace disruptive technologies but also helps them ensure business continuity despite any operational disruption. By involving an external IT company with loads of experience and specific expertise, any organization can leverage technology in its software and gain an upper hand in the market.
Today, organizations of all sizes are looking to build new outsourcing relationships or strengthen the existing relations with offshore IT companies to fight the unexpected turns brought in after the pandemic. But many still have their inhibitions and questions about outsourcing.
The list certainly goes on! And that is what we are set to resolve through this guide.
So, before you join hands with a third party or IT outsourcing company and get it to start working on your software project, there are several other questions that need to be answered.
Our software development outsourcing guide aims to answer any question that you may have before getting into any outsourcing agreement with an external vendor. Let's get started by understanding what outsourcing is.
Well, in simple terms, outsourcing means delegating your business operations to a third party to add expertise. In this kind of process, i.e., software development outsourcing, you analyze your business operations and identify the part of software development that requires expertise. It could be a particular feature of the software or the complete software development as well. Then, you find a technology partner or a software development company to join hands with. They analyze your requirements and start with the development process.
Also Read: A Complete Outsourcing Guide For Newbies
As the need to launch a digital product erupted, outsourcing software development to an offshore country has become the new norm. Whether it is to plug in the technology gap, cut down development costs, meet sudden demands, scale the development, or even upgrade the software to stay competitive, outsourcing offers the perfect solution.
From startups and small-medium-sized businesses to large-scale enterprises, everyone can leverage outsourcing software development to experts and ramp up their efforts to launch a product that disrupts the digital world.
When it comes to outsourcing, there are several opportunities that it brings with it. It is not just a moniker of offloading your software development to another company, it brings with it some extraordinary opportunities for you as well.
Strategic Time To Focus: Businesses that outsource their software development get the benefit of focusing on their core business functions. While the outsourcing company is focusing on building your software product, you can pay attention to what’s working and what’s not going right with your business. You can actually upgrade your business with strategic planning.
Cost Curtailment: Cutting down your cost is one of the biggest advantages of outsourcing. You can cut down your cost by a large margin if you strategically plan your outsourcing endeavor. If your objective is to minimize your cost or launch the software at a minimal cost, there is no better option than outsourcing.
Incorporate Latest Technology: In case your project is high-aimed and needs technical expertise, getting a highly specialized technology partner is easy in outsourcing. You can choose a company that brings to you the latest tech stack and can deliver the integration you require.
Risk Sharing: In addition to cost reduction, you also get to share the risks with the external outsourcing software development service provider. While you have your in-house team working on some functions, this outsourcing team can pitch in the expertise of an external team as well.
Ultra-Responsive In Addressing Demand Volatility: Bringing together a team of developers for in-house operations could take a long time and if you have demand volatility, you do not have the excess time. Outsourcing gives them an edge with flexibility. You can scale your team up and down very quickly as per your software demands.
We discussed the meaning of outsourcing in this chapter along with its main benefits for most organizations. However, just knowing the benefits isn't all. We are also enlisting all the challenges that CTOs, product managers, and other organizations. Read about the same in the following chapter.
Outsourcing has been proven to be beneficial to businesses of all scales. And even then, the whole point of outsourcing was not just to save money; it was to get expertise in IT operations, in those days, build data centers.
The goal was for businesses to do what they do best at their end and delegate other operations to their respective experts. This helped them overcome a plethora of challenges and excel at their offerings.
Even today, outsourcing is a strategic move adopted by CTOs, product managers, entrepreneurs, enterprises, and others to overcome several business challenges. Let’s understand this better by throwing light on the different challenges you might face and how outsourcing can solve them.
CTOs or Chief Technical Officers handle a majority of the development work, whether they are working with a startup, for a product company, enterprise, or other types of organization. Their main responsibility is to handle all aspects of technology in that particular organization and ensure it is technically mature for any disruption or digital transformation.
However, there are certain challenges that CTOS face while ensuring the technical maturity of their organization. And that’s where they can choose to outsource. The majority of challenges faced by CTOs can be solved by outsourcing software development.
Don’t believe us?
Here are some of the common challenges that you might face as a CTO and how you can overcome them by simply outsourcing development or other technology requirements to an expert company.
Tech innovation requires specialists who do not just have expertise in the required tech but are also driven to perform. However, the majority of the CTOs find it difficult to find the specialist owing to several reasons, the geographical limitation being one of the biggest. Countries like the US, the UK do not have the required IT skills and even if there is availability, the fee they charge is extremely high. Moreover, if you hire someone with moderate to low skills in the required technology, training them for the same can delay any project.
How Outsourcing helps: Outsourcing opens a plethora of opportunities and doors for CTOs to find the best IT specialists from across the globe. They are no longer limited by geographical boundaries to look for talent. Outsourcing makes it easy and cost-efficient to recruit tech specialists for any type of technology project.
CTOs are responsible to ensure their organization and teams are innovating at all levels. They need to take their organization to the front foot of digital transformation. And for this, they need a team that is technically advanced, updated with the leading tech trends, and beaming with new ideas. And such skills are not always readily available for most CTOs, which pulls them back from innovating.
How Outsourcing helps: There are several offshore outsourcing companies offering their technology expertise to help businesses digitally transform. Their vast technology stack will enable businesses to integrate state-of-the-art features and functionalities without worrying about the costs or looking for specialization. Outsourcing to countries like India, Ukraine, Poland, etc., can be a smart option if you are looking to innovate. In fact, India is emerging as a tech leader and you can outsource to India or partner with leading IT outsourcing companies in India to embrace tech innovation.
Many CTOs, especially those working for digital agencies or product companies have a pressing need to meet project deadlines. And these aren’t just for their own projects but also client projects that they have to undertake. Meeting such tight deadlines with limited resources could not just hamper the quality of work delivered but also overwhelm them.
How Outsourcing helps: CTOs can find a technology partner to share their workload. They can hire remote developers, build an extra remote team for added work, or completely delegate the project to be managed by the offshore team. It will help them finish the project on time and deliver it without compromising on quality because of time constraints.
In order for CTOs to innovate, they need to embrace new technologies like Artificial Intelligence, Machine Learning, RPA, blockchain, IoT, and many more digital tech. However, not every region has the required technology and tech maturity to make that happen. Only two options remain for CTOs in such situations - either drop the plan or pay for tech experts to relocate to their region.
How Outsourcing helps: Outsourcing diminishes all boundaries and gives you access to a global talent pool. You can not just find the best digital tech talent in your neighboring country but even across the globe. You can choose the company that deems best for your new tech product and get started.
There can be complex or bigger projects that you are unable to handle with the current resources present in-house. You need a larger team, experienced developers, technology experts, project strategists to handle the complexity of the project. This requires expertise that not everyone is able to offer.
How Outsourcing helps: Software outsourcing companies have years of experience in working on projects of all scales across industries. They have the required expertise to handle projects of all complexities. You can simply share your requirements with them and they can build the right dedicated team for the project.
Another challenge that many CTOs face is technical debt. They have built software, products, or enterprise systems using earlier versions of the technology. Now, the organization is eyeing the new technologies or latest frameworks. However, the current resources or developers aren’t adept at doing the same. This might create technical debt.
How Outsourcing helps: There are several offshore companies that can offer help in migrating or upgrading your existing technology stack. Whether you want to implement new solutions or update your existing systems to a new tech stack. They can help you get out of technical debt quickly.
Chief Technical Officers aren’t the only ones facing challenges in terms of technology. Even product managers, handling products for SMBs, SMEs, and startups, face several dilemmas related to the development work. They have a lot on their plate which needs to be handled while ensuring seamless development work.
If you are also a product manager, here are some challenges you might have faced or come across. Check out how you can overcome these challenges by outsourcing.
Building any product requires tech expertise and in-depth understanding. Without someone with a complete understanding of technology, choosing the right tech stack, library, or framework for development could be a task. And this is where many product managers or entrepreneurs find themselves hassling.
How Outsourcing helps: There are several software outsourcing companies offering technical expertise to startups and other small businesses. These companies can bring years of experience and expertise to the table. They can even act as your technology partner to help you become technologically mature to withstand all other tech challenges.
Successful software development requires prior planning and a roadmap that lays down all the steps in the development process. Lacking the focus to plan the development process and desire to achieve too much too soon can lead to Icarus’ fate. You need to be able to layout a well-strategized plan to initiate and successfully complete the development.
How Outsourcing helps: Here, outsourcing enables startups and the assigned product managers to work with a team that knows the development process and follows the ideal approach, agile software development for example. During the initial stages itself, the offshore company lays down a complete plan, at least for the first few sprints to achieve the development goals within the said time. They plan everything and map the development roadmap and even ensure seamless execution.
Another challenge product managers face while taking their software development from the initial MVP stage to a full-fledged product is the cash flow. They need to ensure that not only is the initial funding enough for the initial sprints but they get more funding as they progress. You cannot splurge in the development and need to be as efficient as you can be in the development.
How Outsourcing helps: Outsourcing saves costs in more than one way. It prevents you from overspending on in-house teams and paying almost 58% extra compared to outsourcing software development. Moreover, you have a technology partner who can build an MVP faster and help you secure investments as well. Another advantage of outsourcing is that it frees you from worrying about development and lets you focus on the pitch to secure more funding.
Many startups and small businesses find themselves unable to scale. They either lack the required resources, skills, technical expertise, or simply the experience it takes to scale a product. It requires a bigger team, greater investment, enhanced technology stack, and whatnot. However, not every product manager has the resources to fill in the requirements.
How Outsourcing helps: Outsourcing to an experienced software development company can help you through each phase of the development. Most outsourcing companies offer the flexibility to scale teams up and down. They offer you the freedom to hire more developers into the team and scale it up when the product moves to the next phase of development.
It isn’t easy for smaller businesses to manage their IT infrastructure, the technology needs, hardware and software maintenance, and other aspects of development. It requires special care, maintained conditions, and constant monitoring. Product managers do not have that much expertise to manage the infrastructure to build and scale the product.
How Outsourcing helps: Outsourcing helps businesses manage the complete IT infrastructure. They have IT specialists, and IT admins who manage the servers 24x7 to ensure your product never faces any downtime.
In addition to the challenges listed above, there are several challenges that are faced by enterprises, product companies, startups, SMBs, and others with their software development. These could be simple business challenges or challenges that hinder growth for an organization when scaling software. No matter what, outsourcing software development helps overcome several challenges, some of which are listed below.
Many businesses lack the direction and clear vision they need to go ahead with their product development. They have either not planned the development or are unable to move as per the planning. Whether it is a startup struggling to take the business off the ground or product owners & CTOs losing the sense of direction while focusing on several tasks/projects at once, lack of business direction could be a big challenge for organizations.
How Outsourcing helps: Outsourcing takes the entire development work off of the organization’s plate. Be it the CTO, product manager, or enterprise technology head, lack of business direction can be a setback in the growth. By outsourcing software development one can have a clear focus on the business growth and future goals.
Many organizations, especially product companies, and digital agencies find it difficult to handle several projects at once owing to restricted resources. They win over bigger projects but don’t have the resources to complete them. Such situations call for them to either give up on the project or expand their teams.
How Outsourcing helps: One can always join hands with an offshore software development company or hire dedicated teams as an extension of their in-house team. Not just that, one can even hire single developers to fill in any gap in technology. Choose an outsourcing firm that has the resources & experience to handle any scale of the project.
Another major challenge that smaller organizations like startups face is the limited office space that they have. The smaller space does not allow them to expand their team in case they have any new tech requirements or want to set up a totally new office for the development team. This means, any expansion in terms of the development team would require them to invest in expanding infrastructure, which could elevate the costs.
How Outsourcing helps: Outsourcing companies take over the complete project, saving you from expanding infrastructure or investing funds in the same. You can hire dedicated developers who will work just like your in-house team and help you with the work.
Many organizations feel that they can handle all tasks within their available in-house resources. However, this leads to overworked and overwhelmed staff. They end up being neither creative nor innovative with their work. Moreover, they lose focus and are unable to deliver the promised quality. You might even see your in-house staff juggling between different projects and tasks.
How Outsourcing helps: You hire a team to handle the extra work while the in-house resources do what they are best at. They can focus on the business aspects of the organization while the remote product development team can handle the development work.
Many companies don’t have a technical co-founder, CTO, or technology partner to help them form an IT strategy. They know their requirements and have an idea of the product they want to build. However, they lack the IT strategy to move ahead with the same.
How Outsourcing helps: Outsourcing companies act as technology partners for the organization and can help with the development task. They can assist businesses in forming the right IT strategy that is aligned with their business goals.
While outsourcing is known to simplify your business process, it does come with some challenges that might seem like nothing to some but be super daunting to others. Working with startups, enterprises, CTOs, and organizations of all scales, we have come up with a list of the biggest challenges that are commonly encountered during software development outsourcing.
Improper communication is one of the many well-planned strategies in place that is imperative to ensure you are not left with any confusion during the process. Outsourcing, while in general, is the same for all industries (getting a service done by another organization), the way you implement it varies with the way of working of each organization.
Many organizations come across different challenges in their work and operations which compel them to outsource software development. They need to identify the gap before they jump into devising a strategy for their business.
Apart from conflicting company cultures, there might also be a change in the methodologies. There are different methodologies like scrum, waterfall, agile, etc., and if your way of working is in stark contrast with how your outsourcing company works, there might be many challenges.However, you can discuss your ways of working, the methodology you follow, and the approach you take to development or working in general. This would eliminate any misunderstandings or incompatibility with the ways of working.
Cultural and regional barriers become an imminent challenge despite the growing inclination towards globalization and outsourcing. There can be different corporate differences between the in-house and the outsourced teams or remote developers which might impact different aspects of the business.
However, businesses can organize training programs and make their teams ready for outsourcing.
The next challenge that many companies face when outsourcing their development work is project management. In many cases, you are supposed to manage the entire team while in others you can get fully managed teams.
It is important that you give special regard to project management.
In many cases, the CXOs or the software owners are able to share every detail about their software in-depth. But where they lack is sharing the business context. It is very important that you also share your business context.
Knowing the target users, market, demographics, and what value you intend to get from this software product would help the outsourcing company to serve you better.
Governing the project can be a lot for many product managers, considering the many tasks that it entails. In fact, governing the projects could be a hassle, leading to ineffective governance. They might not be able to handle the project or even find it hard to manage the in-house developers as well as the outsourced team.
However, when you outsource to an experienced team, they provide project managers who govern the project and ensure everyone is working as planned in each sprint.
There are several companies that have successfully outsourced but later get too dependent on that company. This is unhealthy and called vendor lock-in. For effective outsourcing, it is important that your partner outsourcing company is efficient in knowledge transfer post-development.
While outsourcing can help overcome several business challenges, there can be a different set of challenges that it might come with. However, with the right outsourcing practices and a professional outsourcing partner, one can
While outsourcing software development, having a well-planned strategy in place is imperative to ensure you are not left with any confusion during the process. Outsourcing, while in general, is the same for all industries (getting a service done by another organization), the way you implement it varies with the way of working of each organization.
Many organizations come across different challenges in their work and operations which compel them to outsource software development. They need to identify the gap before they jump into devising a strategy for their business.
No matter what the initiative, having a goal in mind can help you scale. You need to set up a specific goal that would have a realistic yet challenging value. Without a goal that is in line with your business plan, you might risk the software development outsourcing going in the wrong direction. No goal in mind would only lead to wasted time, cost, and resources. You need to have real objectives to ensure that your outsourcing endeavor is leading the right way.
When outsourcing software development, there are a number of long-term goals that can help you make the most of the opportunity. There could be many goals that can help you in the long run.
Some companies might start outsourcing as it could help them get software development services at a smaller cost. It might help cut down the overall costs of the development. Many other companies believe that outsourcing can help them scale up their teams quickly.
Outsourcing can help in fulfilling any type of long-term requirement of a developer or a team of developers. Another long-term goal that you might want to set is regarding maintenance. You need to form a long-term outsourcing relationship with a vendor to ensure your software is not just fully maintained but also upgrades as and when any new technology is launched.
In the long run, you want to achieve quality codes for your software from a software outsourcing company that also helps you cut down your overall software development budget.
Apart from the long-term goals that most people talk about, there are some short-term goals as well that you can set up based on your requirements. These could be as simple as getting on-demand support or on-demand developer for your software. You might have a small project at hand that needs completion within a specific period. However, due to a lack of developers, it is taking longer. Hiring a remote developer for those particular hours can speed up your development.
The next goal for any software development would be to plug the technology gap. Most organizations, startups, and enterprises choose to outsource their software development to integrate the latest technology in their development work.
You can get an API or application program interface, a plugin, a small module, or any other thing developed for your software. This could help when the API you need is to be developed using cutting-edge technology that is yet not present in your in-house team or even in your local region.
Outsourcing can also help you with migration. When you want to migrate your website, web application, mobile application, or any other digital product from one platform to another and upgrade it, outsourcing can be very helpful. It can speed up the process of migration and help you become digitally advanced.
Even when you are planning for digital transformation, joining hands with an external technology partner can speed up your digitalization efforts
With goals in place, you can move ahead with your software development outsourcing plan. This is where the technical co-founder of your startup can help you choose the right strategy to choose.
The first step towards successful software development outsourcing would always be about strategy. If you have adopted the right outsourcing strategy, your outsourcing efforts are bound to succeed. But if you have had a wrong start, your outsourcing efforts would not last long. There are several strategies that businesses adopt depending on their requirements and their work.
Every organization has a gap that it seeks to fulfill through outsourcing. This could be a short-term gap or a long-term one, a project requirement, or a technology gap to fill in for a client project. Different organizations have different requirements which we have depicted using various scenarios. Let's talk about these in this section.
These are those organizations that have a core team of developers or programmers sitting in their office but are lacking technical expertise. They need a specific technology added to their project. This could be new technology or something that your in-house team is lacking. Many even have some technology challenges which cannot be solved by the in-house teams.
This can be solved by hiring remote developers for the project. They can hire specific tech experts from across the global talent pool and find the right people to work for their project.
Whether you want to fill short term technology gap or build a long-term outsourced, cost-effective center of excellence, hiring developers, or setting up an extended team is the best solution. So, depending on your requirements, you can get core developers or a complete team of developers, designers, project managers, QA testers, and others.
You can easily hire developers and build your extended teams for software development and add additional expertise to their projects. Not just a team of developers, you can also build your own team for full-stack development, on-demand for ad-hoc needs, maintenance & support, and independent testing.
Make remote team members an asset to your organization and leverage the value that they can deliver.
Many organizations do not have a technical team in their office for software or product development. Getting the infrastructure, hardware/software, and hiring a full team comprising developers, QA specialists, UI/UX designers, testers, project managers, and others could exceed their budget. They need to set up an ultra-powerful team dedicatedly working on their project but at a lower price. The best part here is that there would be a project manager over the team to make sure everything goes as planned.
One of the best parts about outsourcing is that it lets you choose between different engagement models based on your tech requirements. You can even build complete dedicated teams with developers, project managers, designers, quality assurance engineers, and others for your project.
The organization can have as much involvement as it wants. It can discuss requirements directly with the project manager and ensure the work is done as described. It can even have meetings with the developers if needed.
This is when you have too much on your plate to handle the development of this product or software. These are organizations that either needs some software outsourcing company to build their software completely or hand over a project to an external company. They need a trusted vendor to build the software from scratch and manage it until it scales. In such cases, you will require a team that will manage the end-to-end product development and will hand the product over on its development.
For startups and SMEs with smaller team sizes and just a few people at the management level, managing an offshore team or remote developer could pose more challenges than being beneficial. That’s where outsourcing complete project development comes to help. Depending on your requirements and the involvement you want, you can get end-to-end product development.
Ideation: Creating the product roadmap and strategy, prototyping the UI/UX, and developing the MVP.
Development: This is the stage where the actual software is developed by the developers. When outsourcing development, your idea of the software is transformed into a full-fledged software with its APIs, web, mobile, and cloud apps.
Scaling: This is the stage where your software is up-to-date and ready to rule the market. It would include everything from inbound to outbound strategy to generate demand.
The biggest advantage of outsourcing the complete project to a software outsourcing company is that it will ensure clear deliverables and reduce friction. All you need is a clear goal, a well-developed outsourcing contract with the scope, and other things listed clearly. This would help in the end-to-end development of the software in a more streamlined and speedy manner.
In such situations, a company can take the managed product development approach. You share the product idea with the company and discuss the requirements. The vendor handles everything from MVP development to scaling the product and launch.
This is a situation that most startups find themselves in after the seed funding round. They have an MVP or a very basic version of the product. This version was only enough to help them display & validate their idea and receive the funding.
However, now they need to scale up the product and get product development with new features and functionalities which they are unable to develop with the existing resources. They need expert assistance from technology partners or need to hire a technical co-founder to scale the product.
One of the easiest ways for product managers to scale their products without expanding their infrastructure or tech expertise is to hire extended teams. IT offshore companies offer extended teams that act as your in-house team, just sitting in an offshore location. You already have a team who built the MVP, now you need more developers, technology experts, and engineers to scale it. This can be easily done by joining hands with a software development outsourcing company.
Another scenario that most startups find themselves seeking assistance from an offshore IT company is when they are launching a tech product but do not have the required technology expertise. They need a technology partner or need to hire a CTO or technical co-founder to help with everything technology. They are ready for disruption but aren’t very well-versed with the technology terms, frameworks, libraries, etc.
Such situations call for the organization to hire technology partners. Many IT companies help startups from scratch to build their MVP, get validation, ensure cash flows, all the time assisting with the development and other technology aspects.
This is another scenario when a company is looking to modernize its existing legacy applications. They need to modernize their existing software or systems by infusing the power of the latest disruptive technologies. This is when organizations look for an external software development company to handle their project from the middle to modernize them. They might need the company to develop a particular module of their existing software or need an outsourcing company to help with digital transformation.
This is where they need to find a digital transformation enabler. Such companies have teams to help with any type of external support like:
APIs, Microservices, Serverless Architecture
Here, you might need an interface for your software, want to have a new plugin developed using a new-age technology, or anything else. This is a great strategy as you can keep your in-house team working on the core of the software while the remote team of developers can build the independent module or work on your smaller project.
Depending on your situation, you might just need a single remote developer for your in-house team or you might need a complete team of all the developers, testers, designers, and everyone to turn your software idea into a reality. In fact, for some projects, you might have everything jotted down and can even give the entire project away to an offshore software development company.
When outsourcing, you need to be careful as to how you undertake the entire transition to ensure it succeeds. Performing due diligence before outsourcing or choosing an offshore software development company is also important.
But even before that, you need to be sure if outsourcing is the right solution for you or not. Timing is a huge factor in outsourcing success. Outsourcing when your company is neither ready nor in need of an external source can be harmful. The same goes if you refrain from outsourcing despite all signs telling you to outsource.
So, let's find out first when is the right time to outsource and when a company should avoid outsourcing.
Many startups, enterprises, and CTOs come to us with the same question. They are not sure if it is right for them to outsource product development or hire an in-house team to do the job. If you are wondering if software development outsourcing is for you or not, keep reading to know if it is right for you to outsource.
The next reason why you should probably choose to outsource your software development is if your local developers are not as skills as your project demands. You can always find the required skills in countries where IT talent is better and more qualified.
You already have an in-house team of developers but they are too busy in other projects. This is the time you can definitely reach out to an outsourced software development company. You would not be exploiting your in-house team and they would be able to work in their full efficiency on the current project, maintaining quality.
The next factor that convinces most people to opt for software development is the requirement for technology. The latest technology is being added to the digital world and a new version of the latest frameworks or coding languages is being launched. Finding a new developer each time you want to add this technology stack could be challenging, in terms of both time and money. By joining hands with a technology partner, you can be assured to add the latest tech stack to your software development.
You need to have careful monitoring and management of any project if it is taken in-house. You need to ensure compliance, manage teams, check the code quality, and much more. With so much in your place, you might find it difficult to focus on your business growth. By availing of the outsourcing software development services by an expert company, you can easily focus all your energy on things that need your special attention.
As you work with experts that you’ve chosen from across the world, all you need to do is explain your product idea to them and they would get started with the development. Moreover, bringing in expert teams to work on your project would mean speeding up your development timelines.
Outsourcing software development can be a very effective way to cut down your overall cost of development. You save on the IT cost, the infrastructure cost, hardware cost, and many other costs when you start outsourcing. You can even save up to 70% of the cost by outsourcing compared to the same done in-house in regions of Europe and North America.
While it is important to know when you should outsource software development, at the same time, it is also important to know when not to do so. Yes, there are many instances when you can work better without outsourcing to achieve success. Here are some of the things that will tell you that you should not be outsourcing software development.
Jumping into outsourcing is never a good idea if you are still not convinced that you have found the right company. There are a number of things that you need to assess before finalizing the outsourcing software development company. Do not join hands with a company just because it is offering you cheap development. Check the reviews, testimonials, portfolio, experience, technology stack, niche, etc., to ensure quality.
Before outsourcing, discuss the non-disclosure agreement, IP protection, confidentiality of your software, etc. If you see even the slightest hint of any threat, avoid outsourcing. Additionally, if your core information like the customer records, business data, etc., needs to be passed on to the company, such situations call for in-house development.
For companies like Uber, whose core business revolves around the Uber app itself, outsourcing its development is never a good idea. You need to be involved in your core business competency and cannot delegate its development to someone else.
While outsourcing is supposed to decrease the overall cost of software development, there can be some instances where it might expand your budget. For example, if you want a plugin or API developed, hiring a highly specialized professional for it could be very expensive. You can rather get an intern or a junior developer from your local area to get it done.
Even when you are outsourcing your software development to some offshore company, you are always liable to have some control over the work and access the docs or files required for the same. If you find yourself being totally cut off from the project and see the outsourcing software development companies take all the decisions, you can definitely avoid this method.
Right from the start, you need to have a clear vision of what you want from them and follow up with them. If you have your apprehensions and doubts, here are some ways that can help you succeed in outsourcing software development.
Knowing when to outsource and when to skip is crucial for success. Not every operation or task should be outsourced. There is a stark difference between in-house and outsourced product development and one can leverage its benefits only when they know what to outsource and when. It is always advisable to outsource what you have very little knowledge of and keep the core functionalities in-house.
It is very important that you pay extra attention and heed to the onboarding process of your team for outsourced services. Just like you would onboard any regular team for your in-house operations, you should treat the remote team the same way. Sharing the information about your company and its culture, introducing them to other team members, delegating tasks, and everything should be as smooth as with any in-house hiring.
Before you finalize any company, it is important that you ask them to work on your test project first. Get them to work on a smaller module or project to test how the communication goes. Also, check their trustworthiness and honesty about the process, delivery on promises, and how quick they are in developing it. You can even start with a smaller product or a prototype of the product with MVP development.
When you have the developers or team members sitting within your physical proximity, the communication tends to be extremely high. You would end up telling them everything you know and ensuring they are clear about what’s required of them. But when you are working with remote teams, this poses a problem.
It is important that you at least give 25% of that communication time to the outsourced teams as well. You cannot just assume that they would know everything about the software, your company, or the way things work, or what you expect them to do. Say everything clearly and make sure there are zero assumptions.
The next tip to succeed when you are outsourcing software development is to be involved as much as you can in the development project. You would be totally involved in any in-house project. Do not be too carefree about your outsourcing project thinking the project managers would handle everything.
Although they would definitely take care of everything, it is your responsibility to be involved. Be available for weekly meets. Also, it is important that you give early feedback to anything and everything you feel is not going as planned. Outsourcing gives you flexibility and you can always communicate with them about your requirements to get early changes done.
The next tip is to establish dependencies with the external team that you hire. This is an important tip to eliminate any type of miscommunication or misunderstanding. This is where you have an outsourcing contract that establishes all the important tasks that need to be done by the external team. It should be clear as to what all the offshore companies are expected to deliver and what they will not be responsible for. This would also eliminate any unhealthy dependencies.
Another important tip while working with an external team is to encourage feedback exchange. This way you know where they are on the work front and if they are stuck somewhere. Not just that, feedback exchange helps you get a fresh perspective on things and a new set of eyes to look at the project. The external team might have some better opinions or ideas about the software development which might help enhance the product even more.
As the world is turning into a global village, many countries are opening doors and offering outsourcing services.
Apart from India, China, Ukraine, there are several other countries that offer outsourcing software development services.
When you are planning to outsource your software development, there will always be a question around which region to choose for. Countries across the world have started offering outsourcing services to organizations across the globe. If you wish to know the major outsourcing regions from which you can choose your outsourcing partner for software development, here is a list of the same.
With IT hubs like Bangalore, Hyderabad, Gurugram, and similar cities, India is fast gaining popularity as one of the best countries to outsource software development. India produces over 3.1 million graduates and 300,000 graduates each year. Not only does India have great IT talent, but the cost of outsourcing is also pretty low. You can hire remote developers from India for at low as $15 per hour. The people are also fluent in English, eliminating any language barrier.
In fact, a new Korn Ferry study revealed that India might become the tech leader by 2030 amid the tech crunch that is expected to hit the global IT market. No wonder outsourcing to India is becoming so popular today.
With 92% of the Philippinos speaking English, the Philippines has become a great country to outsource software development. However, there is still a bit of a technology gap. So, if you have complex software to be developed, it is probably best that you chose some other country. The Philippines is best for simple software development.
As per the stats from HackerRank, Poland ranks third in housing the most skilled professionals. However, language continues to pose a barrier as only 30% of Polish people consider English as their second language.
With 4.7 million tech graduates being churned out by China every year, this country is one of the most popular destinations for western companies to develop any type of software. However, there are challenges here as well. Only 10 million of the 1.3 billion Chinese population speak English. Moreover, IP protection and piracy is also an issue in this country.
Ukraine has great tech talent and can be trusted with all types of software development projects. While English is not a common language there, over 80% of their IT populace can communicate in this language. Its time zone also overlaps with the US and UK, giving you better flexibility.
India has gained popularity as a hotspot outsourcing destination. Many companies from across the world have joined hands with Indian companies to outsource their software development. In fact, as per a recent survey, 85% of the companies based in the United States prefer outsourcing a majority of the operations to India. Whether it is data processing, eCommerce management, search engine marketing, software development, or any other kind of IT software outsourcing service, they love outsourcing to India.
There are several reasons why outsourcing software development to India is a great idea. Here are some:
With over 3.1 million graduates each year, India has a pretty large talent pool. There are over 200,000 software engineers serving in India who have experience in the field. The IT sector of India employs over 3 million talented individuals. You can easily find your perfect software engineer for the development work in this country.
The country is 9.5 hours ahead of the USA, 4.5 hours ahead of UK, 3.5 hours ahead of Europe, and 4.5 hours behind Australia. However, it doesn’t let this time difference create any issue with the work. The overlap period allows for easy syncing for meetings or discussions with clients. In fact, you can have your business running 24 hours as your offshore team in India would be working after your in-house team has gone home.
The next advantage that you have of outsourcing software development to India is that you save on your development cost. Going by the outsourcing cost guide, one can see that the cost of outsourcing software development to India is far less than getting the same done by an in-house team.
You can get developers working for you for as low as $15 dollars. The price might go up based on seniority, expertise, and technology. Yet, it will still come under your regular in-house development.
The communication barrier was once considered one of the biggest reasons why companies shied away from outsourcing to India. India is the world’s second-largest English-speaking country. You can expect a smooth transition of thoughts and knowledge with IT professionals who are extremely fluent in speaking English.
Many people have their apprehensions that such low costs would mean low-quality codes. However, the quality of the products that Indian developers and Indian outsourcing software development service providers have delivered. There are so many ISO-certified companies in India and you can trust them with the quality of the codes.
The Indian government has taken several initiatives to boost the IT sector and take it to the global level. It is making outsourcing to India secure for foreign countries and welcoming global corporations. The government has taken the “National IT Task Force” 108 point Action Plan to boost this sector. The country’s cyber law is also on point to ensure there is no threat to your security or intellectual property.
India is undoubtedly one of the leading destinations for outsourcing software development, IT operations, hiring remote developers, or simply choosing as a development center. The vast latent pool, unlimited technology opportunities, ease in communication, cost savings, supportive government policies, and various other factors add up to the attractiveness of India as an outsourcing destination.
Choosing to outsource to India isn't enough. You also need to find the right company to partner with for your outsourcing relations. However, seeing the countless IT outsourcing companies in India, most CTOs, entrepreneurs, product managers, and even technical co-founders find themselves in an abyss. They are unable to choose between so many companies. That's where this checklist will come into play.
When you are outsourcing software development to India, there are certain points and factors that you should check. These factors can not just help you make a more informed decision but also ensure that you join hands with a web development company that is praised for its outsourced services.
Technology is ever-evolving and if you are not in line with what is cutting edge, your software might not be able to succeed in the market. You can check with the teams and ask them what are technologies they are well-versed with and if they could rope in the technology you need. The company should also have the required infrastructure to handle the project efficiently.
This is an important factor as you would not want to get on board with a team that does not respond to your queries on time. In the very initial phase itself, see how long they take to respond to your initial emails or texts or calls. Good communication is the key to succeeding with your software development and if the company cannot be available when you have any requirements, you can choose to not choose them.
What type of partnership you want to have with the company is also an important factor to judge the company on. Check their service or engagement models. They might be offering end-to-end software development, only providing remote developers, offering complete dedicated teams, or might even be working on just short-term projects. Know if you and the company are both on the same page before getting started.
One of the most underestimated aspects but an important part of this process is the maturity level of the management. It is imperative that you know how experienced their managerial team is and the project managers are. This could help in a smooth transition and more efficient management of your project.
Your Intellectual Property is your right and one of the biggest apprehensions that companies have when outsourcing software development is the theft of their IP. It is important that you check the contract, their terms on IP protection, Non-Disclosure Agreement, confidentiality protection, etc. Also, check that the company is ready to comply with the regulations and standards of your company, your country, and all else.
Each project has certain budget limitations that it needs to abide by. You need to find a company that would fit in with the budget that you have. Check all the costs that would be included in software development. You cannot compromise on the quality of your project. You can also check the hidden costs and ensure that there are no added costs that the company might add to your contract.
Also Read: Outsourcing Contract: What You Need To Know
The next thing to check when you are choosing a company for outsourcing software development is the portfolio. Check out the portfolio of the company. What type of projects they have worked on and what is their expertise.
The next thing that you need to check is the testimonial. You can check what the customers have been talking about the company. It’s not just the reviews on the company site but also on other review sites to ensure that they are actually a customer-serving organization.
Now that you have a checklist with you to help you find the right company, it is time that we talk about the right process to find the right company for outsourcing software development. Let’s talk about the steps that you will have to take on your way to finding the company that fits your requirements and works as per the scope of the software.
There are different platforms where you can find software outsourcing companies like Clutch, Google SERPs, listicles, etc. You can shortlist companies based on your project size, their tech stack, and other offerings.
Once you have shortlisted the companies, create a request for proposal and share the same with the companies. Also, have a discussion regarding what you are looking for in the project partnership and your exact requirements.
Depending on the type of requirement that you have, the next step that you need to take is discuss the engagement models. They need to know if they need a single developer, whole team, specialists, or managed projects and discuss if the company offers that.
Once you know the companies offering the type of engagement you are looking for, it’s time to assess them based on your costs/their project budgets, your launch time/their timelines, your tech gaps/their resources, and others.
Once you have assessed the costing and everything else, start with negotiating pricing with the shortlisted companies. This is where you analyze the quotes and find out the company that is ready to offer the best at the cost.
Once you have gotten down to the final 2-4 companies, the next step is to start interviewing the developers. Most of the professionals outsourcing companies out there do offer resumes of experts and let you interview them before hiring.
An important step in any outsourcing partnership is to finalize and sign the contract. The outsourcing contract contains all the vital information required for the agreement and the partnership that is to follow. Whether it is the time & material contract, fixed price outsourcing contract, or dedicated team outsourcing contract, make sure to have it fool-proof before signing one. Each component of the contract like project scope, service level agreements, asset transfer, product ownership, IP protection, timelines, payment structure, subcontracting, exit strategy, etc., should be crystal clear.
Many people have the question as to what they should expect once they have signed the outsourcing contract and started outsourcing software development. If you have also just entered an outsourcing agreement or partnership with an offshore agency, here is all that you can expect initially until you get used to working with remote teams/remote developers/outsourcing vendors.
The initial days seem like onboarding a lot of people onto your team or company. You need to be aware that these will act as your in-house team members but work at an offshore location. You will be having a number of meetings and conferences with the project managers of the extended team or the remote developers initially for all the knowledge transfer.
The first sprint is all about letting the external team know more about the scope of the project and how to go ahead with it. They will get familiar with the processes, tools, ways of working, and other systems to start taking over the development work. You can expect some quick meetings and interactions for feedback and queries regarding the approach. This sprint usually lasts two weeks.
The external team or developers or company will get more acquainted with the project. Within the first month, you will see them sharing a level of excitement about your product and even sharing their own perspective and innovative ideas or reviews about the product. They should be able to handle more tasks around product development on their own.
The first six months are about reviewing the outsourcing relationship and mapping the success of the same. If the outsourcing company has worked well, you will see it in the progress of the product. Depending on the complexity of your product, even a complex product would have a working prototype or an MVP ready by the end of six months. Check the KPIs and see how well you were able to scale the development and what type of feedback you have received from your customers or employees.
We hope you have a clear idea of what and how outsourcing software development can help you with your business. At Classic Informatics, we have over 18 years of experience in the domain of information technology.
As a software development outsourcing company, we have assisted hundreds and thousands of startups, enterprises, CTOs, and organizations of all scales build their software and move ahead in their journey to digitally transform. Whether their objective was to save costs, develop a state of the art software, or speed up the development, we have proven our expertise and garnered a lot of applause.
By outsourcing to our software development team, you can infuse your project with a talented workforce, high-quality codes, and seedy development.