“Outsourcing” has become a buzzword in the times of digitization. “Outsourcing software development” is a process of transferring all the IT related developmental projects to an experienced IT firm. The outsourcing market is growing year on year. As per the Statista report, the global spending on outsourcing will reach a new $413.7 billion benchmark by 2021. The US is the biggest outsourcing country of software developments. It is already leveraging the benefits. India tops the tally of IT service providers with a wide pool of resources. The trend indicates that outsourcing will grow in the coming years and bring many opportunities along.
Organizations operating from different industry verticals like retail, oil and gas, or manufacturing lacked the experience of engaging IT in their business model. The smart firms did not sit back due to lack of experience, but they met experienced businesses in this field to adopt digitization. Some mid-sized companies hired software engineers for their software-related demands, but this arrangement cannot be compared with outsourcing software development to the team of experts in the field. The experience, coupled with expert developers at a great comfort provided by IT firms, affirms a successful delivery of software engagements. There are more benefits associated with outsourcing that we will be discussing in this article.
Why should I outsource software development?
Since every company has a unique and tailor-made model of achieving its objectives, they have their reasons and benefits for outsourcing software development. Large scale companies outsource all software development projects, IT infrastructure, software maintenance activities, while mid-sized firms may only delegate core development projects. Some companies may not find IT’s role in adding much value to their core business processes at some point in time, while some might want to go for full automation.
Every business decides outsourcing software development after considering its market strategy, budget allocation, Employee strength, operational costs, etc.
10 benefits of outsourcing software development to third party vendors?
There are many benefits associated with outsourcing software developments as per the business’s unique set of requirements. Like some big companies would like to concentrate on their core business by transferring hassles of IT developments to other vendors in the market, while other companies may have core businesses established and are trying to expand their reach in IT. They might want to outsource only critical projects and have a dedicated in-house IT team to manage their IT operations. In such cases, once a project is delivered, the control and enhancement of the application go back to the company rendering the third party free of its charge. Although the benefits of outsourcing vary as per the business’s objective, most of them revolve around the following key points:
- Cost Efficient: The first and perhaps the most sought after reason to outsource the software developments is to make your project cost-effective. The return on investment in outsourcing is very high. Did you know that 59% of the companies claim to reduce their software development cost by outsourcing? The reason for outsourcing being cost-efficient is cheap labour and high-quality servicing. Software developers based out of developing countries like India have comparatively low salaries in comparison to developed countries. The hourly rate of Indian developers for software development is much lower in comparison to other countries. This benefit is related to cheap labour and extends to the lower cost of building construction, rents, employee perks, and much more. Every investment comes with the added advantage of reducing costs overall. Businesses save half of their project cost in infrastructure development, rent, salaries, training costs, product support, customer care, and other employee benefit schemes.
- A team of experts: Many high-tech profiles being vacant for months due to the non-availability of experienced resources can paralyse your project. Outsourcing opens a door for experienced, talented, and highly skilled individuals in your organisation. It gives you a wider pool of global talent to get the best suited hired. These resources are not only proficient in technical skills but also come along with cultural diversity. Their diverse background and local experiences can be leveraged to the business’s benefit. Imagine you are designing a marketing campaign for African consumers, and you are not aware of their culture. Employees from African backgrounds can act as a key resource to win the deal. You can save your time from the cumbersome process of recruiting them in-house. All of these hires and employee benefits would be taken care of by the partner organization. Outsourcing gets you the best talent with very little investment.
- Flexible model: One of the advantages of outsourcing software development comes in the form of flexibility offered. Here, flexibility is in terms of utilizing the services of developers for software related issues. The offshore team can be ordered to start developing any project as per your need and market assessment. In case of hiring an in-house team, if there is no project required to be taken up at any point of time, then also expenditure would occur to keep the team running. An in-house team cannot be terminated as there might be an issue in your software, which costs you a lot without the developers’ team.
Outsourcing mitigates the extra expenditure and provides flexibility in this regard. You can ask a business partner to reduce the number of people in the project at the time of no developmental work. The team can be expanded as required with the overhead of hiring on them. It is very flexible to expand or decrease the team size or to reduce or increase the number of developmental projects per quarter with outsourcing.
- Fast delivery: Outsourcing can dramatically improve the delivery timelines of any project. Let us understand this with an example, if you want to include an automated chatbot in your website capable of natural language processing. It could take most of the customer inquiries and save time for your team. The same time can be used to take up other meaningful work. Such a bot development team would require ML developers, front and backend developers. How would you manage this with an in-house team of developers? Time-consuming right! You will hire a team of developers for this, which requires time if you do not want to compromise with the skills of resources to be hired. Now imaging the same situation if you would have outsourced software development. You would have avoided this tedious process of hiring. A simple notification to business partners and since IT firms have developers skilled in various fields available they can map you to the best fit. They would take responsibility for getting the project done as per your timelines. This certainly improved the time-to-market for your aspired project. All of it is done in a time-efficient manner with no hassles for you. The time is saved from hiring, allocating, explaining, forming a team, and collaborating with outsourcing. Hitting the market first with your aspired project surely increases the chance of your success in this competitive environment.
- Outsourcing the risks: All your risks can be outsourced with your software development to the business partner. It releases you from thinking about it all the time. This exercise frees up your mind to think about expanding business, marketing strategy, and improving supply chain schemes. Rather than worrying about software related issues and risks, you can focus on core business activities. Let experts do their job. Experienced in project development, IT firms are well aware of the risks and how to handle them.
- Focus on core business: There are many overheads attached if you go for in-house software development. One of the overheads is the diversion of focus from core business operations. The in-house team would work in a tightly coupled environment with business associates. It is bound to lose focus in such an environment where every core business activity is looked upon from a software point of view. The business would need to dedicate time and efforts in conveying every small change in business operation to the software team. This can become a barrier for your expansion at times. Industries should understand that software development projects support or enhance their business operations and should be designed later. Software requirements should not bound a business’s core operations while the vice versa may hold. Businesses can reduce this effort leakage by outsourcing this to a third party. They would be accountable for developing and supporting software applications without consuming much of the business’s time in this. These efforts can be utilized to tailor winning market schemes.
- Exceed customer expectations: Experienced IT firms would help in assisting your customers with new software developments delivered. It is good to study customer behaviour and expectations, which may or may not be stated otherwise. There are some unspoken expectations; these should be captured as well. For example, It is expected that the software developed would be compliant with the country’s laws. There should not be a breach of any law while the use of the software developed. Such kinds of requirements are obvious and expected to be met. Outsourcing software development to an experienced partner helps you by adding an experienced set of people in the field. They work as your right arm to present the software requirements and expectations. Like the customer requires easy GUI even for complex works. This can be understood well by the software industry but the oil and gas industry.
- Room for innovations: Outsourcing brings innovations to your business strategy. The team of experts in the software industry may suggest some breakthrough ideas that can help your business strategy. Brainstorming sessions with software professionals by explaining to them your business process can be very beneficial. The talent pool comes as an advantage; outsourcing may have useful ideas as they have worked in the same field for a long time. Take an example of the paint industry, painting the car used to be laborious and time-consuming work in earlier days but not anymore due to the invention of AI.
- Address changing environment: IT works on the philosophy of “Change is only constant.” The software developed at any point in time will need an upgrade in the future. Upgrades can address scalability, customer experience, employee satisfaction, or anything under the sun. The changing technologies offer innovative solutions for all such problems. If you are associated with an expert IT team to suggest these changes, it gives you an added advantage. You will stay ahead in the tally with useful solutions notified beforehand. One of the biggest technology transformations which endured almost all applications to upgrade is “Cloud.” If you have a dedicated IT partner with experienced professionals in multiple fields, then you increase the chances of your success manifold!
- Secure applications: This is a growing field. With the advent of digitization on such a large scale, the risk of online attacks has increased. It comes without saying that any software development work done should be made secure from such attacks. Outsourcing the security of the applications developed to the same partner is effective to a great extent. The developers could re-study and re-test their codes to find loopholes. You can reduce the hassles of hiring ethical hackers, particularly for a project, by outsourcing the whole development to a third party.
Risks of outsourcing software development and the mitigation plan
Every coin has two sides. Everything is not glittering in the world of software outsourcing; there are some risks attached. These risks can be mitigated with some simple exercises. Some of the common risks and their mitigation plans are listed below to help you build your mitigation plans keeping these risks in mind:
Risk 1: Unorganized clutter of code chunks with no comments- Yes! This is a big risk. The developer of an application keeps on changing, and it becomes very hard and time consuming for other developers to analyze the code in the absence of the previous developer. This increases maintenance time, costs, and invites security loopholes.
Mitigation plan: The code should be written while maintaining all standards with proper comments. Customized code should be used only when there is no way to meet business requirements using standard solutions. The code developed should be more aligned towards generic and object-oriented to accommodate future needs without major structural changes.
Risk 2: Lack of control over other organizations- This is common insecurity among business owners during outsourcing. They fear losing control over critical components of their business. Also, all the requirements and customizations would not reach them as they want it.
Mitigation plan: If you are outsourcing software development to a reputed IT organization, then this risk can be mitigated. These organizations adhere to agile methodology and work in tandem with businesses to deliver quality products with underestimated timelines. Experienced firms ensure full participation and follow transparent reporting tools to keep business updated with all developments.
Risk 3: Communication barriers- It used to be a fear among business owners that the team operating their project remotely might not work to provide expected results. One of the biggest barriers to mitigate this risk is lack of communication. Teams might operate from different time zones with multiple accents.
Mitigation plan: This might look hard to mitigate, but after disruptions like COVID, remote work culture has evolved significantly. A good communication tool like “Microsoft teams” or “Cisco chat” has reduced the burden of formal emailing or other communication issues. Multiple functionalities have eased up the process of connecting. Experienced IT firms have trained staff to understand business language. The two-shift model is used “day shift” and “night shift” to provide 24-hour coverage on services. This risk is very much mitigated, but deploying good tools and the team will further reduce the risk.
Tip: Don’t look for the best technical minds to work on your project. You could look for long term commitment and proactive engagement in the team you would like to work with. Active communication and commitment can take your projects to new heights of success.
This article would have helped you in finding answers to your doubts regarding outsourcing software developments. However, some queries might be hitting your minds, like how to choose the best partner for your business or which process would your partner follow to deliver projects?
It is natural to have such queries, but they will stay until you take the next step. To be on the safer side, you should select a very experienced partner and commit to service. Ensure that your partner follows high industry standards whale developing or delivering the product aligned to your business goals. So, what are you waiting for? Get ready to outsource all your worries and bring in the expertise!