The process of choosing IT vendors has entirely changed in recent years. As a result, organizations obtained an opportunity to deliver more complex IT solutions by hiring talented specialists worldwide. As a result, software development outsourcing has become very popular among businesses. In this post, I will cover all the pros and cons of IT outsourcing, possible risks and ways to avoid them, and everything you should know to leverage this cooperation model successfully.
What IT Outsourcing Stands For?
Before talking about all the benefits and peculiarities of this collaboration model, it’s worth starting with the basics, namely IT outsourcing meaning.
Software development outsourcing stands for the business approach, implying transferring IT functions (separate tasks or the whole development flow) to specialists from other software development companies (usually located abroad). This practice allows businesses to get digital products fast with fewer expenditures, using all the advantages of outsourcing software development to third-party vendors.
Common Types of IT Outsourcing Software Development Services
Outsourcing is made of two general types: location-based and relationship-based. Their basics will be detailed below.
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Location-based outsourcing is determined by the distance between the client and the IT service provider. In its turn, it’s divided into following:
Onshore/domestic outsourcing:
It implies the customer turns to a partner company within the country. This outsourcing approach is associated with faster results: the client company gets access to IT infrastructure, technologies, and skills unavailable before. Moreover, having moved some tech responsibilities to a trustworthy vendor, the customer can center on other business-critical activities requiring special attention.
Nearshore outsourcing:
It implies moving development workflow to the adjacent region. In addition, the client company representatives can quickly attend the vendor due to its geographical closeness and less spending for traveling.
Offshore outsourcing:
It means transferring software creation far away from your location. It is worth mentioning that such a type of cooperation gains momentum due to its flexible cooperation model. The offshore software development company can offer you the following types of IT partnership:
- Full-cycle software — the company is responsible for the entire software development lifecycle, from Discovery Phase to project maintenance and support.
- Team augmentation — the client’s team is expanded by the vendor’s experts for quickly achieving the set business objectives.
- Outstaffing — the client hires a separate vendor’s specialist to fulfill their tasks and takes complete control over their activity.
Relationship-based outsourcing is split into types based on management and project fulfillment peculiarities.
You can apply the outsourcing models below, taking into account the benefits and drawbacks of outsourcing essential for your situation:
- Project-based approach entails the team engaged in project development from the beginning to the end.
- The team-based approach implies the outsourcing team being involved in several simultaneous projects (e.g., web and mobile app development).
When Do Businesses Need to Rely On IT Outsourcing?
Organizations turn to outsource IT services to effectively reach their objectives and gain a competitive edge, especially in today’s fast-changing technology environment.
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This cooperation model will work for you best if:
- You run a startup or SMB with a tight budget. Besides, your company doesn’t hold a recovery plan or funds to address data safety and security issues.
- There is a shortage of skilled specialists to overcome the emerging issues.
- The company’s customer support isn’t competent enough to solve the rising difficulties.
- New employees’ recruitment and adaptation is a time- and resource-consuming process.
These issues can be addressed if you apply to an experienced software outsourcing company for help.
Advantages of IT Outsourcing for Businesses
More and more entrepreneurs are shifting towards outsourcing app development to focus on critical business activities and save precious time. According to the research, the global IT outsourcing market is expected to gain $97.51 billion by 2024.
This growth is driven by the reasons that stem from the main advantages of outsourcing:
- Cost reduction
- The vast pool of talented specialists
- The enormous range of technologies to select
- Scalability and flexibility
Let’s discuss each reason in detail.
Cost Reduction
Assembling an in-house team for software development is a more cost-efficient and comfortable solution. However, diving deeper, you’ll notice that this approach is associated with additional expenses (like office rent, purchasing software, sick leaves, etc.), so outsourcing IT-related services will be a more attractive cooperation alternative to you. The statistics claim that 70% of enterprises outsource their software creation for cost reduction. In addition, many outsourcing IT service providers offer top-quality solutions for reasonable prices worldwide.
Here are the average hourly rates for IT outsourcing services across the regions:
- Central Europe – $35-$100/h
- Western Europe – $50-$200/h
- North America – $49-$210/h
- Latin America – $29-$105/h
- South Asia – $21-$82/h
- Southeast Asia – $21-$61/h
Massive Pool of Talented Specialists
Access to a vast pool of skilled tech experts is the strongest side of IT outsourcing. It enables hiring specialists even for complex projects, for example, Logistics management systems development.
Moreover, the recruiting process may be done in a few days rather than months, so you can hire as many team members as needed. Start with onboarding one expert by considering different qualified specialists around the globe.
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Broad Set of Technologies to Select
IT outsourcing benefits also entail open access to hiring tech talents experienced in different technologies, even the rare ones, like RPA technology.
Most outsourcing software development companies practice tech training for their staff to keep up-to-date with the latest IT technologies. It allows employees to sharpen their knowledge to deliver an outstanding customer experience.
Business Scalability
When scaling your business, you may find it challenging to find goods and services to expand your company with. Moreover, handling an internal IT department becomes more expensive and time-consuming when your business grows. Thus, to satisfy your company scaling needs, you’ll need to attract more people.
One more thing about outsourcing is that it enables different collaboration models, varying from dedicated teams to staff augmentation, in order to give enterprises the most effective and cost-efficient solutions. So, you can quickly scale your business up and down, adjusting to the current situation.
For example, you can reduce the number of specialists if you don’t have work for them or extend your team with new members if you need to accelerate the development process.
IT Outsourcing Drawbacks, Risks, and Ways to Mitigate Them
Despite a ton of advantages for businesses, app development outsourcing has some pitfalls that you should be ready to deal with. Communication issues and security problems discourage business leaders from selecting this cooperation model. However, experienced outsourcing vendors know to prevent or mitigate possible risks.
To make this section as helpful as possible, I have pointed out the most typical outsourcing challenges and possible solutions.
Choosing Trustworthy IT Partner
It can be challenging to find a reliable service vendor fitting your expectations. There are many outsourcing software development companies on the Internet that promise to deliver high-quality software within a couple of weeks. But how not get hooked by a one-day firm or an untrustworthy partner with an awful service quality?
Firstly, review an outsourcing vendor’s website and pay attention to the details you are interested in. The high positions in Google mean the company’s readiness to cooperate; the user-friendly UI/UX and intuitive navigation signify the focus on user convenience.
You can also check the company’s portfolio to know more about the expertise and industries they operate. Moreover, pay attention to the vendor’s years of experience and number of employees: it’s better to deal with a company that has at least one year of hands-on experience and enough specialists to realize your IT solution.
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Furthermore, you can look through business platforms like GoodFirms or Clutch, follow potential vendors on social networks, and monitor how active they are in professional communities. And finally, establish a face-to-face meeting to understand whether you’re comfortable with each other.
Communication Difficulties
Using offshore development services, you may encounter communication obstacles, restricting the contacts between you and the rest of the team members. To address this problem, you can schedule your meetings beforehand.
Another prevalent communication problem you may encounter is a team’s level of English. Most outsourcing partners are highly proficient in English speaking and writing. However, if you’re unsure about language proficiency, you can test a future vendor during a video call or face-to-face contact.
Security Problems
Cooperating with an outsourcing vendor implies transferring your private or commercial data. And this is one of the outsourcing issues that arise, as data leak or loss can cost a company hundreds of thousands of dollars. So how to avoid this issue?
- Signing an NDA will protect your idea from third parties and guarantee your ownership rights privacy.
- Make sure that software solutions are designed to comply with personal data protection regulations (e.g., GDPR, CCPA, etc.); otherwise, you’ll be fined. Finally, you can ask them if they apply data encryption algorithms, user privacy policies, private data repository, and other methods to guarantee IT concepts protection.
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Product’s Quality Control
While you’re far away from your outsourced team, it’s challenging to control the quality of developed software. To mitigate this issue, you should track the development process of the remote team and set up frequent checks-ups of the fulfilled work scope.
In addition, you should remember that outsourcing software development firms can help you deliver any-scale software solutions aligning with your business needs. Still, you should also be involved in this process. Only doing so can get the best results in creating a profitable solution fitting your company.
Things to Consider Before Project Development Outsourced
Now, let’s see what points you should consider making the most out of IT outsourcing.
The Tips on Cooperation Success
Before starting the outsourcing partnership, you should carefully consider every step. And here are some questions to think of:
- What do you need for that?
- How to use the pros of IT outsourcing the most effectively?
- How to achieve effective collaboration with your outsourcing partner?
Scrutinize the market situation and your business needs
Even though your product seems perfect for you, try to control your emotions and think logically. At the initial stage, your task is to check the viability of your idea, putting yourself in the customers’ shoes. This way, you’ll be able to define the pros and cons of outsourcing and make use of them.
How to check the feasibility of your idea? Firstly, you need to analyze the working mechanisms of the market you want to enter. Then, take a look at competitors and market leaders, know your target audience and understand their pain points that can be later transformed into your product’s functionality.
Look for an outsourcing partner and interview them
After defining your business needs and goals, as well as analyzing the market situation, you need to find an outsourcing firm you’ll work with. This issue requires an attentive approach. You can find reliable outsourcing partners using hiring platforms such as Clutch, reviewing feedback left by previous clients, and getting acquainted with their company websites.
Then, generate a list of organizations you’re interested in, and start reaching them. It’s better to prepare in advance a set of questions you’ll ask them to clarify. The questions can relate to the company workflow, communication organization, management peculiarities, meeting schedule, etc.
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Sign an NDA to control your concept security
So, you’ve found a software development company you can trust and submit to them your scrutinized software concept, ready-made prototypes, or design options. At this stage, you need to maintain the number of executives having access to your idea and protect it from being stolen by tracking the data flow. Signing a Non-Disclosure Agreement (NDA) would assist you in your concept protection.
What does NDA mean? It’s an authoritative document that details all the possible conditions of data exchange, explains how the entrusted data can be employed, and more. When launching a startup or managing a small staff, this document is a must.
Plan your cooperation and seek a long-term relationship
Once you’ve decided to collaborate with a particular software development firm, you need to establish communication through different channels like Slack, Telegram, Google Meet, Zoom to keep in touch with your team and effectively monitor their flow. You can reach the project managers and ask them all the questions hovering in your head concerning outsourcing IT services you intend to use. But keep in mind that your cooperation doesn’t stop after the product is made.
Strong connections with your IT outsourcing partner enable quick improvements implementation or bug fixing in case of sudden issues. Moreover, the team previously engaged in your project knows it all the inside out and can provide you with the best fitting solutions to the problems emerging.
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Summing Up:
Outsourcing app development is a serious business step. Before entrusting your project to an outsourcing IT partner, you must carefully weigh all the pros and cons, especially if you deploy a large complex project. However, thousands of satisfied customers prove that outsourcing is a reliable and cost-effective collaboration model from a short and long-term perspective.
