Outsourcing at present is considered the one-word solution to all business challenges in the IT industry. They have been raised from the mere tag of service providers to invested partners based on their contribution to business growth and prosperity.
Amongst all, as per ~60% of respondents of the Statista survey, software application development is the most commonly outsourced IT function across the globe. Apart from delivering the benefit of reduced cost, premium output, and operational efficiency, these services help in streamlining one’s business processes. It supports the company’s focused strategy to maintain a technological edge and most importantly, a competitive advantage.
Why is the Concept of Software Development Outsourcing Blooming Globally?
Software development outsourcing is popular because it is the easiest way to get quality software developed with complete accountability and assured post-development support. Further, it provides companies with the faster to market advantage. Yet another unbeatable advantage is the costs involved.
In simple terms, software development outsourcing refers to an arrangement of hiring an external software development company. This can be through tendering, contracting, or sub-contracting to deliver all required in-house software development services. The increasing preference for this business model is driven by reduced costs and increased chances for focus on core competencies.
Lately, companies worldwide are rapidly procuring outsourcing software development services related to business intelligence, web development, mobile application, cloud computing, robotic process automation, artificial intelligence, etc. According to a Computer Economics study, large organizations have increased their IT outsourcing budget by 8.7% in 2020 as against 6.3% last year. This growth is primarily driven by increasing digitalization.
What are the Different Outsourcing Models?
The outsourcing business model is segregated into three options based on their geographical presence.
– Onshore Software Outsourcing:
This involves a collaboration of hiring a company with the outsourcing partner in terms of resources, within the same country (onshore), for the particular software development. Since both the hirer and the outsourcing service provider is located in the same country, communication becomes comparatively easier with smoother functionality.
– Offshore Software Outsourcing:
In this case, the hiring company and the outsourcing service provider are located in two different countries (offshore). This is the most preferred source of software development outsourcing due to the low cost and availability of online communication channels.
– Nearshore Software Outsourcing:
Hereby, the outsourcing companies are located in neighboring countries with relatively similar time zones. This model offers a greater variety of talent pool as compared to onshore software outsourcing while still maintaining easy communication, cultural similarity, travel ease, among others.
All said and done, settling on a software development outsourcing firm is a complex and tedious job. The quantum of risk involved, in terms of data, quality, communication, and output, requires a complete check and time involvement to ensure this business collaboration.
This article aims to offer guidance on how and what can be demanded from your potential software development outsourcing service partner. Below mentioned are some of the parameters every company should check while considering outsourcing to gain optimum results.
Let’s get started.
Business Longevity – a sign of an outsourcing pioneer Your choice for software development outsourcing should be based on the fundamental factor – experience. A longer business life with a stable rise in customer base indicates successful project delivery capability and service efficiency on a larger scale. They tend to understand the industry requirements and implantation of the latest trends and end-consumer needs.
Secondly, be specific and emphasize a subject matter expert rather than picking a service provider who is ‘jacks of all trades’ with a lucrative cost edge. This strategy offers a definite focus on their project size handling and immense knowledge source for your particular software development. On the other hand, if you are looking for end-to-end software development outsourcing services like consultations, business analysts, testers, designers, etc. be vocal about it and search in similar lines.
Do adequate research or a comparative supplier analysis based on services, geographical presence, compliance, client base, awards/accreditations, etc.
Gauge Transparent Business Norms:
Offshore/Nearshore outsourcing involves the inherent risk of non-disposal of complete transparency throughout the process. This is due to constraints on physical presence and frequent client visits. Therefore, it is best to settle down with certain bilaterally benefitting norms like – full project transparency, contractor’s work schedules and time tables, access to scrum board, JIRA, or transparent project tracking applications,24*7 service support, among others.
Another important aspect should be your data security. You can ask for an NDA for the avoidance of any illegal data trade, a discrepancy in intellectual property rights, or copyright infringements.
Be clear about your requirements and communicate your expectations from their involvement. As a parameter for choice, you could also start with a pilot project to determine the outsourcing service provider’s communication skills, trustworthiness, project handling, and time management.
Expanded Portfolio of Experts and Technology:
Since the outsourcing service providers determine the developmental cost based on the hourly rate of developers and their seniority level, make sure that your chosen partner has the required skilled workforce. Your chosen software development company should offer unlimited potential to gain expertise on every single business requirement and a vivid possibility for user experience development.
Settle for modern architecture, technique tools, continuous integration, and continuous delivery practices. Keep an eye for user experience, software load timings, design capabilities, and mobile functionality skills. Shortlist amongst the list of service providers in your analysis to gauge better metrics of your business requirements. Determine the value for money that the service provider would be able to deliver on time and then decide.
Analyzing the Financial Stability:
One of the most common mistakes made by companies before outsourcing is omitting an analysis of financials. It is equally important to ensure that your outsourcing partner is financially secured. This ensures that the latter has enough working capital to avoid any fallbacks or cash crunch in the middle of your project. Additionally, it provides extra security and assurance for trust and quality deliverable.
The analysis is based on scrutiny of the offshore software development company, its financials, and history and client base. They should have a stable operating income (excluding extraordinary losses/gains), project volumes, resource capacity, and enough cash availability for unforeseen liabilities.
Asserting the Company’s Potential – value over price
Determine the potential through cross-verification of previous projects, client reviews, and recommendations. Larger work capacity and exponential clientele can speak volumes about the outsourcing service provider’s preference among customers. Many times, these companies showcase their project size, technological skills, and knowledge utilized in previous case studies. Be completely satisfied through verification of these provided data from independent review sites as well and do not be compelled by low-cost tenders.
Your outsourced software development services help in mitigation of risk at several levels. Therefore, it is important to select a responsible and experienced outsourcing partner. We believe an outsourcing partner should possess a high-quality project management system and a tried and tested process for application development.
Ensure future support
You must ensure that you will continue receiving technical support post-development of the product. No matter how good a product you get, you will still need regular maintenance and updates to resolve errors and downtimes. Therefore you should add this requirement explicitly in the contract. This clause will bind them to the contract and make them more committed to your task.
Product ownership
Discussing the finer details, such as project ownership, is crucial before anything is outsourced. And having it in pen and paper is important. If not, a third-party vendor may steal your idea and capitalize on it. Setting expectations right at the onset helps to build mutual trust.
What are the Benefits of Software Development Outsourcing?
– Exponential Cost Savings
The major benefits of outsourcing include reduced developmental cost, overhead spending, and workload. Your company saves precious time spent on recruiting, hiring, and training these employees. It is analyzed that outsourced labor is ~70% cheaper as compared to in-house labor in Europe or North America. It also brings in subject matter expertise to increase output and efficiency manifolds, with minimal upfront investment.
Besides, by contracting an outsourcing service provider, software development company can reduce their overall labor expenditure. These savings on insurance, training, paid leaves, etc. can be used to pay outsourcing teams at competent rates.
– Expanded Support Services
When we hire an experienced outsourcing software development company, we gain a 24*7 support service. Unlike in-house experts who have to divide their work hours and focus, outsourcing software development companies focus solely on one job. This in turn delivers a shorter-time-to-market delivery for your application. Your company gains a competitive edge which is ultimately the prime focus for business sustainability.
– Continuous Innovation and Development
One of the major challenges in the IT and software development industry is ever-evolving technology. Adhering and maintaining a knowledge base for the entire evolution and innovation can cost massively in terms of investment, cost, and labor. In such conditions, software development outsourcing empowers your company with access to a wider talent pool and perspectives. It delivers international standard technological expertise along with a diverse talent pool for globally acclaimed service delivery.
– Escape From Legal Monitoring
Software development outsourcing enables your company to gain access to expert international developers without the hassle of getting into the nitty-gritty of legal compliance. The outsourcing partner takes care of all the legal paperwork, compliance, regulations, and political constraints if any.
– Solution to the Flexible Resource Requirement
In this fast-paced business, project demands are never consistent nor predictable. Software development outsourcing delivers this flexibility to expand the hiring company’s internal team and not replace it, to suit the changing business needs. They also deliver a comprehensive product portfolio to meet a wider range of business requirements for every stage of the customer lifecycle. They support the entire development cycle from planning-development-delivery-product release with utmost expert involvement. The resultant effect is an overall successful project.
The last step:
Post all your analysis and research, you should be able to shortlist a few software development companies to whom you would outsource your requirement. As the last step, you could write them a e-mail requesting for RFP/RFI highlighting why they are the best fit for your company. Their reply can further enable you to match their offerings with your expectations.
Another important thing is cultural compatibility and should never be compromised.
About the Company:
Flatworld EDGE is an ISO-certified company delivering IT infrastructure solutions through its eight delivery centers and geographical presence across 45+ countries around the globe. The company encompasses over 10+ years of experience in reinventing software processes and successful project delivery of ~600 projects to 300+ satisfied customers.
Flatworld Edge’s unique selling proposition lies in software development service across multiple platforms including php.mysql, Microsoft.Net, Larvel, among others. Our professionalism and quality delivery are accompanied by extensive planning and support across the software development lifecycle. Our software development service portfolio includes mobile application development, software development, infrastructure management, and software testing services.