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Outsourcing Software Development: Should You Do It?

outsourcing-software-development-guide

What is outsourcing software development?

Outsourcing software development means recruiting a third-party service provider to take care of your software development needs.

The software development outsourcing partnership can be done through a third-party vendor, a tech consulting agency, a subcontractor, or a freelancer.

There can be a difference between outsourcing and consulting. With outsourcing, the client has more power in what they want to do in the project. The outsourcing partner comes in and delivers the tasks.

With consulting, the consultants are more involved in strategy work through knowledge-sharing and recommendations. Sometimes, they do the coding work as well.

Nowadays, consulting and outsourcing companies don’t clearly distinguish between these two concepts. Depending on the job, they will play different roles with different clients at different times.

Different types of outsourcing:

  • Onsite: the outsourcing partner sends their developers to work at the client’s office for a fixed period of time.
  • Onshore: the service is outsourced to companies within the same country.
  • Nearshore: the service is outsourced to companies in a neighboring country.
  • Offshore: the service is outsourced to companies in a more distant country.

Different models of outsourcing:

  • Project-based: the project requirements and timeline are set from the beginning, then the project is handed over to the outsourcing partner to manage from start to finish.
  • Dedicated team: multiple developers can be outsourced to work on multiple projects within the same company. Both sides share an equal amount of responsibilities upon agreements.
  • Staff augmentation: similar to the dedicated team model, but the client is more responsible for task distribution and team management.

Before you decide to delegate your software project to a third-party, let’s look at the pros and cons of outsourcing software development.

The pros of outsourcing software development

1. Save Money

Hiring a new employee, especially those in tech, can cost a company a lot of money. But this must be done because the job market for software engineers, especially those at the mid-senior level, is highly competitive. 

On top of the cushy salary that software engineers usually have, they also receive generous employee benefits such as health insurance, fancy office equipment, tuition reimbursement, wellness program, performance bonus, paid sick days/vacations, etc.

This hasn’t even covered the company’s costs to hire new employees such as employment taxes or office expansion.

Joe Hazima has come up with a metric for estimating the extra cost of hiring a fully functioned employee, which is the salary base times 2.7.

Outsourcing software development lowers the cost of onboarding employees and saves your company a lot of money in the long run.

Especially if you do offshore outsourcing, which is subcontracting services from a distant country. Your software development expenses will be much lower in countries where the costs of living are not as expensive as the country where your business resides. Make no mistakes, just because the expenses are lower, doesn’t mean that the quality of service is lower.

2. Modern Skills & Technology

In pre-Covid time, outsourcing outside the region or country might not be popular because many businesses require their tech consultants to work onsite. 

Now that remote working has become the norm, companies have access to global talents who can help them manage tailor-made software development projects.

Technology consulting companies have cultivated expertise and experience from working with a variety of clients in different industries. 

By working with a trusted outsourcing partner, you can be assured that the product quality is top-of-the-line.

For instance, here at Reactron – your partner in software development – we mostly hire developers that have at least Mid-Senior levels of expertise in software development. We also diversify our tech stacks to handle your various software development needs.

The cherry on top? We’re also your Project Manager. You’ll get to minimize the time dedicated to supervising the project and spend more time building your business.

3. Focus on Scaling Your Business

Get things done quickly and effectively.

The biggest advantage of outsourcing software development is that your projects can be finished very quickly.

Your team gets to focus on the tasks that scale up the business while the software consultants take care of pending tasks that you don’t have the time or resources to spend on.

It will also benefit your in-house Dev team because they can concentrate on doing what they do best. If your software requires technologies that are outside your team’s knowledge, it can take a long time to learn new skills and apply them. It’s better to consult experts in the field and let them help you build the software that you need.

There’s also the flexibility in deciding your starting point and ending point when outsourcing software development. For example, it’s hard to say goodbye to your in-house software engineers even when you have no projects for them anymore, because you’ve invested so much time and money into them.

There’s also no interruption during the process due to sick leave, maternity leave, or parental leave.

4. Ease Hiring Pains

Long hiring process

On average, a job posting for the Software Engineer position is open for 64 days. It can take approximately 45 days to hire a team lead, 30 days to hire a mid-senior developer, and 15-25 days for lower-level developers. More details below:

outsourcing-software-development-1
Outsourcing software development 1:  time to recruit

 

Some technologies take a longer time to hire than others. For example, a senior position for Go, Python, C++, or RoR developer can take up to 8 weeks to recruit.

outsourcing-software-development-2
Outsourcing software development 2: time to recruit based on technology

 

While the recruitment process takes place, you already have to spend money to make sure that you get the best candidates. For example, you’ll have to invest in a good HR team or recruiter, marketing activities to present a good employer branding, and run ads to make sure that your job listing reaches all potential candidates.

The HR and tech teams usually exert themselves in making sure that their candidates are the right fit for the company: skills-wise, culture-wise, and personality-wise. 

Even so, this is incredibly difficult to tell through merely 2-3 rounds of interviews and assignments. The biggest mistake a company can make when it comes to hiring is choosing the wrong person. 

Risky employee turnover

Your company could spend all the resources on the developer just to find out that they’re not a good fit. Or worse, if the person decides to leave after only 3 months of working because they’ve found a better offer. 

Rightfully so, because it’s a competitive market out there. In the end, you’re the one who has to take the brunt. All your time and effort spent on training your new employees – down the drain.

With outsourcing, your consulting partners are more obligated to finish the job because it directly affects their portfolio and reputation. In some cases, there are even penalties for those who cannot deliver.

With this said, it doesn’t mean that your outsourcing relationship is short-lived. Even though the most common form of outsourcing software development is project-based, there are other types of outsourcing such as a dedicated team or staff augmentation.

More on different types of outsourcing software development and how to choose the right one for your company on our blog – How to choose your software outsourcing partner?

The Cons of Outsourcing Software Development

1. Data Privacy

It’s hard to share your precious company’s data with a third-party vendor that you found on the internet. Especially when you know that you’re developing cutting-edge software that no one has ever seen before.

Counter:

  • Leverage your network and find a reliable outsourcing partner through recommendations.
  • Thoroughly research your software consulting agency to ensure that they can be trusted.
  • Check the Intellectual Property Rights (IPR) rules and regulations by the country. If you outsource in a distant country, does that country’s IPR regulations align with the one in your country?
  • Have your outsourcing partner sign an NDA (Non-Disclosure Agreement), which restricts them from sharing company information.
  • Include a clause for Intellectual Property Rights in your contract to prevent copyright infringement. 
  • Establish transparency by using modern project management tools that track tasks. This way, you’ll always be clear about what your partner is doing.

2. Communication Fall-Out

In offshore outsourcing, companies can run the risks of miscommunication due to different time zones, language barriers, cultural discrepancies, and location restrictions.

These risks can lead to serious issues such as:

  • Not being able to communicate effectively.
  • Misaligned goals between your company and the outsourcing partner.
  • Unrealistic expectations and unclear requirements.
  • Failure to move forward with the project due to uncommunicated obstacles.
  • Not meeting deadlines on time.

Counter:

  • Have a clear plan for the project and what you want the outcome to be.
  • Set realistic goals, expectations, and budgets for the project.
  • Have frequent updates on the situation whenever necessary
  • Make it easier for you and your partner by using collaboration tools such as emails, phone calls, video calls, messaging apps, etc. (whatever is effective for both parties).

3. Lowering Morale

Outsourcing software development could send a signal to your Dev team that their jobs are replaceable. This can cause distrust and reluctance from your in-house developers, which prevents them from effectively collaborating with the outsourcing partner.

On the other hand, your outsourced people might feel like they’re not part of the team. If they’re not updated with the right information at the right time, it can heavily affect their performance and productivity.

Counter:

  • Leadership must communicate with transparency. Let both teams, in-house and outsourced, know their roles and responsibilities.
  • For the in-house team, let them understand how outsourcing software development can benefit them. 
  • For the outsourced team, include them in important team meetings that are relevant to their job.

Should you outsource software development?

You should outsource software development if:

  • Your team lacks the knowledge and experience for the job.
  • Your business area of expertise is not software development.
  • You don’t have enough time or resources to spend on developing software.
  • You have a tight budget and are not ready to expand your team yet.
  • The scope of your software development project is too small or too big for the team to handle. Too small and it’s a distraction for the team. Yet it still has to be done because it’s causing a backlog for progress. Too big and it’s tough to manage on your own.
  • You’re running on a tight schedule. Your company needs to launch the product soon and it’s all hands on deck. You could use the extra help from a consulting agency.

Did you check all the boxes? Then it’s time you consider outsourcing your software development needs.

If you have a project that needs to meet the deadline soon but not enough resources to spend on it, let Reactron take care of it!

We are a tech consultancy with demonstrated experience in Mobile Development, Web Development, Back-End Development, and Infrastructure. Talk to us about your challenges and how we can help you fulfill your software needs.

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