Technology is constantly evolving, and new pieces of technology are constantly being developed to replace obsolete ones. Nowadays, technology advances at a breakneck pace, to the point that new technology introduced this year may become obsolete the next year. The competition is fiercer than it has ever been.
As a result, IT sectors surprise the challenges with new loopholes breaking the barriers every time. Therefore, businesses must constantly evaluate and adapt to new business trends set by technology in order to maintain a cost-effective business model that incorporates offshore outsourcing as a viable option for staying ahead of the competition and considering the pandemic.
In its simplest form, software development outsourcing refers to an arrangement in which an organisation hires an external software development agency to efficiently complete all duties associated with a software development project that may be completed in-house. Below are the four essential factors you should keep in mind before hiring your outsourcing partner.
Image Source: TatvaSoft.com – IT Outsourcing Page
Outsourcing software is the process by which a firm cedes control of a particular business process or project to a third-party vendor who is skilled and capable of doing the needed business responsibilities.
Table of Content:
- Why Is Software Outsourcing Important?
- What are the models for outsourcing software development?
- Why Should You Outsource?
- The Advantages and Disadvantages of Software Development Outsourcing
- How to outsource software development effectively?
- When Should a Business opt for software outsourcing services?
According to a Statista report on “IT functions outsourced worldwide 2017,” software application development was the most often outsourced IT function, as indicated by 64% of respondents. Indeed, software outsourcing is a critical factor in the continuous expansion of the global IT outsourcing industry.
According to a recent analysis by Statista, the worldwide IT outsourcing business was worth an astounding 66.52 billion US dollars in 2019. Additionally, according to a Technavio analysis titled “IT Outsourcing Industry by Service, End-User, and Geography – Projected and Analysis 2020-2024,” the IT outsourcing market is expected to expand by USD 98 billion over the forecast period of 2020-2024.
Such robust numbers show that demand for software outsourcing will continue to grow as businesses seek to digitise and optimise their business processes, which serve as the foundation for their organisation’s digital transformation.
Software outsourcing is growing in popularity as organisations choose to outsource their development projects due to the numerous benefits, which include reduced development costs and quick access to a huge pool of IT tech talent. Software outsourcing is extremely promising for businesses hoping to acquire a competitive edge through collaboration with tech talent located throughout the world.
Let us examine in detail the present situation of software outsourcing and how to do it effectively in this post.
Why Is Software Outsourcing Important?
Outsourcing is cost-effective, and offshore software outsourcing, in particular, helps reduce development costs, which translates into reduced market prices and more competition. However, according to a survey by Deloitte and Dubai Outsource City, businesses are increasingly turning to software outsourcing to accomplish a number of business objectives other than cost savings.
Nowadays, IT decision-makers and business owners look to outsource in order to streamline their operations and increase productivity. By delegating, businesses may focus on their core capabilities, ensuring that their long-term strategic initiatives remain on track.
Following that, let’s take a closer look at some of the more prevalent software outsourcing services and engagement models, as follows:
Software Outsourcing services
In 2020, outsourcing services will typically include web and mobile application development, as well as other innovative and advanced technologies such as Cloud computing, Robotic Process Automation, and Artificial Intelligence – all of which are establishing a foothold in the industry and are expected to have a significant impact going forward.
Additionally, many software outsourcing vendors offer a comprehensive portfolio of services that cater to customer companies’ specific business needs at any stage of the project’s development cycle, as well as throughout the entire development cycle – from planning to development, delivery, and product release, software outsourcing vendors can provide the necessary expertise and resources.
With software outsourcing, services are supplied via remote operation models, allowing clients’ businesses to collaborate with top IT professionals located throughout the world who are dedicated to their projects.
What are the models for outsourcing software development?
Businesses can outsource software development projects in a variety of ways, with development centres located on-shore, offshore, or near-shore. Consider the following in detail:
Onshore Software Development
Onshore outsourcing is the process by which customer organisations collaborate with development teams from software companies based in the same nation. Onshore outsourcing has the advantage of virtually eliminating language barriers, which simplifies communication and, therefore, makes outsourcing more efficient. However, clients may be required to pay a premium for development expenditures.
Offshore Software Development
Offshore outsourcing is the process of collaborating with development teams located in other countries. This is the most cost-efficient alternative due to the low cost of labour and the availability of online communication methods (e.g. Emails, VoIP Phones, Zoom video conferencing, etc.) that enable remote management of software projects to be effective.
Nearshore Software Outsourcing
Nearshore outsourcing firms conduct business with clients in neighbouring nations.
Why Should You Outsource?
In general, outsourcing software development enables businesses to manage the numerous issues associated with lowering overhead costs, rapidly assembling a distant technology team, and consequently shortening the product’s time-to-market. The following are some of the compelling reasons to outsource software development:
The Advantages and Disadvantages of Software Development Outsourcing
Software Outsourcing Advantages:
1. Lower development costs and reduce overhead spending
The primary reason organisations outsource their development projects is to realise significant cost savings. Spending less and maintaining under budget enables firms to expand and scale successfully while also keeping up with market demand. Thus, the key reason organisations outsource their software development needs is to save money.
Additionally, by contracting work to a third party, businesses can reduce their labour expenditures – which include a variety of employee perks such as insurance, training, and leave – while still paying outsourced teams a competitive wage.
Outsourcing vendors typically calculate development costs based on the hourly rates of developers depending on their seniority level, without factoring in the aforementioned charges – so making the overall outsourcing endeavour more appealing to business groups.
Customer businesses can work with software outsourcing suppliers on a need-to-know basis. Unlike permanent employment, there is no legal requirement or duty to maintain a long-term contract, giving consumers the option of paying for outsourcing during the course of the project’s execution. This is particularly advantageous in comparison to hiring full-time in-house developers year-round, whose knowledge may not be required as frequently following project completion.
Additionally, cloud computing technology makes it easier than ever for people to work from home or from any location, eventually establishing remote working as the standard. Offshore remote working is becoming increasingly about the interaction between humans and machines, rather than micromanagement. In today’s world, the location of remote developers is becoming irrelevant. Hiring remote IT technical talent to work on software projects has never been more appealing.
3. Strengthen Your Business Through a Focused Strategy
Working with a remote development team expands opportunities for businesses as they gain exposure to a variety of new, emerging, and disruptive technologies such as Blockchain, Artificial Intelligence, and others, which aids in the effective transfer of knowledge and best practices to internal teams.
Having immediate access to a huge pool of IT talent on a wide scale enables clients to efficiently complete their projects while freeing up time to focus on their core capabilities. This is especially beneficial if the customer company is not in the information technology field, as it frees up employees’ time to focus on other revenue-generating activities such as sales and marketing, hence increasing business growth and productivity.
4. Accelerate product development and reduce product time-to-market
Because the outsourced labour is already experienced and knowledgeable about the technologies and tools used in the development process, no additional time is required for training and onboarding, saving customers significant time and accelerating the development process. This is especially advantageous in the context of huge international corporations, where decision-making and approval processes may take far longer than typical.
Additionally, any adjustments that occur will be addressed expeditiously to ensure that projects continue on schedule. The remote development staff is driven to complete projects fast and on time, giving customers a competitive edge over their competition.
Cons of Software Outsourcing
1. Failure to adhere to quality standards
When contracting offshore software outsourcing companies, the allure of low labour costs is frequently undercut by lax quality standards. This danger is inherent when businesses contract with an external agency to develop their software projects at a much lower cost than what is available locally. Additionally, the inability to supervise the workers involved in the development project directly makes it difficult to maintain complete insight into the process, as well as to resolve issues and provide feedback and assistance to drive the project ahead.
2. Barriers of language and culture
Due to linguistic and cultural obstacles, collaborating with IT staff in a remote location can be rather challenging at times. Additionally, time zone differences might make it difficult for clients to schedule effective contacts and feedback with the outsourcing team, posing a challenge to project progress updates owing to a lack of visibility, disruption, and connectivity. Gradually, the cumulative impacts can put both parties under strain and expose the project to the prospect of missed deadlines and/or prolonged timelines, resulting in rework or failure.
To eliminate this risk, it’s vital to organise frequent online meetings between customers and the remote team to maintain lines of communication open and provide feedback at each stage of the project’s progress.
3. Threats to security
Today, data is a new asset, and organisations may face risks when entrusting their data to a third-party software outsourcing company. Numerous software development projects require the management of confidential and sensitive information about clients, including intellectual property, making data breaches a serious risk. Thus, businesses considering outsourcing should carefully consider data security risks and choose the right software vendor who understands and values security, as well as has in place all necessary safeguards to ensure the protection of their customers’ data in accordance with applicable security laws and regulations.
How to outsource software development effectively?
Numerous factors contribute to the chance of success in software outsourcing. Among them, there are several points that businesses should bear in mind, including the following:
- Establish explicit outsourcing objectives
- Assist in the administration of projects and engage with remote colleagues.
- Maintain reasonable expectations.
- Establish milestones and monitor progress periodically to provide feedback.
Again, no promise can be made that an outsourcing project will be a complete success. However, there are certain actions that businesses may take to increase their chances of success. Additionally, customer firms should seek outsourcing partners that use Agile methodologies to manage their development projects in a flexible manner, allowing for higher quality and more frequent release cycles, as well as improved cooperation. Additionally, utilising modern solutions for efficient project task management is strongly suggested to assist in gaining visibility into the development of the project.
When Should a Business opt for software outsourcing services?
1. Increase awareness of your business
The incorporation of software development propels your firm to new heights. It aids in the promotion and distribution of your business by making your brand visible to anyone and practically anywhere via a computer or smartphone.
2. Improves sales and service
- Software development propels your firm to greater levels of integration than ever before. It enables your business to be available from any device, including smartphones and computers, at any time and from any location.
- It enhances sales and customer service. The way your clients interact with your business is critical. Do you wish for them to provide you with constructive criticism? Then you cannot avoid having an internet platform to facilitate their access to your services and products.
- It generates conversions by calculating the percentage of incoming traffic that becomes sales, leads, or subscribers.
- It reduces the cost of doing business and enables your organisation to reduce the amount of money spent on authorising new software.
- Direct Communication- No other methodology provides you with the same amount of direct communication with your clientele as this one does. Direct communication with your clientele is the most effective way to grow your business quickly.
- It is less prone to security problems. Rather than that, it enhances security!
- It is virtually endless in terms of what you may design and tweak to meet your own requirements! Software development is a highly adaptable and scalable process.
3. Increases customers’ engagement
Every firm wishes to grow its customer base. However, how can a business improve its customer base? Online marketing is the answer. Online marketing tactics must be implemented by businesses. You may increase consumer engagement with the help of a mobile app or website and encourage them to return to you rather than to a competitor.
4. Direct communication
Only software development enables direct engagement with clients. No other technique enables you to communicate directly with your customers. It is the quickest method of increasing brand recognition.
5. Helps in marketing your business
Software development enables you to do on-the-go marketing for your business, advertising your products and services wherever you are without spending additional money or time. Customers can contact you from anywhere in the world.
Our reliance on software continues to grow as we enter the new era of automation, mobile apps, and post-pandemic existence. This is not a bad thing; an application has the potential to improve your life significantly. Businesses must invest in software development to succeed in such a technology world. Software development is about much more than creating a mobile application or a website. You can obtain a plethora of benefits by upgrading your software.
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