Software development outsourcing is a brilliant strategy. It helps companies around the world bridge the tech talent gap, optimize costs and speed up time-to-market. It is important, however, to know when and how to use this model to ensure it will justify the investment.
We put together this guide based on the market best practices and our decade-long experience in IT outsourcing and software team augmentation.
Table of contents:
- Software development outsourcing vs. an in-house team.
- When to outsource software development: use cases and different approaches.
- How to outsource software development with minimum risks.
- Successful software development outsourcing with Digiteum.
What IS outsourcing software development model anyway? Generally speaking, if you outsource software development, you entrust the whole or part of your project development to an outside tech provider. It suits both companies that don’t have an in-house tech team and those that do but need to get more tech specialists on board.
Let’s go through the most common reasons why companies opt for the outsourcing model and learn how they benefit from it.
You have budget limitations and need to optimize cost
Tight budget is one of the main reasons to outsource software development. This model allows to drastically decrease the cost of development and work out an efficient saving strategy.
- The cost of working with a remote development team from reliable outsourcing locations (e.g. Eastern Europe) is lower than hiring an in-house development team in the U.S., Australia or Western Europe.
- You don’t have to invest in a lengthy recruitment process, employee benefits, health insurance and take on long-term financial commitment to employment.
- You don’t need to invest in additional infrastructure, office space and equipment.
Example: A San Francisco-based producer of wireless earbuds planned to build an MVP app for their wearable. They needed a development strategy that would be cost-efficient and at the same time allowed them to get a product with several unique features such as AI-based translation, in-app text and voice messaging. We suggested an optimal tech stack and integrations and developed the app with the required functionality within the budget and time limits.
You’re on a tight schedule or need a temporary scale-up
Naturally, it takes less time to find a reliable tech provider with the necessary skills than to build up an entire in-house team or train new employees. This is why outsource software development model works so well for many startups focused on fast kick-off. However, enterprise-level companies and SMBs equally value efficiency and often resort to outsourcing to speed up their projects.
- Tech companies already have a core team, including lead engineers, architects, DevOps, designers and QA specialists who often can start within 2-4 weeks. Even if some competence is missing, vendors leverage their resources to quickly bring in new talent.
- Software development outsourcing is a good option to quickly ramp up an existing in-house team if you need to meet a tight project schedule.
Example: A leading U.K. company in the pharmaceutical sector set a goal to build an innovative data analytics and collaboration platform within 8 months. To meet this tight deadline, they had to augment their engineering team and add at least 15 software engineers, DevOps and QA specialists to their team. We filled in all the positions on short notice. A group of teams working on the project met the deadline and continues working on the platform today.
You are missing skills or competence in-house
Outsourcing development to other countries is a proven practice to access top-rated engineers that would otherwise be hard to find in your location.
- This model is an ideal solution for companies that experience tech talent shortages locally.
- Having access to a global talent pool, you get better chances to find specialists with specific domain expertise and tech skills your project needs.
Example: A Canadian company that specializes in printing technology needed to redesign its web application and develop new functionality. Our team has a decade-long experience working with similar web applications and in-depth knowledge in this niche. We used this expertise to redesign the system, chose relevant tech stack and offered a range of proven engineering solutions to develop a feature-rich high-performing frontend time and cost-efficiently.
Now that we figured when to outsource software development projects, let’s also learn where to go for top-tier talent.
- Onshoring. This approach means that you outsource to a tech company in your country of residence. This is often the case if you search for competitive rates outside big hubs (e.g. a New York company is outsourcing software development to a tech agency in Tuscon). The biggest pros of this approach are proximity, no cultural differences or language barrier, though savings are significantly lower than that of nearshoring and offshoring.
- Offshoring. Outsourcing to an offshore provider is one of the most economical strategies thanks to a big gap between the rates in certain locations (e.g. a U.K. company outsourcing to a software house in the Philippines). There are several risks connected to communication inefficiency due to time differences or a cultural mismatch. These risks, however, can be minimized by setting up an effective communication framework from day one.
- Nearshoring. Nearshoring means outsourcing from a vendor in a neighboring country (e.g. a German company outsourcing to Poland or the Czech Republic). This is perhaps the most balanced approach because it combines the pros of onshoring – minimal cultural differences or language barrier, overlapping time zones – and offers viable savings like the offshore approach.