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In general, outsourcing is the practice of companies giving their projects over to an outside development team. Why would an IT firm give its projects to another group? In this blog, we'll learn about the benefits and challenges of outsourcing as well as answer your question.
What is Software Outsourcing?
Software Development Outsourcing is the practice of hiring an outside software agency or company to develop complete software or complete certain parts of the software development outsourcing process.
Firms don't have to train and hire developers for their projects. By handing the project over to experts and professionals from outside, development is made much more accessible. It is also essential to consider the primary and secondary company's location when hiring outside software developers.
1. Onshore Software Development Outsourcing
Onshore software outsourcing is when a company employs an outside software development team that comes from the same nation.
Onshore software outsourcing has the benefit of improving communication between parties. Onshore software outsourcing is an excellent option for those who want to improve their communication and understanding.
However, the costs of hiring new staff can influence the final decision.
2. Offshore Software Development Outsourcing
When a company engages a development agency or external agent in another country, it is called offshore software development.
It is a popular model for startups and small businesses because it offers significant savings. The companies can save money by choosing their outsourcing country and conducting all communication via remote means.
It may seem like the best way to cut costs, but communicating with other countries is difficult due to language barriers and distance.
3. Nearshore Software Development Outsourcing
The model is a mix of both onshore and offshore outsourcing. Nearshore software development is when a company hires a software engineer from another country, but they share the same time zone.
Nearshore Software Development Outsourcing is used when a US-based company outsources its project to an organization based in Mexico.
Why Do Companies Choose To Outsource?
You must be wondering why companies are giving away their projects to other businesses. There are many reasons behind the growth and popularity of this model.
1. Save Significantly on Operational and Labor Costs
Outsourcing business models are a great way to save money on labor costs and operating expenses. In the US and Canada, development costs are much higher.
The same is true for regions such as Western Europe, the UK and Australia. Similarly, Eastern Europe and India can complete the project at a fraction of the price. Businesses can save a lot of money by hiring development teams from low-cost areas.
2. Reduce The Time-Consuming Processes
The project can be completed much faster by outsourcing the team. As an alternative to outsourcing, businesses will need to hire their developers.
This can be a lengthy process. The time required to train new employees is also considerable. Outsourcing, on the other hand, gets work done faster.
3. Overburden of Work
Outsourcing is the most effective solution when a company's capacity for delivering projects has already been exceeded.
When companies are overburdened, they outsource specific projects. They give business to other firms and provide quality projects without disappointing their clients.
4. Insufficient Relevant Resources
When a company lacks the necessary human resources to complete a specific task, it will often outsource the job.
This allows them to complete the project quickly without having to hire a large workforce.
A Brief History of Outsourcing in The Software Industry
In the 18th Century, businesses would hire other companies to do the work. A manufacturing company might hire a separate company to handle a particular phase of work while still controlling the remainder.
When we speak of software outsourcing dedicated, this takes us back to the 1980s, when technological advancements allowed remote work.
This deal was noticed by IT companies who preferred to use their teams. This deal encouraged other companies to use the business model of outsourcing.
This deal can be considered a revolutionary move in the corporate world.
Outsourcing Software Development Is A Good Idea?
Answer the following questions using some current statistics. Statista projects that the IT Outsourcing Segment will reach $ 430.5 in.
This segment will show a CAGR between 2023-2027 of 8.7%. By 2027 the segment's revenue is expected to reach $587.4. Outsourcing is becoming more popular as businesses all over the world are adopting the model.
The demand for digital solutions by businesses has increased in the 21st Century. Outsourcing is a solution that can help meet the growing needs and has many benefits.
It helps save money by using a developer from a market that is affordable. It also eliminates the necessity to train and hire an in-house staff to complete the project. In addition, it is possible to hire and train a global team to complete the project instead of depending on just a few people within an internal team.
Outsourcing can be an excellent way to satisfy the needs of the client.
Trends in Software Outsourcing
The outsourcing model has been used for many decades, but it continues to improve. Modern technology plays a significant role.
The technological trends make the outsourcing model accessible to businesses, removing drawbacks while increasing efficiency. Software development outsourcing is a trend that has radically changed the landscape.
1. Cloud Computing: Leveraging its Power
The cloud is a wonder for remote workers. Remote working has been streamlined by the core capabilities of technology.
These include fast and accurate information access, improved connectivity, increased productivity, efficiency, upgraded infrastructure, etc. Cloud technology allows businesses to collaborate effectively with both offshore and onshore teams.
2. The Adoption Of Robotic Process Automation (RPA), Which Is Booming
Robotic Process Automation (RPA) is a software tool that allows you to create, manage and deploy software robots.
They can perform many human-like tasks, such as reading the text on a screen, typing the keys, using the navigation system, as well as identifying and extracting data. RPA is being adopted by software development companies to speed up the completion of tasks and increase accuracy.
3. Multiple Vendors Are A Good Option
Software development projects are divided into phases that require different skills. People are now choosing multiple software vendors instead of just one to take care of all phases.
4. Cybersecurity: More Attention Needed
Outsourcing companies continue to focus on cybersecurity due to the increase in data breaches and hacks. Outsourcing companies can gain a competitive edge by ensuring the proper security standards, following the regulations, implementing the correct authentication and managing data security.
Most Outsourced IT Service
Certain services are outsourced at the highest level due to the growing use of outsourcing in the information technology industry.
The services that are being outsourced to the maximum extent include:
1. Web Development
People now go to online websites for information about any business and its services. Companies are now more focused than ever on having a website.
Outsourcing web development has been a result of this trend. Businesses are hiring large numbers of third-party web development partners to complete projects in the shortest time possible and at the lowest cost.
2. App Development for iOS and Android
Mobile applications are the most effective way to show innovation in a short time to the growing number of users.
Apps with innovative use cases attract a large audience, which ensures a substantial income for the owner. This has also led to an increase in the demand for app development services. To get their app developed, businesses are turning to offshore partners.
3. Database Development & Management
Data development and management is an IT service that includes database design, data access, management, application, development, and analysis of data for business intelligence.
In recent years, remote management and data development projects have become more popular.
4. Manage Network and Infrastructure
The management of the computing systems components, such as switches, routers and firewalls, is called network infrastructure.
To achieve consistency in your firm and make it easier to manage, you need efficient infrastructure and network management. Hiring a team of dedicated employees to do the job could be expensive. Outsourcing has become the most cost-effective solution for businesses that want the job done without hiring employees.
5. CyberSecurity
Customers and companies are both concerned with the safety of their professional and personal data due to an increase in data breaches across the globe.
Businesses can use cybersecurity services to protect their data by implementing practices like backups, secure devices, networks and encryption. It isn't feasible to hire a team of experts for each task. Outsourcing cybersecurity services is the best option in this environment.
6. Business Process Outsourcing
The firm must have a large workforce to manage a variety of front-office and back-office functions (such as sales, marketing, tech support and regulatory compliance).
The rise of BPO firms has allowed businesses to solve this problem by completing these tasks using an external team. Business Process Outsourcing is the same as Business Process Outsourcing.
7. Technical Support
Virtual help desks are also called technical support outsourcing. This is a practice in which a company hires an outside professional to answer the questions of its customers.
Read More: Why Outsourcing Software Development Services Is Gaining Traction With Non-Technical Leaders
Benefits of Software Outsourcing
The most effective way to accomplish the task is by hiring a team in-house. Owners have more control over the team and can communicate better with them.
Having an internal team is also more effective for monitoring. Despite this, many businesses still outsource their tasks and projects, whether they are offshore or local.
Software outsourcing is a great way for businesses to benefit from the services. An outsourcing strategy is a good option for projects.
These include:
1. Cost Savings
You can save a lot of money by hiring developers in Asian countries such as India. The cost of development per hour is significantly different between Western countries and Asian ones.
Outsourcing offshore can reduce the cost of skills and expertise, which is $100/hour. Most companies choose to outsource projects because of cost differences.
2. You Can Access A Large Talent Pool
Outsourcing allows you to choose the best experts out of a vast talent pool. Search for the right fit in different countries, and then select one that fits your needs.
You can also contact multiple teams to work on various phases depending on their skills and expertise. Even countries are not bound to your selection of the best developers.
3. Improved Time-To-Market
You can hire an experienced development team without having to teach them the details of your project. As soon as they receive the project, their team will begin working immediately.
This helps you to launch your product and deliver the project in the shortest time possible.
4. Flexible Payments
A business model that involves outsourcing allows you to work with any team or person. You can change your development team if it is not meeting your needs.
Outsourcing ensures that you only pay for the services you receive.
5. Improved Focus on Tasks and Operation
The outsourcing model allows businesses to delegate excessive work to professionals. Companies can avoid being overwhelmed with work by outsourcing.
They will be able to focus more on their core business. Outsourcing the additional work can improve the quality of the remaining tasks.
6. Better Quality
Businesses and companies that provide outsourcing services are often experts in their fields. Hiring a competent outsourcing company can improve output quality to an impressive extent.
You can get an excellent product within the shortest time if you have communicated your requirements.
7. Get the Latest in Technology and Expertise
Outsourcing service providers are known to rely heavily on project management and the latest technologies to deliver projects.
Outsourcing companies gain a competitive advantage by using the most recent technology while their clients receive quality results.
How To Start A Software Outsourcing Company?
When a company opts cloud technology for outsourcing software engineering, it goes through these phases:
1. Needs Assessment
Businesses should first determine the projects or tasks they want to outsource. Outsourcing can be done for the entire project or just certain phases.
This step also assesses the severity of the entire project.
2. Find the Right Outsourcing Partner
After determining the necessity of outsourcing, the next step is to find the best outsourcing partner. To do the same, businesses first determine if the outsourcing firm provides the required services.
It is now time to review the portfolio of the outsourcing company and its references.
3. Communication of Scope and Requirements
Communication is necessary once the service provider for outsourcing has been selected. This communication is where the primary or client business will define the scope and requirements of the project.
This communication contains information about the type of project, the number of tasks and deadlines, as well as the budget.
4. Start of a Project
After you have completed all necessary communications, the company will assign a team of developers and a manager to your project.
The group, along with the project manager, are in charge of overseeing your entire project. During this time, you can also contact the project manager to get more information or for feedback.
5. Collaboration and communication in a Continuous flow
Throughout the entire project, communication and collaboration will be maintained. This allows you to share your requirements, receive feedback on project progress and get updates.
Communication and collaboration are essential to avoiding misunderstandings with an outsourced company.
6. Quality Assurance and Testing
After the development phase is complete, the next step will be quality assurance and testing. It is the responsibility of the development team to test the final product regularly.
This includes checking that it has no bugs, its features work correctly, the responsiveness of the page, or the smooth running application.
7. Delivery and Deployment
When the project testing is done, either the client or the outsourced team deploys it on the respective platform (Android/iOS/others).
The software is now available for use by the intended audience.
8. Maintenance and Support
The outsourced team can also provide maintenance or post-deployment assistance, depending on the preferences of the primary company.
The team will remove the bugs identified, update the software, make the required improvements, and add/remove features.
Software Development Outsourcing Models
There are several models to choose from when outsourcing a software development team. Each model is specialized according to its type and scope of work.
Software development outsourcing is primarily based on three models:
1. Fixed-price Outsourcing
This model involves the client/primary company and service provider deciding on a fixed price after analyzing all project requirements.
This fixed price must be met for the entire project, including all tasks, milestones and deliverables.
2. Outsourcing Time and Material
Time-and-Material is the most suitable outsourcing model when the requirements and nature of the project cannot be clearly defined, and there may be chances for changes.
This model pays the agency based on how many hours they spend working on the project.
3. The Dedicated Team of Outsourcing
This is the best method for a large company that has a lot of software development and wants to build long-term relationships.
This model provides clients with a software development team that works exclusively on their tasks and projects. It is an expensive but effective model, where the team will be dedicated to your project only.
4. Employee Augmentation Services
This model is used when one or two phases are being outsourced. This model allows businesses to hire one or two developers who will work alongside their internal team.
The model is used to temporarily fill the skills gap.
Factors To Consider While Choosing An Outsourcing Partner
We have discussed the various components of business goals and models that involve outsourcing. Outsourcing is a great way to develop software.
However, you must choose the best outsourcing company to guarantee the success of your project. It is not possible to measure the expertise of an outsourcing company. However, verifying some components will increase your chances.
These components include:
Specialized Technical Knowledge
When outsourcing software development projects, the most crucial factor is technical knowledge. You should ensure that the agency you plan to hire is familiar with your chosen technology.
If you want to create a React-based digital solution, for example, the company should have React expertise and experts.
Processes of Project Management
The quality of the project is primarily determined by how they manage it throughout its lifecycle. Be sure to evaluate the project management processes of your outsourcing partners before finalizing a partner.
You can also check the methodology that they employ in project management. Agile, Scrum and Critical Path are some of the most effective project management methods.
Communication and Collaboration
When choosing an outsourcer for your project, make sure they can maintain communication with you and collaborate.
They will have a dedicated project manager or regular meetings. Communication is vital to the success of your project.
Quality Assurance
Before deploying the software, evaluate the quality assurance process. Be sure to perform multiple tests, such as component testing and integration testing.
Also, make sure that they are performing performance testing. This will confirm the functionality of the software.
Legal and Security Compliances
Analyze the level of security that they will be able to provide for your project. Outsourcing agencies need to be up-to-date on the latest security technologies and trends to guarantee that their products can provide privacy for their intended audience.
As they work on your project, they must also be familiar with the legal requirements for software deployment in respective markets. The product developed must meet all the legal needs of its market.
Best Countries For Software Development Outsourcing
We have access to an international talent pool when we choose software development outsourcing services. We can consider hundreds of different countries as long as we don't limit ourselves to only onshore outsourcing costs.
Not all IT sectors and countries will meet your project requirements. When choosing the right location to outsource your software development, you need to consider certain factors. These factors include but are not limited to, lower costs, an IT market that is highly developed, high-quality education infrastructure and effective communication.
India is the ideal location for outsourcing software development. This statement is based on several factors. India, being the second largest English-speaking nation in the world, makes communication with customers from around the globe easy.
The IT industry in India is enormous, contributing 7.4% of India's gross domestic product. India has the fifth largest GDP worldwide, so you can imagine how deep this industry is in India.
Shortly, it doesn't appear that India's IT industry will experience any downfall. India produces nearly 500k software developers each year.
They will contribute to the IT sector. The landscape of the country will only grow.
India, in terms of cost-efficiency, is by far the best market for software products and projects. The cost of the per-hour rates or salaries for hiring developers is a fraction compared with engaging in the USA and UK.
The cost of completing your project can be as low as $10, whereas it would otherwise cost $20,000 to $30 in the USA or UK.
You don't have to sacrifice your expertise and proficiency when you choose India as the destination for your project.
Research from Grid shows that Indian developers are 11% ahead of American developers in math and logic assessments.
Binding Up
The IT industry is being transformed by outsourcing. This new approach is bringing a great deal of value to all stakeholders.
The business does not need to hire a development team. Outsourcing also eliminates the need to train employees on specific projects. Outsourcing IT services does not have any physical limitations.
You can save significant amounts of money by cloud outsourcing software development to India.
The team can be changed, and new developers hired if they are not performing well. The different outsourcing engagement models allow you to choose a team of developers according to your needs. Cyber Infrastructure Inc.
can offer you the most suitable solution with its core competencies. Your idea is welcome, and we will give it a digital face.
