Contact us anytime to know more — Abhishek P., Founder & CFO CISIN
To combat the sudden changes brought about by the pandemic, companies of all sizes look to strengthen or create new relationships with IT firms offshore.
Many people still question and have concerns about outsourcing. There are many more! This guide will help you to do just that.
Before you hire a third party or an IT outsourcing firm to work on your project, it is essential to answer a few other questions.
This guide to software development outsourcing will answer all your questions before you agree with a vendor. We'll start by defining outsourcing.
What is Outsourcing?
Outsourcing is simply delegating business operations to another party to gain expertise. This type of outsourcing involves analyzing your business and identifying the parts of software that require expertise.
This could include a specific feature or even the entire software development. You then find a partner in technology or software development to work with. Then, they begin the process of development.
Outsourcing software development has been the norm as the demand to launch digital products increases. Outsourcing is the best solution to fill technology gaps, reduce development costs, respond to sudden requests, and increase development or upgrade software.
Everyone, from startups to small and medium-sized enterprises to large corporations, can take advantage of outsourcing software development and increase their efforts to launch a disruptive product.
Outsourcing brings many opportunities. Outsourcing is more than just offloading software development. It also gives you some incredible opportunities:
- Outsourcing software development allows businesses to focus on core functions.
You can focus on your core business while the software development company is building it.
Strategic planning can help you upgrade your business.
- Outsourcing has many benefits, including cost reduction.
If you plan strategically, it is possible to reduce your costs by a significant margin.
Outsourcing is the best option if you want to reduce your expenses or release software for a low price.
- Outsourcing makes it easy to incorporate the latest technology.
If your project has high goals and requires technical expertise, you can easily find a partner with specialized knowledge.
Choose a partner that can provide the most recent tech stack and integrate it for you.
- You can share risks in addition to reducing costs.
This outsourcing team will be able to bring in external expertise in addition to the in-house staff.
- Extremely responsive to demand fluctuations: If you are experiencing volatility in your business, it could be a lengthy process.
They gain flexibility by outsourcing.
Your team can be scaled up or down quickly to meet your software needs.
In this chapter, we discussed what outsourcing is and its benefits to most companies. But knowing about the benefits alone is not enough.
The challenges faced by CTOs and product managers are listed as well. The following chapter will provide more information.
Businesses were encouraged to focus on what they were best at and to delegate the rest to experts. They were able to overcome many challenges and improve their services.
Outsourcing is still a strategy used by many CTOs and product managers to solve business problems. We can better understand it by highlighting the challenges that you may face and how outsourcing could help.
Common Challenges You May Face With Outsourcing
Outsourcing is proven to be a great way to streamline your business processes, but it also comes with specific challenges in software development.
For some people, these may seem insignificant, while for others, they can be incredibly daunting. We have compiled a list based on our experience working with CTOs and companies of all sizes, including startups.
Poor Communication
Ineffective communication is just one of many strategies that are in place to avoid confusion. While outsourcing is similar across all industries (having a service performed by a different organization), how you go about it depends on the working style of your organization.
Outsourcing software development is a necessity for many organizations due to the challenges they face in their daily operations and work.
Before they can create a business strategy, it is essential to determine the gaps.
Workstyles That Are Incompatible
A change in methodologies could also occur, in addition to a clash of company cultures. If your company's way of doing things is very different from the outsourcing firm, you may face many difficulties.
You can, however, discuss the way you work, your methodology, or the general approach to working and development. It helps eliminate any confusion or differences in the form of working.
Differentiation By Culture/Region
Despite the increasing trend towards outsourcing and globalization, cultural and regional barriers are a constant challenge.
Different corporate differences can exist between in-house teams and outsourced or remote developers, which may impact various aspects of a business. Businesses can train their staff to be ready for outsourcing.
Improper Project Management
Project management is the next hurdle that companies encounter when they outsource their development. You may be required to supervise the whole team in some cases, and you might get a fully managed team.
Project management is an essential aspect of your work.
No Sharing Context
CXOs and software owners can often share all the details about their products in depth. They are not able to share the context of their business.
You must also be able to share the business context. The outsourcing company will be able to serve you better if they know the demographics of your target market and users.
Many companies have outsourced successfully but then become too dependent on the company. Vendor lock-in is a bad thing.
The partner company you choose must be efficient at knowledge transfer after development.
Outsourcing can overcome many business problems, but it can also come with its own set of issues. You can overcome these challenges with the correct outsourcing practices and a professional partner.
Outsourcing Strategy
It is essential to have a strategy for outsourcing software development. This will ensure that you don't get confused during the process.
While outsourcing is similar across all industries (having a service performed by another company), how you go about it depends on the working style of your organization.
Outsourcing software development is a necessity for many organizations due to the challenges they face in their daily operations and work.
Before they can create a business strategy, it is essential to determine the gaps.
Analyze Technology Gap & Set-Up Goals
Even if you are launching a new initiative, having an end goal can be helpful. Set a plan with a challenging but realistic value.
You could risk your software outsourcing project going the wrong way if you don't have a clear goal in mind that aligns with your business strategy. A lack of a plan will only result in wasted resources, time and costs. To ensure your outsourcing venture is going in the right direction, you need real goals.
Long-Term Goals
There are several long-term objectives that you can achieve when outsourcing software development. Many goals can be helpful in the end.
Outsourcing could be a good option for some companies to get lower-cost software development. This could reduce the cost of the product. Outsourcing is a popular way for many companies to scale their team quickly.
It is possible to fulfill any long-term need of a programmer or team of programmers by outsourcing. Consider setting a long-term maintenance goal.
It is essential to establish a long-term relationship with your vendor to make sure that the software you have is fully maintained and upgraded as new technologies are released.
You want quality software codes from an outsourcing firm that can also help you reduce your budget for software development.
Short-Term Goals
You can also set short-term objectives based on the requirements you have. You could get on-demand developers or support for your software.
It could be that you have a smaller project to complete within a specific time frame. Due to the lack of developers, it takes longer. You can accelerate your development by hiring a remote programmer for these hours.
Technology Gaps
Next, any software developer would want to close the gap in technology. Outsourcing software development is a popular choice for most organizations, including startups and large enterprises, to incorporate the latest technologies in their work.
For your software, you can have an API, application program interface (API), a plug-in, a small module or anything else developed.
It could be helpful when you want an API that uses cutting-edge technologies but your team is not equipped to create it.
You can use outsourcing to help with migration. Outsourcing can help you migrate and upgrade your digital products, such as mobile applications, websites, web apps, or other digital products.
Outsourcing can help speed up migration and make you more digitally advanced. You can now move forward with your plan for software development outsourcing. The technical cofounder of your start-up can guide you in choosing the best strategy.
Outsourcing Strategies Based on Scenarios
Strategies is always the first step to successful outsourcing of software development. Your outsourcing effort will succeed if you've adopted the correct outsourcing strategy.
If you've made a bad start to your outsourcing, it won't last. Businesses adopt different methods depending on the work they do and what their needs are.
Outsourcing is a way to fill a hole in every organization. It could be either a short or long-term gap, project requirements, or technology gaps to fill for client projects.
We have used different scenarios to illustrate the needs of various organizations. In this section, we will discuss these.
Scenario 1: Need Specific Technologists
They are organizations with a team of programmers or developers in the office but lack technical knowledge. The project requires a particular technology.
It could be a new technology or something your team lacks. Some even face technical problems that cannot be resolved by in-house teams. Hiring remote developers can solve this problem.
The project can be solved by hiring specific experts in the field of technology from the talent pool around the world.
Hiring developers or establishing an extended team can be the most cost-effective solution to close a short-term technology gap, build a center of expertise, or fill upcoming gaps in your current system.
You can hire core developers for your project, or you can have a team that includes designers, developers, testers and QA managers.
It is easy to hire and extend your team for the development of software and bring additional expertise into their projects.
You can build your team to do full-stack, to meet ad-hoc requirements, for maintenance and support, or for independent testing. You can leverage remote team members to add value to your company.
Scenario 2: You Need An Entire Development Team
Most organizations don't have the technical staff to develop software and products. The cost of hiring a team that includes developers, QA experts, UI/UX design and development, designers, project managers and other professionals, as well as the hardware and software, could be more than their budget allows.
The team must be a highly-skilled group that is dedicated to their project but for a lower price. It is important to note that a team will have a manager who oversees the project and ensures everything runs smoothly.
Outsourcing allows you to choose from different engagement models depending on your technology requirements. For your project, you can build a dedicated team of developers, designers, project managers and quality assurance engineers.
It can be as involved as the organization wants. The organization can communicate directly with the manager of the project and make sure that the job is completed as specified.
If needed, it can meet with developers.
Read More: The Risks of Outsourcing Software Development and Tips to Avoid Them
Scenario 3: You Need To Give Up Full Development
When you are too busy to develop this software or product, they are companies that need a software company to either build the software for them or hand a project over to an external company.
A trusted vendor is required to create the software and scale it. You will need a product management team to oversee the entire product lifecycle and hand over the finished product.
For small businesses and startups with fewer employees and only a handful of people in management, the challenges and benefits associated with managing a remote team could be more significant than they are.
Outsourcing complete project development can help. You can choose to have your product developed from start to finish, depending on the level of involvement and requirements you desire.
- Ideation: Creating a product roadmap, UI/UX prototyping, and creating the MVP.
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Development: The developers are responsible for developing the software.
Outsourcing development allows you to turn your software idea into a fully-featured application with APIs, cloud, mobile and web apps.
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Scaling: At this stage, your software will be up to date-and ready for the market.
This would cover everything from the inbound and outbound strategies to creating demand.
Outsourcing the entire project to an outsourcing software company will reduce friction and ensure that deliverables are clear.
You only need a clearly defined goal, an outsourcing agreement with a scope and a list of other items. It would make the development process of software more efficient and faster.
A company may choose to take a managed product development strategy in such circumstances. The company receives the idea, and you discuss it with them.
Vendors handle everything, from MVP to product scaling and launch.
Scenario 4: You Need To Upgrade The Existing Software
Most startups are in this situation after a seed round of funding. The product is a basic MVP. The version they had was just enough for them to display and validate their ideas, as well as receive funding.
They need new resources to help them scale the product up and develop it with features and functionality they can't create with their existing resources. To scale their product, they need the assistance of technology partners.
Hiring extended teams is one of the best ways to help product managers scale up their products without having to expand their tech or infrastructure expertise.
Extended groups are offered by IT companies offshore that can act like your own in-house staff but in a different location. If you already have an MVP team, then it's time to add more engineers, technologists, and developers. Joining forces with an outsourcing software company is a simple way to achieve this.
Scenario 5: Need A Tech Partner, CTO Or Co-Founder
Most startups will also seek help from offshore IT companies when launching tech products but lack the necessary expertise.
The startup needs a tech partner or a technical co-founder or CTO to assist with all things technology. The company is ready to disrupt, but they are not very familiar with technical terminology, frameworks and libraries.
In such situations, the company should hire technology partners. Some IT companies assist startups to start from the ground up, build an MVP, validate it, and ensure cash flow.
They also help with other aspects of technology.
Scenario 6: When It's Time To Upgrade Your Software
Another scenario is when an organization is trying to update its legacy software. The company needs to update their legacy software and systems using the most recent disruptive technologies.
When organizations are looking for an outside software company to manage their projects from the middle onwards to modernize, they will look to external companies. The company might be asked to create a module for their software, or they may need help with digitalization.
Here is where they will need to look for a digital enabler. These companies are equipped with teams that can provide external assistance, such as:
- Modernization of Application Development.
- Serverless Architecture, APIs and Microservices
- One-page application
- Embracing New Technologies like AI, ML, Blockchain, IoT, RPA, etc.
- Digital Transformation
- DevOps & Cloud Migrations.
- Mobile Responsive
You might be looking for an interface to your software or a plugin using the latest technology. It's a good strategy because you can have your internal team work on the leading software while the developers working remotely can focus on the smaller projects or independent modules.
You might only need one remote developer to work with your team, or you may need an entire team, including testers, designers and developers.
For some projects, you may have all the details outlined and even be able to give away the whole project to an offshore development company.
Tips for Outsourcing Success
You need to take care when outsourcing to make sure that the transition is successful. It is essential to perform due diligence before outsourcing and choosing a software development firm offshore.
You need to know if you are going to outsource before you do anything else. The timing is crucial to the success of outsourcing.
When your business is not ready, or in need of external help, outsourcing can prove harmful. It is also detrimental to not outsource despite signs that you should. You need to be clear about what you expect from your software development partner and then follow through with it.
Here are some tips to help you overcome your doubts.
Know What To Outsource & Skip
Success depends on knowing when and how to outsource. Outsourcing is not appropriate for every task or operation.
Outsourced and in-house product development is vastly different. One can only benefit from the benefits of outsourcing when one knows what and when to do so. Outsource only what you are not very familiar with and leave the core functions in-house.
Assure Seamless Onboarding
You should pay special attention to your onboarding team when you are outsourcing services. You should onboard the remote unit in the same manner as you would any other regular team that you hire for internal operations.
The same as when you hire an employee in-house, sharing information and introducing the team to others, assigning tasks and sharing company culture should all be smooth.
Try It Out
It is vital that before you decide on a company, you have them work with you to test the communication. Ask them to do a small module or project to see how well they communicate.
Check their honesty and trustworthiness about the development process and whether they will deliver on what was promised. With MVP development, you can start by developing a small product or prototype.
Use Communication Tools to Leverage Your Resources
Communication is usually very high when you are physically close to the team or developers. It would be easy to tell them all you know and make sure they understand what is expected of them.
This is a significant problem when working with remote teams.
You should also allocate at least 25% of this communication time to your outsourced team. It is not enough to assume they know all about your software, company or how things are done.
You also cannot expect them to do what you want. Make sure you say everything and that there are no assumptions.
Get Involved and Give Feedback
To succeed in outsourcing software development, you should be as involved as possible with the project. In-house projects would require you to be involved completely.
You should not assume that the project manager will handle all aspects of your project.
It would help if you still got involved, even though they will take care of all the details. Attend weekly meetings.
It is also essential to give feedback early on anything that does not go as planned. You can communicate your needs and requirements with the outsourcing company to make early changes.
Find the Right Software Outsourcing Company
After you've created a list to guide you in finding the best company to outsource software development, let's talk about how to go about it.
We will now discuss the steps you need to follow to find the right company to meet your needs and work within the scope of your software.
1. Shortlist Companies
You can search for software companies on different platforms, such as Clutch or Google's SERPs. Shortlisting companies is based on project size, tech stack and other features.
2. Share Requirements
After you've shortlisted companies, send them a Request for Proposal. Discuss your requirements and what you want from a project partner.
3. Discuss Engagement Models
The next step is to discuss engagement models, depending on what type of requirements you may have. The company should know whether they require a team of developers, specialized projects, managed projects, or a single developer.
4. Calculate your Estimates
After you have identified the companies that offer the engagement type you're looking for, you can assess their suitability based on factors such as your budget/project costs, the launch date/their timelines and your technology gaps/their resources.
5. Negotiate Pricing
After you've assessed all the costs and other factors, begin negotiating the price with companies that have been shortlisted.
You will analyze all the quotations and determine which company is willing to provide the best service at the lowest cost.
6. Interview Developers
Interviewing developers is the next step after you've narrowed down your list to 2-4 final companies. The majority of professional outsourcing firms will provide you with resumes and allow you to interview the experts before making a decision.
7. The Contract is Finalized & Signed
Signing and finalizing the contract is an integral part of any partnership for outsourcing. The outsourcing contract contains the essential information needed to form the basis of the relationship and agreement.
Before signing any contract, ensure that it's foolproof. The contract should include all the details, such as project scope, service levels, IP protection and ownership of products, IP transfer, timeframes, payment structures, subcontracting agreements, exit strategies, etc.
A Final Note
It would help if you now had an idea about what outsourcing custom software development services is and how it can benefit your business.
We have helped hundreds of thousands of organizations, including startups, large enterprises, and CTOs, to build software and progress on their Digital Transformation journey.
We have gained a great deal of praise for our work, whether it was because we helped them save money, create state-of-the-art software or accelerate development.
You can add talent, quality codes and a lean approach to your project by outsourcing it to our team of software developers.
