Discovering Pros of Software Development Outsourcing

Published: September 30, 2020Updated: April 26, 2022
5 min to read
Discovering Pros of Software Development Outsourcing

Software outsourcing is far from being a hot topic. It is business as usual now. Unfortunately, not everyone understands exactly what software development outsourcing is and why it can be a contentious topic. This is exactly why we’ve written this article to investigate everything you need to know about software outsourcing.

What’s What in Outsourcing Software Development Services

First, let’s define the terms. Outsourcing, outstaffing, and offshoring are sometimes used interchangeably, butthere are differences.

Outsourcing is moving any business process outside of your company. A small businessthat hires a third-party accounting firm, IT technician or a cleaner engages in outsourcing.The business owner just arranges the terms with another company and everything is taken care of.

Outstaffing (also known as «staff augmentation») is working with a third-partyemployee as if he was your own. This is basically renting people. They are for all intentsand purposes working for the other company, get paid by the other company, and have all the work-related regulationsdealt with by the other company. However, they are managed by you and are doing the work that you told them to do.

Offshoring is moving production to a different country to benefit from lower labor costs. This iscommon among manufacturing businesses, who prefer to build factories in countries with lower costs of living and lowerworker wages. The goods are then shipped back to richer states and sold for a decent profit. Nearshoringis the same thing, only the country where the production is moved is close to the country of origin.An example of this would be a US-based business moving production to Mexico.

How This Applies to Software Outsourcing Companies?

All three options are available for the IT domain.

Software Outsourcing is quite common. If your company is working in theOil & Gas domain and needsan ERP to manage a pipeline or a refinery, creating it in-house would be rather hard.You’ll have to hire an IT management team, developers, testers, designers, business analysts… Not onlythis will take time, but you’ll also have to enter a field that is very different from your typical work.

Hiring a software outsourcing company, especially with experience in your industry, would be reasonable.They already know how to solve the relevant issues, have a qualified software development team ready (or canassemble it within about 2 weeks), and are proficient in creating applications. This is both fasterand cheaper than creating your own department from scratch.

Outstaffing also has its place in software development. Here it’s most commonly knownas the «dedicated team model.» The principle is exactly the same. A software outsourcingcompany provides you with a number of IT specialists depending on your needs (from a singledeveloper to multiple full-cycle teams) and lets you manage them as you see fit. This is quite usefulfor tech-savvy customers, especially software outsourcing companies who have trouble filling all the vacant positions. Andin a COVID-19 pandemic, when lots of people are already working remotely, staff augmentationis no different than working with in-house employees.

Note that in most cases, outstaffing is not meant to replace the internal team. It’s a way forCTOs and Product Owners to address growing technical debt without redirecting the main team, increase velocity,quickly add people with new skills to the project, etc.

Offshoring also has its uses. While good software development outsourcing professionals are never cheap, there is stilla difference.For example, the mediansalary of a PHP developer in Minsk is USD 2150. In New York, similar professionals getabout USD 93,000/yr or approximately 7750/month.So an American IT company can partner-up with outsourcing software development company from Belarus and have them operateas an offshore development center, getting quality work for a fraction of the costs.

The models can be combined. For example, you can start with a dedicated team, and growit into a full-fledged offshore development center.

Why to Outsource Software Development?

There is a number of compelling reasons for outsourcing, offshoring, and outstaffing.

1. Manpower

Suppose you are an educator and have a great idea foran eLearning startup. But you don’t knowhow to code to make your vision a reality. So you start looking for local companies that cando it… and it turns out that most of them specialize in small-scale website development. Moreover,many experienced developers prefer to work for giants like Amazon, Google, Facebook, or Microsoft, so thereis a shortage of qualified professionals that you need.

This is where outsourcing companies come in. Building turnkey software is their bread and butter.

This also works for IT companies that have more work than they could handle. Working with a development partnerwould increase both their capacity and their revenue.

2. Costs

As we’ve mentioned before, the same developer would be able to command a totally differentprice depending on where they’re based. IT outsourcing/outstaffing services typically cost less. Theprice can also be affected by various political actions, e.g. in Belarus, many software developmentcompanies enjoy a favorable tax regime.

For IT companies, hiring an outsourcing firm would be cheaper than filling the vacant positions themselves.

3. Time

Outsourcing software development is a good option to decrease time-to-market. Building a team fromscratch, especially if the product requires a lot of people, is a long and hard process thatcould take months. Outsourcing companies, on average, can provide you with one within 2 weeks. This all couldhappen while you are negotiating terms, so the development can start as soon as possible.

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