When You Should Consider Software Development Outsourcing?
March 29, 2020
Software outsourcing has become extremely popular. 64% of technology companies outsource the entirety of their software application development. According to Technavio, a company that provides market research, the IT outsourcing market’s growth is accelerating and has the potential to increase by $98 billion (USD) between 2020-2024. The market for these services could be worth as much as $409 billion (USD) by 2022. It is no wonder that companies are relying more and more on software development outsourcing when 78% of businesses feel positively about the company they outsource to. Previously, organizations chose to outsource software development primarily for the cost savings. Today, cost-saving is still important but not the only reason. There are many benefits to IT outsourcing including speed, access to talent and expertise, taking work off the PM/PO’s plate, and more. This article will outline why you should consider outsourcing software development, the benefits of these services, and how to choose the right technology partner for your project.
Why outsource software development?
One major benefit of software development outsourcing is that it reduces costs. In short, companies can save an average of 30% on operating costs. Outsourcing company can take advantage of the difference in wages between countries but doesn’t have to in order to be more economical. Economies of scale make it cheaper to outsource even to companies in countries with high wages. Besides, it saves companies in personnel costs. Finding, recruiting and training talented developers is hard, costly and time-consuming. A company avoids paying for all the costs associated with recruiting and managing full-time employees (like onboarding, salaries, benefits, vacation pay, sick leave, etc.).
Another reason to use such services is that it can accelerate your time-to-market. If you are looking to get your product out to customers before your competitors, software development outsourcing can help you do that quickly. It can also expand your reach with external expertise, assets, intellectual property, and more.
When you should outsource software development?
When you need cost reduction
As mentioned before, software outsourcing can help you save 30% or more on your development costs. However, the cost savings go beyond this. Research done by the Massachusetts Institute of Technology’s Sloan School of Management found that IT outsourcing can also assist in reducing other expenses like sales and general and administrative costs. These costs can be four to five times IT costs. In the same study, based on data from around 300 companies in the United States, the researchers found that, on average, a $96.14 million boost in IT outsourcing spending was associated with a $121.14 million decrease in operating expenses (for non-IT sections of the firm).
Read also: How Much Does Software Development Cost?
When you need to scale
Successful businesses need to be flexible and respond to changing markets quickly. This is where scaling up and down comes in. Human resources work can be one of the most burdensome and challenging aspects of scaling. Outsourcing company can help you to increase your company’s output without raising your fixed costs. It frees up your HR department from dealing with more employees. It allows your core employees to focus on what they do best.
When you need to speed up solution or product development
Sometimes speed is a major competitive advantage for your business. In such a case you probably don't want to spend several months to hire and set up your in-house team of developers. Very quickly you can have access to a dedicated software development team that has experience in agile methodology in addition to top-quality project management. Also, you can set timelines that work with your schedule. But the most important, you definitely boost the time-to-market of your product because a specialized software house provides you a team of experts within just two weeks. In case you need to release your product realy quickly for investors, you should think about developing an MVP. An MVP allows you to deliver a usable product to the market much quicker and with less capital investment than it would be possible with the full-fledged product.
When you need access to talented people
When hiring locally you’re limited to the pool of talent in your local area. When you find a development company, you have access to the world’s talent pool. Take note that according to a survey conducted by Harvey Nash and KPMG 46% of Chief Information Officers use outsourcing in order to access skills. Cost savings were a lower priority for these people than getting access to talented people.
When you want your PM/PO to focus on the main line of business
When offshoring or nearshoring you are moving tasks from them to be performed outside the company. This leaves fewer tasks to be performed by your core team and lets your product managers or product owners focus on what they do best, their main line of business. It can free up time and energy and help your PM or PO execute a superior product.
When you need special knowledge or expertise
This is one of the most popular reason for businesses - to gain access to expert knowledge and experience that your present employees may lack. A proper IT partner gives you access to top minds who can supercharge your business all without paying for any additional training costs. It not only gives you access to the best minds it also gives you access to the latest technologies. Without having to master them you are able to take full advantage of cutting edge technologies. At Ulam Labs for example, we have expertise to build your services in blockchain, one of the most disruptive technology of recent years.
How to choose the right software development company for your project?
Finding the right partner among all outsourcing companies can be a challenge. Luckily we have a straightforward guide that will help you choose the best company to suit your project.
First, go to the website of the technology partner you are considering and check their software development services and portfolio. Make sure their list of services match your current and potential future needs. See if the portfolio work is up to your standard.
Finally, if you have checked out their website and made sure you approve of their reviews it’s time to set up a call. The best way to see if they’re a good fit is to get them on the phone and see how they plan to respond to the challenges your business will throw at them.
IT outsourcing can greatly benefit your business. For one, it can cut the cost of developing a software project by, in some cases, 30%. It can also accelerate your time to market, help your business scale, speed up product development, help your Product Manager or Product Owner focus, and provide access to top talent, special knowledge experts, and cutting edge technology. When choosing a technology partner make sure to review their website, check out their company profile on review platforms and finally give them a call.
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