According to recent statistics, around 70% of companies outsource software development. This option is incredibly popular among large businesses that want to boost their capabilities, scale easily, and save money. Besides cost efficiency, outsourcing IT projects brings many more benefits, but it is still not without risks. Your attention is given comprehensive guidance on outsourcing services: how to choose a software development partner, which cooperation model would work best for your needs, tips and best practices for successful IT project outsourcing.
Software outsourcing is beneficial for companies of all sizes: small businesses, startups and global corporations. But organizations without experience in such cooperation are rightly concerned about the potential risks. After knowing the advantages, it is easier for them to trust software outsourcing companies. Next, we look at some insights into outsourcing software development’s advantages, which will help you to get rid of any doubts.
The first and biggest advantage of outsourcing software development is cost reduction. Building your in-house team takes time and requires a lot of money, so it is more profitable to entrust this task and other key functions to an experienced outsourcing partner. And companies which use outsourcing services on a regular basis can significantly save on hiring, onboarding, training, and upskilling. IT partners take care of taxes, benefit packages, and holidays for developers.
Furthermore, the cost of custom solution development differs depending on the country. For example, using the services of an Eastern European software development company may vary up to 80% compared to Western European or North American.
With software project outsourcing, small companies can compete with larger ones. Because typically, they can’t afford all the necessary specialists and the cost of internal upskilling. IT outsourcing provides access to top talent with the exact skills clients need. And since more and more companies have transferred to software projects outsourcing, this market is growing exponentially.
With a huge talent pool of service providers, you are not limited to one area or country. You have an opportunity to source the best developers from anywhere in the world. Additionally, you can avoid the huge expense of equipment, necessary software licenses and subscriptions. Qualified experts trained in the latest technologies will develop your software quickly at high-performance standards.
The shortage of in-house software developers is only part of the challenge. Every year, there are new technology stacks, and specialists in most clients’ companies can’t be experts in all the latest trends and innovations. If you want your IT project based on the most cutting-edge solutions and methodologies, it is necessary to apply for outsourcing. Outsourcing service providers pay attention to leading tech stacks and have highly skilled software developers in many areas.
To gain a competitive advantage, companies should deliver quick time-to-market products. But staffing up an in-house team is not only costly, but it is also time-consuming. Outsourcing service providers have a huge pool of resources to accelerate processes. And clients can adjust the speed of software development based on how many full-time or part-time team members are involved.
There are always many unexpected obstacles in the development process, which can make a project more expensive and longer than you thought it would. In this case, the best thing to do is scale your project. But internal team expansion to meet changing business needs is costly and time-consuming. On the other hand, keeping a massive development team when you don’t need it is loss-making. A partnership with a software outsourcing company provides high flexibility, which means companies can hire additional developers or remove team members as needed. Scaling your project as and when needed helps clients to optimize costs. It also saves time since outsourcing agencies can increase resources in a short time.
By outsourcing software projects, clients can focus on core business tasks and stay competitive. A company should outsource some or part of a software development project if an internal team is too small to conduct several tasks and tackle challenges simultaneously. Otherwise, it will affect product quality and speed to market. IT project outsourcing allow you to deliver some of the work you’re less experienced in and focus on core competencies.
There is no right or wrong outsourcing service model. Your choice should be based on what suits your business needs most, considering the project scope, objectives, and budget. All types of outsourcing models can be divided into three main categories. The first is driven by location: onshoring, nearshoring, and offshoring. The second category includes pricing models: fixed price, time & materials, and dedicated team. And the third is relationship-based outsourcing models, which we will explore more deeply.
This model is also known as staff augmentation or outstaffing. It is most appropriate if the in-house team lacks expertise and you need to expand it but don’t want to deal with hiring new people. In this case, a third-party vendor provides additional staff, and the client is involved in the recruitment stages on request. Then the client takes over employee onboarding and integration processes. As a result, he gets total control and direct communication with outsourcing IT specialists on a daily basis.
This flexible model can be used for short-term and long-term partnerships. With it, clients can adjust outsourced team size by adding or removing resources per changing business needs. It also ensures access to a large talent pool and low hiring costs. But this outsourcing model has two major disadvantages. First, the outsourcing company won’t be responsible for project risks and failures. And second, clients may face adaptation and communication problems with such teams.
This model is a cross between staff augmentation and the project-based model (see the next section). It involves a group of IT specialists that integrates into the organization but can work as a separate unit without collaborating with in-house staff. A dedicated team model will suit you if you need a separate and self-sufficient team to delegate part of your software development. The requirements of the project determine the composition and size of the team. Both the client and service provider share the responsibility and tasks. Along with tech specialists, the outsourcing partner also provides a dedicated project manager who will monitor progress, resolve issues that arise, prepare reports, etc.
One of the obvious advantages of managed teams is that such partnerships usually last longer, and integrated experts may provide long-lasting support for your company. However, keep in mind that this model has low efficiency for short-term projects.
Despite previous models, in this one, the outsourcing partner takes full responsibility for the project and manages development processes from beginning to end. Your software services vendor will take care of implementing the best development practices, including choosing the best technology stack, and provide consultancy on project management. This is a great option for your organization if you want to fully delegate software development to an outsourcing company, as your time is limited. But under this model, clients have the least involvement and control. As all parts of development are on the outsourcing agency side, you should clearly define the scope of the work and project requirements before the service agreement is signed. Then you only get updates, provide feedback and wait for the results in a scheduled time frame.
The project-based model is time- and cost-efficient. It doesn’t require a long recruitment process and micro-management. But anyway, it is inflexible when reports and reviews are needed. Plus, a lack of control over the process and management can be uncomfortable. The project-based model is the best when you have a clear vision for the project, and it is not your crucial product.
Despite all benefits of software development outsourcing, there is always a risk of getting an unsuccessful end product. According to the statistics, 20-25% of outsourced projects fail within two years, and half fail within the next five years. Outsourcing strategy is crucial on your way to a high-quality product that overcomes challenges and meets requirements. Below are some of the best practices to ensure project success within your budget and deadlines.
A well-designed plan always plays a significant role in software development projects. But it becomes particularly important when outsourcing. Both client and IT partner should be on the same page, having a common vision and clearly defined outsourcing objectives. All participants in daily processes, including team leaders, project managers, and developers, must be clear about their responsibilities.
The success of IT project outsourcing largely depends on the selected work model. Previously, we discussed different relationships between the outsourcing company and the client. The main selection criterion is that model should fit the project’s requirements and scope.
And concerning pricing models, it is worth noting that the time and material model is the most flexible. It doesn’t have a fixed budget and predefined deadlines. Software outsourcing companies can also offer dynamic pricing depending on the industry and solution type.
Clear communication with partners is a part of successful IT project outsourcing. Сlients must have updates when they need them. At the same time, outsourced team members should have constant access to the necessary information and resources for effective project development. That’s why selecting an effective communication channel that would be convenient for all is highly important. Also, if the development team is based abroad, think about the possible language barrier.
Ensure the development team has what it needs before starting work on the IT project. Provide them with resources and equipment to complete your product on time and successfully. Plus, an outsourced team may not be fully familiar with some aspects of your business operations. In this case, it requires proper materials and tools to effectively fulfil the tasks of outsourced software development.
The vendor should be available within a certain time after the project is finished because further maintenance is equally important for outsourcing software development. It is better to discuss after-release support before the delivery process starts.
You should clearly know when you’ll have key project milestones, team check-ins and status updates. Some changes would inevitably arise throughout the development cycle, and you should know that team keep the IT project on the right path and makes corrections as necessary. Select appropriate key performance indicators (KPIs) and review them on a regular basis.
Ongoing quality assurance is crucial for monitoring progress. Conduct regular quality reviews with the outsourcing partner. By implementing robust testing practices, clients can minimize rework and ensure that ongoing projects meet deadlines and defined quality standards.
Remember, the practices described above serve as general guidelines, and you can adapt them to suit your outsourced project.
Choosing a compatible software development provider can be challenging. But the following checklist can help you in finding the right one.
IT project outsourcing is becoming increasingly important for organizations in achieving their strategic goals. Behind the project outsourcing process, there are not only cost efficiency and time savings but also access to a large talent pool and the freedom to choose a business partner from anywhere in the world. The development of the outsourcing services market makes companies more carefully choose a future partner. But don’t make decisions based on price only. Take into account all of the criteria described above and evaluate outsourcing agencies by your needs and standards.
Limestone Digital will become a reliable partner in developing your custom solution. Our company keeps up with the latest tech trends and offers expertise that can cover your business needs. Book a call with our manager to begin discussing your project now.
