Why Outsource Software Development?
Software development outsourcing is an established practice and this has been proved as a huge success and has become a new normal. Software outsourcing is basically to hire a third party to do the software related work, this can be either higher software development resources for a project or outsource complete project. Many companies does not have regular requirement of such software development activities and hence don’t have relevant IT team to take care of such activities In such situations, Software outsourcing is the only solution for companies and became a proven method to address their programming needs. Software development outsourcing is not done just to address the programming needs, but it helps in accelerating in improving profitability, enhancing business operations, improving go-to-market strategy, improving market competitiveness and overall improving customer experience.
In case of Software Product development, especially by many start-ups, Software development outsourcing becomes a well-established strategy. This is mainly because establishing an in-house full-fledged Software development is not at all cost effective for such work. Now many business do outsourcing to ensure reducing labor costs, ensuring faster speed to market, removing software bottlenecks and leveraging new age technologies such as AI/ML, IoT, Robotics etc
There are variety of reasons why companies outsource the software related services. Deloitte has done a survey and as per that following are the key reasons for outsourcing of software services (as shown in below figure) –
Cost Cuttings, Focus on Core Business and Solve Capacity issue are the Top 3 Reason apart from other business reasons for companies to outsource software development. Let us examine these key reasons and some other reasons in more detail.
Cost Savings is one of the biggest reason companies pursue this strategy of outsourcing, but it is surely not the ONLY reason for any company to consider software development outsourcing. We need to be careful, while we do the cost evaluation and should not decide that outsourcing is “expensive” because of an incomplete comparison to company’s internal labor costs. In-house employee cost include much more than their basic salary and hence while calculating the cost of in-house employee, one must consider following –
- Supervisory time: for the management of the employee: one-on-one meetings, mentoring and coaching, scheduling work assignments, managing time reporting, etc.
- Allocation of office space to an employee in a company-provided work space. For many companies, office work space and meeting room space is perpetually in short supply.
- Taxes and other benefits such as Medical insurance, paid vacation, Statutory benefits etc. These costs, when added to the employee’s compensation will give u fully burdened Cost Computer hardware and software (including initial licenses and maintenance).
- Other miscellaneous expenses such as staff welfare like tea, coffee, recreation facilities etc.
One must account all such indirect expenses in the overall comparison of software development outsourcing rates versus the use employees.
Focus on Core Business
In modern time, it is essential for any business to find innovative ways to keep themselves abreast with latest technologies and keep themselves ahead of competition, without such innovation, it becomes difficult for any business to survive. Business software applications plays a very important role in supporting the business goals with such innovations for almost all the companies and for many of such companies, these applications might not be their core business and hence outsourcing becomes an essential part. Outsourcing software development helps companies in strengthening their core process and ensuring that their staff put more focus in building the strategic goals in alignment with the business, instead of putting their energies into the non-core work of software development and maintaining that.
Companies must have a proper plan for Software development outsourcing and while finalising a partner, companies must ensure to select a partner whose core business is Software Development and Software services.
Capacity and Speed
IT department in every company works with finite capacity of software development / support staff. Every business has times when their demand is at the peak or they have aggressive growth plan, which requires capacity increase for your existing software development / support capabilities. During such time it becomes difficult for in-house team to re-prioritize the existing commitments and put more focus on a new development/support projects and one can’t tell the company leadership team that growth and revenue are hindered by a limited staff and pile of current commitments. To cater this, you will either need to re-distribute the available in-house resources or you need to hire new resources to manage this growth, in both cases, it will results in higher costs and a decrease in efficiency. With Outsourcing, all these worries will not be there and one can quickly ramp-up the team with fully qualified developers and other software resources. You will have full control of capacity as per demand and skill set requirement and hence help in saving the cost and increasing the efficiency
Access to Intellectual Capital / larger talent pool and the latest technology
One of the key reason of software development outsourcing is to have exposure to large talent pool of skilled resource in the software development field. Companies can’t have in-house expertise in every skill and technology and hence outsourcing become important. With outsourcing companies get access to skilled workforce from entire globe and hence they are able to expand their technical capabilities. Without any need of training or guidance of internal team or spending high cost on training, the outsourcing partner / team will take care of everything from software development to its deployment and then maintaining the same. The availability of skilled talent from all across the globe, due to outsourcing, gives company a competitive advantage
With outsourcing software development, companies can get skilled software resources a per the particular requirement. The outsource partner should have following expertise:
- Skilled Software Resources that are in high demand and having scarcity of hiring options.
- Availability of Niche technical skills as per the need of your Project, but not the skills, which u may want to commit as a full-time hire
- Having Technical Certification, which is not available with in-house staff
- Subject matter experts, having experience in developing similar applications for various other clients
Apart from providing the necessary expertise, The outsourcing partner, also own complete responsibilities and hence they build contingency plan for backfill the resources, if such situation arises. In fact many outsourcing companies keeps trained bench staff for such contingencies and hence can immediately provide take-up the responsibility if a team member is suddenly become unavailable due to any reason
For companies, where IT / Software services are not their core business focus, there is all possibilities, that your in-house team may not have specialization and hence there are good chances that software applications developed by in-house team may lack security standards and due to security flaws may put sensitive company information at risk. Since outsourcing team will have much better expertise & skills and will follow all security standards in code to make it as secure as possible and hence give you a better security coverage against such IT security breaches.
Spend Less Time on Support
All Software whether it is developed in-house or outsourced, requires regular maintenance and support and hence you may need a dedicated team to take care of the ongoing bugs and modifications. In case of outsourcing, you need not to worry as outsourced vendor will take care of the same at a nominal cost and you will save a huge cost for hiring in-house team. Further, if you have a significant time-zone difference with your outsource partner, you may get an advantage of getting support for your round the-clock business operations.
Reduce time to market
For every businesses it is important to improve their go-to-market strategy and speed up their product launch to leverage competitive advantage. With outsourcing, your dependency with the in-house resource is reduced for any product launch and hence you will be able to reduce the time to market and can ensure that your product reaches the market efficiently and fast. At the time of contracting with outsource partner, you can dictate your timelines as per your business need and accordingly outsource partner will ensure availability of resources and timely delivery
More efficient development processes
Since Software development is the core business of outsourced vendor and hence they have complete knowledge of complete software development life cycle including various software development standards, methodologies, best practices, design patterns etc. and can offer necessary consultancy, valuable advice and tools to meet your organizational goals. Outsource software vendor can help a company make their software development processes efficient and productive, which may not be achieve with in-house team.
Thinking outside the box
Outsourced vendors by virtue of having large intellectual talents can adopt new approaches and create great software by thinking out-of-the-box. With their innovative ideas and valuable feedback, you can improve your software development projects and can bring positive cnages in your business
Acceleration of the digital transformation
Gaining access to a large talented team of outsourced vendor can help you to skip the tiring and long recruitment and training process. With accelerated development trough outsource partner, you will be able to move faster on your digital transformation journey and will also be able to reach the target market much faster
There are many more reason for outsourcing your software development. With cost-efficiency and many more advantages of outsourcing, companies can leverage required knowledge and expertise, which, otherwise, may be out of reach
If you would like to leverage these benefits and want to enhance the digital growth of your own organization Lets schedule a free consultation and contact us