In the context of rapid technological advancement, innovative software development outsourcing services are in high demand.
According to a report from Research and Markets, the global outsourcing services market was valued at $620.381 billion in 2020. It is projected to reach $904.948 billion by 2027.
Source: Research and Markets
This trend is driven by the fact that outsourcing software development allows companies to optimize their operations, increase productivity, and stay ahead of their competitors.
The choice of an outsourced software developer is crucial because a high-quality digital solution can transform a business and take it to the next level.
Experts at Lampa have prepared a software development outsourcing guide that will help you make informed decisions and maximize the benefits of outsourcing for your business.
What Is Software Outsourcing?
Outsourcing development is a service in which specific applications necessary for the successful conduct of business activities are developed, supported, tested, and maintained by specialists employed by a specialized external company, known as an outsourcer.
This is a complex task that requires a project team with the appropriate technical and intellectual capabilities. For successful project management, a company providing IT software outsourcing must have its own approach, which includes:
Transparent communication with a client
Stable teams of highly skilled IT specialists
A commitment to long-term collaboration
An ability to scale workgroups
Readiness for a quick project start
Types Software Outsourcing
Development outsourcing is a common practice that has become an integral part of modern business. It enables entrepreneurs to manage their resources more effectively, focus on core tasks, and save time and resources.
Depending on the location of the work, three types of software outsourcing are distinguished.
Offshoring | Offshoring is known as the most budget-friendly approach to delegating tasks to outside contractors. Companies carry out offshore processes to delegate tasks to vendors in distant countries where the labor force is cost-effective. This approach is often used to reduce a company's personnel costs. However, its success depends on effective communication. |
Onshoring | Onshoring is a type of outsourcing software projects that involves delegating tasks to external service providers within the same country. Working in close proximity allows businesses to offer services tailored to the needs of their market. Onshoring improves cost structures and provides greater organizational flexibility. |
Nearshoring | Nearshoring refers to delegating business processes to countries that are geographically close to the client. Nearshoring provides optimal solutions for firms looking to outsource processes to maximize business efficiency. The main advantages of nearshoring include the absence or minimal time difference, similar cultural characteristics, and ease of communication due to good language skills. |
Software Development Outsourcing Models
There are three models of engaging an outsourcer, and each of them has its own characteristics. Let's explore them together.
Full
This model involves the complete transfer of the development process under the control of the contracting company. It is suitable for companies where infrastructure support is important but not a key component.
Among the advantages, it's worth noting:
Reduced overall development costs.
Use of standardized solutions and best practices.
A single point of communication for all technical matters.
This model suits medium and small businesses for long-term projects without a high level of confidentiality.
Partial
In partial outsourcing of software development projects, a portion of the infrastructure, services, and processes comes under the control of the provider. Unlike full outsourcing, there is room for maneuvering and the possibility of joint control over the process.
The benefits of this approach include:
Risk diversification.
Sharing control over the process.
Filling in narrow specializations.
Reducing the risk of confidential information leakage.
Large companies often use this model to engage specialized companies in order to improve the quality of IT support.
Outstaffing
It often happens that a company needs IT specialists on a permanent basis, but they want to reduce the personnel burden on their staff. In this case, outstaffing is the best model for the business. An entrepreneur gains access to staff whose work is controlled independently, while all personnel management responsibilities lie with the outsourcer.
The model provides the following benefits:
Professional specialists that do not need training, upskilling, or recruiting.
Personnel unloading.
Guarantee of quick and high-quality replacement in case of illness, leave, or resignation.
Outstaffing is best suited for companies that find it challenging to accurately assess the competence level of a specialist.
Why Outsource Software Development?
Software development outsourcing is an opportunity to focus on core tasks and the development of the company's main direction. In addition, delegating processes provides the following benefits:
Significant cost reduction. Services from a software outsourcing company are more cost-effective. This is achieved by simultaneously addressing a multitude of routine tasks by the contractor.
Expense control. Work is carried out according to a contract with a strictly defined budget. The amount can change, but any changes, whether higher or lower, are agreed upon in advance, providing a clear understanding of expenses.
High quality. Software outsource company provides access to experienced specialists with valuable skills, leading to improved project quality and efficiency.
Maximum focus on important tasks. Development outsource allows companies to concentrate on their core activities and business strategy without being distracted by operational aspects and additional control.
As we can see, outsourcing software development projects have numerous advantages. However, the successful implementation of such an approach depends on the competence and reliability of the outsourcing software development company. Therefore, it is essential to make a responsible choice when selecting a partner.
How To Find A Software Outsourcing Company?
Certainly, software project outsourcing offers not only advantages but also risks for businesses. Choosing an unscrupulous contractor and inexperienced specialists can be too costly.
What should you rely on when making a choice to avoid failure?
The age of the outsourcing development company and its reputation. Of course, experience and positive reviews do not guarantee quality service, but it's better to give preference to an outsourcer who has been in the market for a long time and can boast successful collaborations with clients.
Offering a wide range of services. IT outsourcing services is a broad field consisting of many services: office equipment maintenance, IP phone setup, IT relocation organization, server equipment rental, and more. The broader the capabilities of the outsourcing software company, the more benefits for the customer. It's convenient to address any issue with a single contractor.
Qualification of the staff. This is one of the most opaque nuances since there are no methods to determine competence in advance. Nevertheless, indirect conclusions about qualifications can be drawn by talking to the client, assessing the quality of contract drafting, and so on.
Cost of services. Don't fall for low prices. A good company will not offer cheap services. If the contractor promises an excessively low cost, in the end, it will turn out to be higher than stated. Or the outcome of the collaboration will be unsatisfactory.
It's also essential to understand the contract arrangement since it guarantees both quality service and compensation from the contractor if they fail to fulfill their tasks.
How Much Does It Cost To Hire An Outsource Software Development Company?
The cost of hiring an outsourced software development company will vary depending on the following factors:
Location: This is one of the main aspects affecting the service price. Companies operating in countries with a lower cost of living (such as India or Vietnam) often offer more competitive rates than organizations in developed regions like North America or Western Europe.
Project complexity: This factor plays a significant role in pricing. Outsource software projects that require advanced technical expertise, extensive functional capabilities, or complex design typically cost more.
Team size: Companies with a large staff of developers, designers, and project managers generally provide services at a higher cost.
Tech stack: The cost may vary depending on the technologies and tools used in the project. Some technologies may require special knowledge and experience and, as a result, can be more expensive.
To hire a contractor with the maximum benefit for your business, study the offers of several companies and evaluate their cases and qualifications before making a decision.
Best Destinations For Outsourcing Software Development
Software outsourcing is a great way to save money and get quality work. However, you need to know which countries have a well-developed market so you can find truly good specialists.
The top five leaders include:
India
Ukraine
Poland
Romania
Czech Republic
Keep in mind that the outsourcing landscape is dynamic, and the choice of direction depends on various factors, including the specific needs of your project, required skills, language proficiency, time zones, and budget.
Summarizing
Outsourced software development projects are an essential strategic practice that provides significant benefits to companies, including:
Cost-effectiveness
Reduced development time
Risk reduction
High quality and more
If you plan to use software IT outsourcing, it's important to make a responsible choice of a partner to avoid collaborating with an unscrupulous contractor. Your decision should be based on your specific business requirements, goals, and your financial capabilities.
Delegate your digital solution development to the professionals at Lampa. Our highly qualified and experienced specialists are ready to help bring your ideas and projects to life, ensuring high quality and effectiveness.