Software – it powers today’s business world. From MS Office to custom applications, success today requires the right digital tools. However, in-house software development isn’t possible for all organizations. Software outsourcing offers a viable solution to organizations large and small facing challenges designing and developing the software they require.
What is software outsourcing, though? How does it work? What advantages does it offer? Those are just a few of the questions we will answer within this blog post.
What Is Software Development Outsourcing?
At its heart, software outsourcing (also called software development outsourcing) is no different from outsourcing any other business process. For instance, accounting and payroll are often outsourced to a specialized firm that handles these critical yet time-consuming and expensive business processes. The benefits to the outsourcing organization are considerable and include:
- More accurate business processes handled by an expert partner
- Recovered time that can be spent doing what the organization does best
- Reduced need to hire additional employees (and avoidance of the inherent costs)
- Faster development and delivery time than with in-house teams in many cases
In fact, software outsourcing has become so popular that Statista notes that the industry’s application outsourcing segment alone is projected to generate $108,748.6m in revenue in 2021 alone.
Statista also highlights that of all IT functions, software development is by far the most frequently outsourced process, accounting for 64% of all outsourced tasks as far back as 2017.
By the end of 2021, Statista forecasts that the total value of outsourced IT projects will surpass $413 billion.
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Why Does Software Outsourcing Matter?
As highlighted above, software development outsourcing delivers critical advantages, including cost and time savings, access to the industry’s best talent, and more. However, those are just the tip of the proverbial iceberg. According to a study published by Deloitte:
“While cost indeed remains a key driver, the ability for organizations to keep up and stay relevant in the modern age of disruption has become equally critical. Organizations recognizing this are now also investing in OSS (outsourcing services and solutions) to multiply performance (speed, quality), reduce capability as well as capability gaps, increase agility, access intellectual capital, reach new markets, and accelerate innovation across their business from back-office support to front-office product and service deliveries.”
Organizations that outsource software development can focus on their core competencies while ensuring they have a trusted partner to foster growth and success. Of course, it is not as simple as choosing a software development company. There are many things decision-makers must know, from the various outsourcing models to how to choose the right software development service.
Three Models for Software Outsourcing
As outsourcing services have grown in popularity and value, new models have opened up. Today, there are three options available to organizations looking to find a strategic partner and leverage a synergistic relationship: onshoring, nearshoring, and farshoring. However, they are far from identical, and decision-makers must make an informed choice to see the benefits they require.
| ONSHORING | NEARSHORING | OFFSHORING | |
|---|---|---|---|
| COST | High | Moderate | Low |
| LANGUAGE BARRIERS | Low | Low | High |
| TIME ZONE DIFFERENCES | Low | Low | High |
| CULTURAL CHALLENGES | None | None | Many |
| ACCESS TO TALENT | Good | Good | Limited |
While the chart above provides information at a glance, we should delve a bit deeper into the conversation surrounding onshoring, nearshoring, and offshoring (also called farshoring).
Onshoring
With the onshoring method, organizations work with a partner located within their geographic area. This could mean within the same state in the United States, or it could tell within a different state, but not outside of the country. The benefits here are pretty obvious:
- There is no language barrier
- Time zone differences may exist but are not particularly significant
- There are no cultural differences
On the surface, at least, onshoring sounds like the ideal option. However, that is a superficial impression. In fact, it is the most expensive of the three options. Also, there is little guarantee that you will have access to top talent, although there is a good chance you will have access to certified professionals.
Nearshoring
Nearshoring takes your outsourcing needs and shifts them to a nearby geographic area. For instance, companies in the US would outsource to providers in Latin America. This offers several critical advantages, including reduced costs compared to onshoring, access to talent that might not be readily available in the local market, no time zone differences, and little in the way of cultural challenges.
Note that while nearshoring is more affordable than onshoring, it is not as low-cost as offshoring.
Offshoring
Offshoring is what many people think of when it comes to outsourcing. The process was popularized in the 1990s and 2000s when many tech companies outsourced their customer service to India. And, make no mistake, if cost savings are your primary focus, then offshoring is the ideal option. However, it comes with some important drawbacks.
First, the time difference is significant. There are also major cultural differences, language barriers, and other problems that can lead to a less-than-ideal experience. While offshoring may work for some needs, it is not the right choice for many others, particularly software development.
As you can see from the information above, nearshoring offers the ideal mix of cost savings, access to leading talent, and few drawbacks. Ease of communication, no time zone differences, no significant cultural differences also make this the preferred option for organizations seeking to outsource their software development needs.
Software Development Outsourcing Options
Just as there are several different software outsourcing models, there are also various options for the services you utilize. These include staff augmentation, project-based outsourcing, and dedicated teams. Below, we’ll break each down into greater detail to help ensure that you’re able to make an informed decision.
Staff Augmentation
For companies with an existing in-house IT team, staff augmentation might be the right outsourcing option to choose. In this situation, you work with a software development company to identify key skills and then contract with eternal specialists who become part of your in-house team (although they are not technically company employees).
Project-Based
Do you have an upcoming development project that is posing problems in terms of access to talent, time constraints, or something else? In this software development outsourcing method, you turn the entire project over to a third-party team that handles design, development, and rollout according to your standards and requirements. However, note that with this method, you only gain access to external talent for the outsourced project(s).
Dedicated Team
A dedicated team could be the answer for businesses with little or no in-house IT talent and ongoing requirements. This method offers access to an entire team of software design and development experts, but on an ongoing basis, rather than a project-only basis. In essence, you can build a team that works within your business but is not comprised of employees. This is the best solution for businesses with ongoing software development needs but do not want to hire their own in-house IT teams.
Moving Forward: Finding Your Path within Software Outsourcing
As you can see, there are multiple options available when it comes to software development services and outsourcing your needs. How do you choose the best path forward? It comes down to just a few steps.
1. What do you want to develop?
The first step is to define your needs. What do you want to develop? An in-house app? A client-facing software tool? A productivity suite? Without a clear understanding of this, you cannot move forward. Start with your needs – what do you need to accomplish – and then move on to the next step.
2. Know Your Goals
Next, what do you want to accomplish with the outsourcing project in addition to creating the software or app you need? Do you want to save time? Money? Access talent that’s not available to you? A firm understanding of your goals is essential, as they inform project KPIs and other crucial milestones.
3. Explore Outsourcing Models and Options
With a better understanding of your needs and goals, you can then begin exploring software development outsourcing options. Is nearshoring the better option for you? Do you need an entire dedicated team, or do you need to outsource a single, time-sensitive project? Does the project’s scale require just one or two developers, or do you need a large team?
Unsure of your needs, goals, or constraints? The right software development partner can help you define and refine those requirements.
Why Choose Softrizon?
Whether you’re struggling with a skilled staff shortage or want to focus on what you do best and leave the software development to us, Softrizon can help. We offer project-based solutions, dedicated teams, staff augmentation, and other solutions tailored to your unique requirements and timeline. We also help you leverage the benefits of nearshoring, reducing costs, and connecting you with the deepest talent pools in Latin America while simultaneously reducing language, time, and cultural barriers. What can we help you build today?
