software outsourcing
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Software Outsourcing – A Guide to The Popular IT Trend of Today

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Discover the Mysteries of Software Development Outsourcing and Why You Need It

Ever since the businesses started to adopt and develop software to improve their work flows, the concept of software outsourcing has been quite popular. But within the past couple of decades, the concept of software development outsourcing and offshoring has seen a massive boom.

But while many may be familiar with the term itself, very few people know what the process actually entails. Moreover, additional terms like offshoring and nearshoring only add to the confusion.

Therefore, let’s begin by understanding the process of software development outsourcing, and how it benefits businesses who use it instead of hiring in-house teams for their essential work processes.

What is Software Outsourcing?

Before we get on with the guide, the first thing we need to do is to understand the concept of software outsourcing. Now, the concept is quite simple, really. A business that requires software development services hires an external service provider, also called a software outsourcing company, to manage the development of their software solutions.

The software in question being developed could be a custom software solution to streamline your company’s internal processes. Or it could be a commercial tool meant for your consumers.

Software development outsourcing is also a great way to compensate for gaps in your company’s technological resources, as well as allows your core resources to focus on other aspects of your business. By hiring an expert .NET developer or any experienced development company, you can ensure that your software project will be a success.

Some of the most common applications outsourced to third-party development companies include:

  • Software consulting to help businesses decide a software development strategy that fulfills their business needs.
  • Testing and Quality Assurance to help discover bugs or issues within an existing project, and to ensure that it complies with the company standards of quality.
  • UI/UX design is often outsourced to specialists known for creating intuitive and engaging front-end layouts and workflows, allowing for a better user experience.
  • Solution integration to integrate a new software project with your company’s existing software solution.

Software Outsourcing Aims at Reducing Costs

One of the primary benefits of software outsourcing, and one that attracts many businesses to opt for it, is that this process of software development can be quite economical. Compared to the hiring of an entire internal team of designers and developers to develop your software project, opting for a third­-party service provider is not only simpler, but cheaper too.

These software development companies have expert resources for a variety of development technologies. That makes it easy for you to form a team of required resources, from a pool of vetted experts.

The process not only makes it easier to find the best technological resources, but is also quicker and more economical than hiring individuals for your development project.

Looking for the Right Software Outsourcing Team?

What is a Software Outsourcing Company? What Do They Do?

A software outsourcing company is an entity that provides the service of business process outsourcing, or BPO, specifically for software development projects. Their entire purpose is to develop a software project for their client company, either for their internal processes, or as an external offering for their customers.

Many software development companies hire large and versatile teams of software developers with expertise in different .NET development tools and software stacks. This allows them to offer a well-rounded software development outsourcing service to their customers, by providing any necessary resources they might need for their software project.

These service providers often wonder a variety of in-demand services such as UI/UX design, network infrastructure, server support, cloud development services, and even software development consultancy.

All in all, they are a great option for businesses who require highly skilled technical resources for individual projects, or for those looking to supplement their existing team for a specific period of time.

The Three Main Models of Software Outsourcing

Now that we understand what software outsourcing is, and how it can benefit businesses, we need to know the different types of outsourcing . Essentially, there are three types of software outsourcing models available. Businesses usually opt for model that suits them, depending on the service they desire to outsource.

The outsourcing models include:

  • Onshore Outsourcing

This is the simplest type of offshoring practice. Businesses following an onshore outsourcing model are generally located within the same geographical region as the company hiring their services. Basically, these service providers would usually be located within the same city or country, as the name suggests.

  • Nearshore Outsourcing

Nearshore outsourcing, or near shoring refers to the process of hiring an outsourcing service located in areas neighboring your region. For example, an American company hiring a software outsourcing company in Canada can be said to be following a nearshore outsourcing model.

  • Offshore Outsourcing

Offshore outsourcing is the most popular model used by businesses around the world. In this outsourcing model, the service provider is situated at a geographical location far from their client company. One of the most common applications is the outsourcing of customer services to countries like India and the Philippines.

Offshoring Vs. Outsourcing – How Do They Differ?

Offshoring vs. Outsourcing – a debate that confuses many. Many people often use the two terms interchangeably, yet are unaware of the subtle difference between them. As we discussed before, offshoring is a type of outsourcing. So while we can substitute the word Outsourcing for Offshoring, the reverse is not true every time.

Debunking Common Software Outsourcing Myths

While software outsourcing is quite a popular mode of business for many companies, both as a service provider and as clients, there are many myths about the process. That results in small businesses which could benefit from the services of outsourcing companies, not even considering the possibility of employing them.

Let’s address some of the most common of these myths and misconceptions.

You Can Get the Same Benefits from individual Freelancers

Freelancers are often highly skilled in different aspects of the service they provide. However, most software projects that need to be outsourced are more than what a single freelancer can handle. In order to develop and deliver a quality product, a team of experts need to work together.

In such cases, hiring a number of freelancers for various aspects of the project can be quite costly. It is usually better to employ the services of a software development company to outsource your project, and get a high quality product in return.

Outsourcing Increases Costs

This one is one of the most common myths associated software outsourcing. Many people believe that it is more economical to hire your own dedicated, in-house team of software developers compared to employing a software development outsourcing company.

However, that is mostly because they only look at the upfront costs, which might be higher compared to an in-house team at the start. But as time passes, internal teams often end up costing far more.

Software Development Outsourcing Gives You Access to Global Expertise

One of the biggest benefits provided by software outsourcing, is the access to a virtually bottomless pool of talent from around the world. This allows you to hire software development teams that consist of the top resources available, ensuring that your product is developed by expert developers.

Hiring an in-house development team, while instilling a great of confidence, often finds gaps in technical expertise. That is because in-house recruitment restricts the pool of candidates, unless your company has a budget large enough to entice the required talent into relocating to a new geographical region.

And while training could help cover up the technological gaps, that would only add to your company’s cost, as well as the time to develop your software product. Therefore, you should try to choose the software outsourcing model that suits your business needs perfectly.

Benefits of Software Outsourcing

Besides the promise of a far larger candidate pool, there are numerous benefits to software development outsourcing. From reduced costs to faster time-to-market, these benefits include:

Reduced Risk

Training your own employees for a new technology is not only time-consuming, it is also a risk. Businesses cannot be sure about their risk of investment, especially when that risk requires both time and capital.

Software outsourcing services are often well-skilled and experienced in creating a variety of software products, including the type you want developed for your company. Before hiring them, you can check how well the service provider is reviewed. You can even take a look at their software development portfolio.

This ensures you get the best software development team within your budget.

Flexibility

With another company supervising and developing your software solution, it allows you to focus on other aspects of business. Moreover, it also reduces the strain on your existing teams by removing the need to search, hire, or train a new resource, and helps them focus on the tasks at hand.

This process allows both your company and your software project to grow and develop simultaneously, without hindering each other’s progress.

Reducing Costs

As we discussed earlier, software outsourcing generally costs less than hiring an in-house team. According to Delloite, nearly 60% of companies who use software outsourcing, do so for the cost benefits.

The first place companies save costs is by removing the need and effort required to vet and hire a sizable development team. As a result, time which would otherwise be spent training and working out the new team dynamics is also reduced, translating to lesser costs in the long run.

Faster Turnaround

A faster turnaround time to the market is also one of the most important reasons companies hire software outsourcing services. That is because when you build your own development team, it takes time to find the right resources, acclimatize them to your business, and get them started on your product.

An outsourced development team on the other hand, can start working as soon as they get the information required to build your software. That means compared to a new in-house team, a software development outsourcing company offers a faster turnaround time to the market.

Want to Outsource Your Projects to the Best Professionals?

The Drawbacks of Software Development Outsourcing

Users and supporters of software development outsourcing services are often quite vocal about their merits. Yet no option, no matter how good, is without a few drawbacks. So now that you know how software outsourcing is better than hiring a new development team from scratch, let’s take a look at some issues that may cause problems during your software development process.

Varying Quality Standards

No two software development teams have the same work process or standards of quality. And with software outsourcing a popular mode of businesses, many new service providers often forgo forming and adhering to a set of industry standards when it comes to software development.

That often means that there is no sure way to judge the quality of that service provider’s work. That is because that while one project they develop may be of a high quality, there is no guarantee or consistency in their producing more projects of the same calibre. This mostly happens when these outsourcing companies do not precisely follow the practices defined in any .NET development guide. Therefore, it mostly results with a bad software quality that often irritates clients at the time of approval.

Language, Cultural, and Time Barriers

Another potential issue that might cause problems with your software development project, is the different time barriers, cultural differences, as well as issues caused by the language barrier. These potential pitfalls, if not addressed properly, often translate into major problems for your software development project.

Most of the popular software outsourcing service providers are located in Asia, South America, and Eastern Europe. For a business situated in the United States, hiring a software outsourcing company from one of these areas will obviously mean dealing with the different time zones, as well as a distinctly different language and cultural barrier.

If both parties involved in a software outsourcing project fail to compromise, it can cause issues that could potentially derail your entire software project.

Potential Security Issues

Many countries around the world do not have a comprehensive digital theft legislation in effect. This makes it difficult to protect the originality of your project’s code bases, making it almost impossible to ensure that your code is not reused for other projects.

Moreover, there have been cases of companies finding out that their development companies have developed backdoor channels into their product, as a means of gaining access at a later time to exploit its data and services.

Best Outsourcing Locations

Currently, a few countries and geographical regions have become the preferred locations for international businesses to outsource their software development. Large software development companies in these areas have made it their business to provide a variety of software development outsourcing services to clients from all over the world.

Latin America

With its proximity to the US, as well as a steadily rising quality of education, Latin America has been quickly rising through the ranks of regions producing some of the best IT specialists in the world. These highly skilled engineers and developers are in heavily in demand by companies around the world looking to build their own software product.

Popular Outsourcing Countries

Some Latin American countries are better known than others when it comes to producing highly talented software developers. These countries include:

  • Costa Rica

The country is fast garnering a reputation as a highly productive, behind-the-scenes, IT services provider for major players in the tech industry. Many companies like HP, IBM, and others have established offices in Costa Rica, testament to the quality of work the country’s talent provides.

  • Mexico

Besides boasting one of the largest technological market in the entire Latin America, Mexico also benefits from its proximity to the United States. Many outsourcing services providers work with American businesses in a nearshore arrangement, as their developers, QA specialists, an engineers are fluent in the English language.

  • Argentina

Among Latin America, Argentina stands apart with its network of free university level education, as well as government-funded IT initiatives that empower their youth to go for STEM studies. Moreover, the country boasts a high English proficiency, as well as low market rates, which make it an ideal location for a software development outsourcing company.

Cost and IT Infrastructure

Compared to the United States, median salaries for software developers, even senior developers, rarely exceed the $40k mark. This makes outsourcing a highly lucrative mode of work, as it allows developers to earn more than the country’s average, while still living a comparatively economical geographical region.

The IT infrastructure is quite robust, and is improving even more day after day. Mexico has been increasingly pushing initiatives to digitize the government and economic work processes, while Argentina is proving itself as a hub of blockchain and crypto in Latin America.

Tech Talent Available

Latin America offers large pool of tech candidates, ranging from developers, engineers, quality assurance professionals, and more. the region also produces a large number of WordPress developers, as well as .NET engineers.

On average, Latin American countries produce an estimated five hundred thousand new IT specialists, making software outsourcing a lucrative business for the majority of these candidates.

Intellectual Property Protection and Theft Security

Unlike Europe, each country in Latin America has its own laws regarding IP protection. In the case of Mexico, the country defers to the USMCA, or the United States- Mexico-Canada Agreement, which defines that all IP protections be designed in line with US guidelines.

However, Argentina has recently joined the Paten Prosecution Highway program, which shows that the country is now willing to work with the international intellectual property protection authorities and uphold their IP standards.

Asia

Asia’s outsourcing market is as large and varied as the continent itself. Different countries have different languages, culture, IP laws, IT infrastructure, and even the cost of living. However, let’s take a look at some of Asia’s most popular software development outsourcing destinations.

Popular Outsourcing Countries

Asia is home to a large number of countries who provide various outsourcing services. Moreover, the quality of work varies from country to country. A few popular destinations include:

  • India

India is arguable, one of the most well-known outsourcing services provider in the world. From customer services to software development, Indian service providers are experts at offering high-quality outsourcing service.

One of the primary reason for this, is the comparatively cheaper cost of living in India, when compared to the United States. Secondly, the high quality of technical education, combined with a high English proficiency, makes them ideal service providers for many international companies.

  • China

China is by far, the largest producer of high quality technological talent across the entire globe. Their developers and engineers are some of the best in the world, which is evident by the rapid advancement in technology that can be seen in the country.

However, despite providing such a great pool of high-quality IT talent, the comparatively low English proficiency hinders it from getting the top spot in the software development outsourcing services.

  • Singapore

Singapore is a business hub in Asia, with many major international companies like IBM, Citibank, and Microsoft calling it home. With a great IT infrastructure, Singapore is an ideal location for software outsourcing services, due to its comparatively lower cost of living, and access to a suitable pool of tech talent.

The size of the IT talent in the country is quite small compared to its neighbors. However, the quality of the available resources is quite high, making them suitable for developing robust software for top international businesses.

Cost and IT Infrastructure

Many Asian countries generally have a strong IT infrastructure, considering the region’s focus on STEM education, as well as the interest of international businesses in establishing roots within the region.

China’s quickly growing IT infrastructure is driven by the country’s goal to be a technologically superior entity. Singapore, on the other hand, enjoys the benefits of a robust IT platform due to the presence of large and well-funded tech companies in the region.

The cost of hiring software development teams can vary from country to country. In India, the average salary of a developer lies between $11-13k, while in Singapore, that number can rise as far as $80k for senior resources.

And while this may sound expensive, this is still cheaper than hiring and training a software developer in the United States.

Tech Talent Available

The availability of high quality tech talent varies from region to region in Asia. In China, you will find many top-level software developers and engineers. However, finding one who does not work for the Chinese government, or one of the country’s top IT firms, can be a hard task.

In India however, the difficulty lies in sifting the good developers from the mediocre, a process which can be quite draining on a company’s resources.

Intellectual Property Protection and Theft Security

IP protection and security also varies from country to country. Singapore’s IP protection laws, based on the UK’s 1977 Patent Act, are considered the best in Asia, and only second globally, behind Finland. On the other hand, China does not have any IP protection laws whatsoever.

Compared to Chine, where businesses have to ensure the IP protection of their own products, and Singapore, which is quite strict in upholding intellectual property rights, India lies somewhere between the two. While there is legislation in place to prosecute those who infringe a business’s IP rights, it can be quite difficult to recoup any losses incurred.

Eastern Europe

Just like Asia, Eastern Europe hosts some of the world’s most in-demand software outsourcing countries, whose resources provide their services to businesses in UK, US, and many other European countries.

Popular Outsourcing Countries

Some of the most popular software outsourcing destinations in Eastern Europe include:

  • Ukraine

Ukraine has a high ratio of English proficiency, and their tech talent consists of developers and engineers highly skilled in their respective technologies. Moreover, the IT environment in Kiev is highly similar to the startup culture found in the United States, making Ukrainian software outsourcing services the ideal fit for US-based companies. 

  • Romania

Romania is known for its rich history and culture, as well as being a provider of high-quality IT talent to businesses across the globe. Their primary development service involves helping businesses digitize, by automating their workflows and business processes, and using advanced data handling and management techniques.

  • Poland

Polish IT resources can be found across the globe, working in many research and development labs at some of the biggest tech companies in the world. Many Polish software outsourcing companies offer a variety of services, from software development, to DevOps.

Cost and IT Infrastructure

While the average salary for developers’ ranges from region to region, the scale generally lies between $12-50k for the countries mentioned earlier. Ukraine and Romania generally cost more when it comes to median developer salary, while Poland is somewhat cheaper compared to the two.

The IT infrastructure in the former Soviet-bloc countries has always been top-notch, with a primary focus on STEM studies emphasized since the primary level. The best universities in the area offer highly-ranked degrees in data science, AI and ML, IoT, and much more, in order to drive a technological revolution across the entire region.

Tech Talent Available

Across the entire Eastern Europe, the combined IT pool consists of over one million skilled resources, working in a variety of fields and applications across the globe. Moreover, the region produces nearly sixty thousand new IT resources each year from some of its best educational institutes and universities.

Intellectual Property Protection and Theft Security

Eastern Europe’s intellectual property protection is one of the best in the world. As part of the European Union, these countries have to abide by the EU Trade Agreements, which contain high levels of IP protection, quite similar to the US IP legislations.

Finding the Right Software Outsourcing Team Looks Daunting?

Software Outsourcing as a Global Strategy – How Major Businesses Use It

Software outsourcing has seen a huge uptick since the COVID-19 pandemic began. Around the world, nearly two thirds of businesses today outsource one or more business processes to third-party service providers.

That is because in the digital world of today, opting for outsourcing can help you run a business without being bound by constraints such as the availability of required resources or services. Moreover, it can help you build a product that viable universally, in more than one way.

Let’s look at some of the biggest examples of software outsourcing, and see how it turned out for them.

WhatsApp

WhatsApp is one of the most used applications on our smart devices today. A part of the Meta family of products, WhatsApp had quite a humble, and ironic beginning. Created in 2009, the product was the idea of Brian Acton and Jan Koum, after Facebook rejected them.

In order to get the best product within a limited budget, they decided to hire a professional software outsourcing company from Eastern Europe to do it for them. And the rest is history.

GitHub

GitHub is one of the most popular tools used by software developers around the world. Owned by Microsoft since 2018, the tool offers developers the option of project hosting, and version controlling. Today, over forty million users use Git to manage and track bugs, version control their projects, and managing their project’s source codes.

Originally, it was designed using Ruby on Rails. But once it became apparent that the project needed resources who were extremely familiar with Git itself. The task was assigned to an outsourced talent by the name of Scott Chacon, who helped guide GitHub’s design to where it is today.

How Can I Outsource a Software Development Project?

There are many factors and facets which can affect the success of a software development outsourcing project. By focusing on these all-important facets, we can ensure that the software product we get is developed according to our business needs.

The major aspects that you need to focus on before outsourcing your software project include:

  1. Establishing a distinct and clear goal as to what you want to accomplish by outsourcing the project.
  2. Preparing to fulfill the role of project management effectively, or assigning an expert resource to do it on your behalf.
  3. Formulating and adhering to realistic and achievable goals and milestones.
  4. Formulate your project into proper milestones, and track these milestones periodically to check for any inconsistencies or issues.
  5. Prioritize feedback.

Frankly, there is no way to 100% guarantee if a software outsourcing project will be a success. But by fulfilling the aspects listed earlier, you can improve your chances of success by a long shot.

Conclusion

Software outsourcing is a vast field today, with application ranging from simple project development, to vast enterprise-level projects with extensive R&D. As a business owner, you need to study the various aspects of the software outsourcing service to ensure that you outsource your project to a software development company that is a good fit for your business.

Now that you know all about software outsourcing, you are ready to begin your journey to develop a custom software for your business.

FAQs

What is software outsourcing?

Software development outsourcing describes a service where a company hires a third-party software development services provider to create their software project.

What are the advantages of software outsourcing?

Software outsourcing have a number of benefits, including:

  • Less risk
  • Reduced costs
  • Faster time-to-market

How do you outsource a project?

In order to outsource a project, you need to:

  • Identify your goals
  • Select your outsourcing model
  • Research different vendor options
  • Test your chosen development team
  • Oversee your project throughout the process