Companies across various sectors sign off their IT functions with outsourcing companies to save on costs and time. But is this process always a good idea?
Well, that depends on what you are looking for in this process. If the issue is that your company is strapped for cash and needs to cut corners in some areas, outsourcing might be a great idea. But if you want to maintain control over the project, don’t always expect things to go smoothly.
According to software development outsourcing stats, there has been a global increase in money spent on outsourcing IT functions. In 2019, the figure surpassed 66 billion US dollars, and it is expected to exceed 409 billion by 2022.
Image Source: PixelCrayons
As more businesses turn to outsource, more people ask themselves: Is outsourcing software development projects always a good decision? Or can it come back to bite you?
For the past few years, outsourcing projects has been a contentious topic. This procedure has benefits and drawbacks, as well as restrictions. The advantages and downsides of software development project outsourcing are thoroughly discussed in this essay.
Let’s begin with the benefits of outsourcing software development!
What’s Great About Outsourcing Software Development Projects?
“If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.”–Lee Kuan Yew
Many businesses don’t have an in-house software development department. Instead, they hire a team to work remotely. Similarly, there are many other reasons businesses choose to outsource, such as reducing cost, improving decision making, and more.
Pros Of Outsourcing Software Development!
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A cost-Effective Way Of Getting A Project Done.
Many businesses take up software development projects but cannot have an in-house team. In such cases, outsourcing becomes a cost-effective solution that lets them complete their project without incurring further costs.
Not only that, but outsourcing companies usually offer affordable rates for better value, which makes them even more appealing to cash-strapped businesses.
According to the survey, 58% of projects go to outsourcing partners that offer a lower rate, while 31% go to the provider that offers the best combination of quality and price.
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Availability Of Resources With The Latest Technology And Tools.
Outsourcing companies are constantly up-to-date with the latest tools, techniques, and methodologies used in software development.
Working with an outsourcing company enables you to enjoy access to their resource pool without having to pay extra for training or for purchasing hardware/software licenses.
Besides, outsourcing partners usually pay more attention to the training and upskilling of their employees, which makes them a better choice when it comes to long-term benefits.
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Access To The Best Talent Pool In Terms Of Skills And Experience.
Well-managed outsourcing companies have a pool of talented and experienced people who can take on various roles to get the job done. This talent pool comprises skilled professionals from different backgrounds, including management, development, testing, UX/UI design, and more.
These companies usually have a vetting process to ensure they only hire the best candidates. This also helps them retain top talent for long, translating into better productivity and reduced downtime due to employee turnover.
India’s talent pool is highly qualified to meet the n/ITeS industry’s needs and other fields. There are no language barriers because the country has over 100 million English speakers, the second largest after the United States. Every year, over 150,000 engineering graduates enter the IT industry, ensuring that services are always available.
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Flexibility In Terms Of Choosing Location And Payment Models.
When you outsource your project, you have the freedom to decide where it will be executed. You can choose a location that is best suited for you. Although Deloitte’s survey says, 59% of interviewed businesses are already outsourcing to India, with an additional 22% planning to go or considering it.
You can also choose the payment model that works best for you. Most outsourcing companies offer fixed-price contracts, but others agree to work hourly or combine fixed/variable pricing methods.
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A Chance To Focus On Core Business.
You can now focus on your core business since you have outsourced the work to a company responsible for delivering on time, meeting deadlines, and maintaining quality standards.
You don’t have to worry about the project anymore, and you can also save money by avoiding any unnecessary costs that come with having a full-time in-house team.
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Better Management Of Projects.
An outsourced development partner lets you build a long-term relationship from which both parties derive mutual benefits. This is made possible by a dashboard that lets you monitor the progress of your project in terms of time, cost, issues, risks, and more.
This not only helps you manage projects better, but it also enables you to plan for future projects in a cost-effective way that considers all aspects, including budgeting, resources required, staffing requirements, project progress, and more.
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The Time Saved In Recruiting And Training New Resources.
When you hire full-time employees, you have to go through the recruitment process, taking a considerable amount of time. You will also have to train new team members to understand and contribute fully to your project.
However, when you outsource projects, you only get a one-time assignment from a partner responsible for completing the project successfully within a stipulated time frame. This means you don’t have to go through the hassle of recruiting, hiring, and training new resources every time you launch a product or need to complete an ongoing project.
Although there are many more benefits of working with an outsourcer, they aren’t free of faults. These faults could put your project at risk if proper mitigation measures are not considered beforehand. So, let’s see other portions of the pros and cons of IT outsourcing, i.e., some of their disadvantages.
What’s Bad About Outsourcing Software Development Projects?
So, what’s wrong with outsourcing? Well, just like there are different sides to a coin, outsourcing has its pros and cons. As mentioned above, we will discuss outsourcing software development pros and cons; here are some of its disadvantages:
Cons of Outsourcing Software Development!
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Time Zone Differences That Could Slow Down Collaboration.
One of the biggest challenges with outsourcing projects is communication and time zone differences between you and your partner. This means even though each party works on the project, they may not always be in sync.
You will have to invest in tools that help coordinate work and consider using time buffers that help compensate for any delays. This way, you can still maintain the same level of productivity even while working with a remote development partner abroad.
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Cultural Differences Can Act As Roadblocks.
Another challenge is cultural differences between yourself and your outsourced partner.
It is essential to understand the culture of your outsourcing partner before you begin work with them. This will help understand their actions, reactions, and how they implement policies that affect your project.
For example, suppose you have outsourced web development work to a company in India. In that case, it is best to know their culture, business practices, customs and to avoid any unnecessary delays.
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Loss Of Control Over Your Project.
Anytime you outsource a project, you are putting the fate of that project into someone else’s hands. You will have no control over how they implement or manage the project. And this can be dangerous if you cannot carefully consider any risks associated with your project.
That’s why you must know the requirements of your project in great detail beforehand. You need to see the project inside-out so that you can identify all risks associated with your project. You should also determine how these risks will be mitigated and whether they are manageable.
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Risk Of Security Breaches And Data Leaks.
When you outsource projects, your data is typically stored on servers where the outsourced partner has access to it. This means that there are chances of security breaches and data leaks.
This can be mitigated with due diligence done by both parties before they begin project work. The risks have to be identified first so that any mitigation strategy or plan can be formulated. It is also essential to understand the data flow between your organization and the outsourced partner’s organization.
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Loss Of Intellectual Property Rights (IPR).
One of the biggest issues, especially when outsourcing IT projects, is the loss of intellectual property rights. This means that your outsourced partner has some or all IPRs for any work they do on your project, which prevents you from using it afterward in future projects.
You need to identify and clearly state your IPR terms during the outsourcing agreement to overcome this issue. This will help you understand what information is shared between both parties and whether any specific IPR belongs to one party.
So, now you know which of these is not an advantage of outsourcing.
Over To You!
Outsourcing is an excellent way of increasing your capacity and also reducing costs. While there are some disadvantages, you need to weigh these against the advantages of outsourcing before finalizing a decision.
And if you hire a reputed custom software development company that has been in the business for long enough, then most of these problems will be easily mitigated.
So, you need to carefully consider the pros and cons of outsourcing before taking a call on whether or not your project requires outside help.
That’s it! This is the end of this article. We hope you enjoyed reading outsourcing IT pros and cons and found it helpful in some way or another.
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FAQs
Q1: Why should you outsource software development?
A1: There are many reasons to outsource software development work. The advantages include increased capacity, reduced costs, access to specialized skills and expertise, etc.
Q2: How to choose a software development partner?
A2: It is essential to do your research before choosing an outsourced software development partner. In addition, you should also go through their portfolio and testimonials from other clients so that you have a good understanding of their work. If you have any questions or doubts about their services, always ask them to clarify before working with them.
Q3: Why is outsourcing risky?
A3: There are two main risks associated with outsourcing a project – lack of control over the work and loss of intellectual property rights. All projects have some degree of risk attached to them, so it is essential not to be alarmed when considering this when outsourcing a project.
Q4: What does it mean to outsource a project?
A4: Outsourcing a project means that you only buy your partner’s services for specific tasks instead of hiring them as an entire team or department like it is done in offshoring.
Q5: Which is the best place to outsource software projects?
A5: There is no such thing as a “great” or “bad” location when outsourcing. Besides, it all depends on the type of project you’re working on. The only thing that matters is the level of service provided.
Although, according to the stats, most companies prefer India as the best place to outsource software projects.
Q6: Which Indian companies are outsourcing?
A6: The best software development outsourcing companies in India include PixelCrayons, TASK, ValueCoders, Xterprise, and Mindfire Solutions.