Is Outsourcing Even Worth Considering?
Software development outsourcing is growing rapidly. Although it hasn’t stayed entirely safe from the pandemic, the estimations predict that the value of the IT outsourcing market is going to rise 5% every year in the next four years. Thus more and more businesses decide to acquire help from outsourcing service providers, and yet still certain misconceptions seem to stop other companies from taking advantage of what the global market has to offer.
If you’re one of those sceptics, read the next six most common software development outsourcing myths that might be holding your projects back.
#1 Outsourcing Means Low Quality
The Myth: We are used to the notion that best quality equals high costs. That’s why being offered great results for little money seems suspicious, too perfect to be real. Or is it?
Debunked: Lower costs can be easily explained by the difference in the salary across countries. While in the United States IT professionals’ average salary is estimated to be at $113,639, European’s can get as low as $34,006. So not only does outsourcing software development cost less but also gives you access to the best programmers, as a result of an easily accessible high–quality education without going into a debt, what’s not as feasible in the U.S.
If you’re still not convinced, follow the example of such giants like Google, Facebook, or Apple — they all have gleaned the value of outsourcing a long time ago and reap profits ever since.
#2 It’s More Expensive Than In-House Team
The Myth: Involving an outsourcing software development team into your project is an expensive affair that will suck your company’s funds dry.
Debunked: The recent trends show a clear increase towards using outsourcing to reduce costs. In the Deloitte 2016 Global Outsourcing Survey, 59% of companies claimed that they have worked with software development companies primarily for cost reduction purposes. Four years later, the percentage has risen to 70%, leaving behind flexibility, speed to market, access to tools and processes, and agility.
Moreover, you need to remember that an in-house team requires more budget for employee insurance or training, as well as infrastructure development. Your in–house team is also being paid based on their time in–seat which has been proven as not the most productive use of work hours. Time & Material Model, on the other hand, frequently used in outsourcing projects, ensures that your money is well spent and proportional to the output.
Outsourcing doesn’t need any of that and it also comes with a lack of certain fees and different tax regulations. Since there are no specific tax laws applicable to outsourcing, every arrangement has to be considered individually. This can potentially mean another way of reducing costs.
#3 All Control Will Be Lost
The Myth: Software Development Outsourcing basically means giving up all the control over the project to another party. You can only hope that the results will be at least fine.
Debunked: There are several models of outsourcing that you can consider to suit your needs best, with different levels of Responsibility and Customer Involvement. What’s most important to underline here is that no matter the model, no reputable company would ever disappear on you, leaving you alone with empty pockets.
If you want to be heavily involved in the project, control every aspect of it, and take full responsibility for its well–being, Staff Augmentation might be the best choice. It’s a strategy that enables you to hire outside specialists on demand that would augment your existing team, with you as the resource provider and the decision–maker.
If you want to be completely relieved of any duties concerning human resources allocation, Project–Based Model might be a better choice. This comes with a great deal of trust since the outsourcing company will take full responsibility for the project management as well as for the project itself. It’s up to them to decide on the appropriate workflow and key performance indicators, keeping in mind the client’s input.
If both of these options sound pretty drastic, we have a compromise in the form of a Dedicated Team Model. This strategy will free up your workload due to no team management needed, but your own project manager or product owner may stay involved in the software development process and make all the decisions. This means that both the client and the company take shared responsibility for the project.
#4 Time Zones Destroy Effective Management
The Myth: Since your software development company will not only be based in a foreign country but probably in a different time zone as well, effective management will be next to impossible.
Debunked: Yes, setting up meetings might become a bit problematic. But it doesn’t mean that there won’t be any good communication. All the professional software development companies make sure to build clear and concise communication channels through which everyone stays up to date. All sorts of collaboration technologies and support tools have been created for this reason exactly — in MPC we use Google Workspace, Jira, Miro, and Slack.
In addition, most companies make use of agile and scrum principles, which heavily lean into a constant reporting mindset and promote transparency — Agile itself has been reported to being used by 71% of companies, setting it as a standard.
Moreover, there are benefits to having a diverse geographical team. You easily gain new perspectives, experiences, and even opportunities. And if you are apprehensive about any cultural differences that might make cooperation difficult, note that most IT companies uphold global workplace standards on all fronts, professional conduct and ethical principles included.
You can also count on their flexibility, which is crucial while working on fast–paced and ever changing projects. And the project itself will be in excellent, round–the–clock care.
We have proven here at MPC that such practices are more than possible and can lead to splendid results. For the last three years, we have managed to successfully cooperate with three different countries — the United States, Philippines, and India — on the same project for Placester, a real estate software company. It has challenged us to create smooth and seamless communication systems among our software developers, learn how to compromise in terms of work hours to be always available when necessary, and how to bridge any differences.
#5 Outsourcing Service Providers May Compromise Your Security
The Myth: Since corporate espionage is a real threat to your business, giving a remote software outsourcing company access to all your trade secrets is like shooting yourself in the foot. Repeatedly.
Debunked: Thankfully, both the law and the technology is on your side. In cases such as this, non–disclosure agreement (NDA) along with a non–compete clause (NCC) will protect all your interests. NDA restricts access to all the confidential knowledge or information that you have to share with the other company for the project’s sake, while NCC will make sure that the other party won’t compete against you by starting a similar trade.
All NDA and NCC documents can be tailored to your needs to reflect the specificities of your particular project, so you don’t have to worry about rigid stipulations that could be harmful to your company.
Another way of making sure that your chosen offshore company does not bring any danger to the table is by checking their policies on privacy and intellectual property. They also need to have prevention technologies employed and be able to oversee data flow. Checking whether they educate their employees on such issues is also a good idea.
#6 Outsourcing Software Development is Only for the Giants
The Myth: Outsourcing is a luxury available only to the biggest fish in the sea.
Debunked: As the latest study done by Upcity shows, 35% of small businesses outsourced a business process in the last 2 years and 82% of them decided to outsource even more post-COVID-19.
The main difference between big and small companies is their reason to outsource: the former look for ways to cut costs, the latter want to improve their efficiency. So although the reasons may vary, the benefits still outweigh the risks.
Due to outsourcing, small companies can focus on their core competencies, reducing their own load and boosting productivity. They can also forget about any geographical limitations, gaining access to experts that otherwise could have been available only to large businesses. In consequence, the overall quality of your products or services can rise significantly. And not being constricted by geographical limitations means new opportunities to seize new local markets — and to create products there which could have been way too expensive to develop on the home turf.
Especially the middle–sized companies can hear some good news: in 2020, they have been the largest contributors to the growth of IT outsourcing. Their average outsourcing went from 9.1% to 11.8%.
Even startups can consider outsourcing, following the example of Skype, Slack or Github. Since it’s crucial for startups to launch their MVP fast while lacking in resources or skills, outsourcing certain tasks might be what it takes to make it.
To sum it up, software development outsourcing to this day may be viewed as risky, expensive, and ineffective. The real side of it presents as follows:
- it gives you access to professional, highly skilled teams and local talents,
- software outsourcing is beneficial for cost reduction purposes,
- the degree of control over the project is up for negotiation,
- special processes and tools have been created to compensate for time zones issues,
- legal documents like NDA help to protect both your trade secrets and confidential information,
- the size doesn’t matter: you can run a small business and still benefit from working with software development partners.
Of course, anyone who claims that every outsourcing service provider is the best investment possible is not entirely truthful. Every industry can have a few bad apples that spoil the barrel, so you have to be careful while making any decisions. Looking out for any red flags is tremendously important; lack of transparency, no project status updates and no consultations with the clients, no strict guidelines, or promising too much are a sure sign of something being wrong.
Thankfully, there are many ways of ensuring you’re making the right decision. Internet ratings and reviews such as Clutch should reveal the real face of the company you’re thinking of working with.
Never decide on the spot. Take your time, do your research, ask relevant questions that will tell you whether the company is trustworthy and competent.
And never believe in myths.