Software Development Outsourcing: Going Strong More Than Ever!

Quick Go-Through: Software outsourcing has long been a prevalent business model or practice in the IT industry regarding handling project deadlines, tech talent shortages, and budget constraints. Outsourcing is gaining immense traction due to the business advantages it brings. This blog will be a helpful guide in understanding why outsourcing software development is a good choice for businesses.

There are two things that any IT-enabled company needs to sustain and gain a competitive edge – control and speed. Control to keep the cost of software development within the budget, and effectively manage the capabilities and resources. Speed to get the software solution to the market fast. However, when the in-house IT team has too much on their plates or the budget constraints are too much to handle, software development outsourcing might seem the best option.

Outsourcing software development enables businesses to achieve higher economies of scale, while also focusing more on their core competencies. They can choose to outsource a part or the entire software development project to a company that is more experienced and cost efficient. This helps businesses to achieve better control and faster time to market, while saving time and money.

In this blog, we will discuss why hiring an IT outsourcing company is quite obvious and how to address the challenges of outsourcing. So, let’s get started.

Is Software Development Outsourcing Dead?

Of course not! At least the outsourcing statistics below do not indicate the same. Outsourcing brings competitive advantage to any business – ability to cope with IT skill shortage, access to top-notch capabilities, and lower prices. So, if it is working for your competitors, there is no reason it should not work for your business.

But let’s begin with some numbers that will show why software development outsourcing is still relevant.

According to the latest forecast by Gartner, worldwide IT spending is expected to total $5.74 trillion in 2025, an increase of 9.3% from 2024, with software and IT services being one of the most significant drivers of IT growth. Moreover, you can expect the global IT outsourcing market size to show an annual growth rate (CAGR 2024-2029) of 8.48%, resulting in a market volume of $812.70 billion by 2029. Approximately 25% of companies opt for software development outsourcing services for their projects, primarily driven by the desire to minimize costs, enhance flexibility, accelerate time-to-market, and tap into an extensive talent pool. This indicates a high proclivity towards IT outsourcing in the coming years.

As digital transformation becomes inevitable following the latest innovations and limitless technology potential, businesses of all sizes are constantly watching out for leading-edge IT outsourcing trends.

Why Do Companies Outsource?

Do you think cost efficiency is the only reason why businesses hire an offshore outsourcing company? Think again!

In a report from Technavio, they have mentioned the rising need for optimizing business processes as the key driving factor for IT outsourcing in the coming years.

Be it a small start-up or a top-notch IT company, all of them today prefer outsourcing to a trusted software development firm to improve operational efficiency, lower costs, and save time. Let us take a look at some of top reasons why software development outsourcing is still going strong.

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Top Reasons to Outsource Software Development

Outsourcing is revolutionizing the global market today. It provides companies with a competitive edge by helping improve product quality, speed-up the time to market, and reduce costs. Let’s understand the benefits of hiring an IT outsourcing company:

1. Cost Savings: An inevitable reason why companies outsource software development is to cut costs while minimizing workload. An in-house development team adds up to a company’s costs, including monthly salary, taxes, perks and other benefits, office space, IT infrastructure, training, etc. Additionally, there are no upfront investments in hiring, training, or setting up the infrastructure.

2. Faster Time to Market: When you opt for offshore software development, be assured there will be expert programmers working on your project round-the-clock. Remember that software development is their core competency and they do this with more efficiency and skillfulness.

With professionals working dedicatedly on your project, the software is guaranteed to have a shorter time to market. This will give your business a competitive edge with improved customer satisfaction.

3. Access to the Best Talent: The US Bureau of Labor Statistics has projected that by 2020 there will be 1.4 million computer science related jobs available in the market but only 400,000 students will have the required skills to apply for the job. Additionally, it takes 41 days on average to hire a skilled software engineer in the USA.

Software development outsourcing gives your business instant access to a highly qualified and experienced talent pool with proven expertise in this field. Their flexible engagement model further makes it simple and quick to get started with the project right away.

4. More Flexibility: When you choose to outsource, it helps save time and money in recruiting, hiring, training, and retaining your employees for the long-term. Additionally, you can easily scale your team size depending on the type, size and complexity of the project.

5. Hire a Large Talent Pool: Are you finding it difficult to hire the best talents for your software development project? Does your location offer limited skilled resources? Outsourcing gives you the opportunity to go global and have access to the fastest-growing and largest talent pool. Hiring an offshore outsourcing company can help address your human-resource deficit and find the right skills for your software development project.

6. Manage Your Risks: With outsourcing, you can choose to split different components of your software development project to different vendors, thus, managing your risks better. For instance, you can consider outsourcing software coding to one company and software testing & deployment to another. This can help mitigate the risk of outsourcing the entire project to one company.

7. Leverage Technology Advancements: Technology is evolving at a rapid pace, and businesses must keep pace with the latest trends and advancements. Outsourcing to a dedicated software development services provider enables businesses to leverage innovative minds and technical expertise, and get new perspective to developing software solutions.

8. Handle Peak Loads: When it comes to managing peak demands, businesses typically have two options – allocating in-house resources to processes and operations they do not specialize in, or hiring new employees. Outsourcing seems to be a better alternative though. You can hire a specialized team only to meet your peak demand; no long-term contracts, no commitments. This helps balance your workload and save time & money, while improving operational efficiency.

9. Focus on Your Core Competency: Software development is a complex process and takes time, especially when your core competency isn’t building software solutions. If you find that developing IT projects takes major time away from your core business, outsourcing to an experienced company can help keep things back on track.

They have in-depth industry knowledge and expertise; so you can be assured of developing high-quality solutions that can give your business an edge. At the same time, you can leverage the time saved on innovating and providing better customer experiences.

Read More : The Complete Guide to Software Development Outsourcing

Key Steps to Outsourcing Software Development & Avoiding Risks

The best software development outsourcing companies offer comprehensive services to their global clients – managing the entire development process, arranging augmented staff to meet your IT skill shortage, or even functioning as an end-to-end autonomous team of your company. Yet not all outsourcing companies are equal and not hiring wisely can wreak havoc on your business. Remember, the most trusted software partners will never hesitate to sign a software development contract.

Discussed here are the key steps to software development outsourcing and ways to avoid the risks.

1. Hire the Right Software Development Outsourcing Partner

The significance of having the right outsourcing partner can never be overstated. An accomplished and experienced IT outsourcing company can help businesses adapt to the latest developments, address the market pressure, and develop custom software while helping maintain agility and efficiency. Additionally, they will provide support through all stages of the software development life cycle – from conceptualizing to designing, testing, and deploying.

However, hiring an incompetent software outsourcing company can be counterproductive. Therefore, it is important to partner with a firm with proven expertise in software development and recognition in the market. Do not forget to test their capabilities through initial consultation, service portfolio, and client reviews.

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2. Importance of Effective Communication

Poor communication, including language barriers, is one of the biggest challenges of hiring an offshore outsourcing company. This can result into misaligned expectations, poor product quality, and dissatisfaction on both ends. To avoid this communication hurdle, it is crucial to establish clear communication policies from the very beginning. The mode of communication, time and frequency should be clearly outlined and followed before agreeing.

To avoid language barriers and misunderstandings, it is recommended to hire an outsourcing partner with proven experience working with international clients.

3. Avoiding Cost Overruns

For many companies, cost efficiency is one of the top reasons for software development outsourcing. Unfortunately, handing over your core development responsibilities to an incompetent firm can make you go over the budget. Additionally, there would be several other problems that become difficult to manage. Initially, cheaper hourly rates may seem attractive. But developers may take longer to complete the project or make mistakes, resulting into higher overall billed hours.

To address the challenge of cost overruns, determine a realistic budget for your software development project. Instead of going for dirt-cheap prices, work with a reputable and experienced company that can deliver the best value for your money and avoid going overbudget.

4. Quality Control

Lack of control on the product quality is another big challenge of outsourcing software development. Inexperienced and novice developers can make rookie mistakes or focus more on cost savings than the quality of the final product. To overcome such situations, it is crucial to perform due diligence before entering into any agreement. Furthermore, you should be well-knowledgeable of the quality assurance and testing process the outsourcing company follows to ensure superior product quality.

Conclusion

With such clearly outlined advantages it is obvious that outsourcing software development is still a game changer. However, choosing the right outsourcing partner plays an integral role here. A software outsourcing company like Radixweb has enabled many businesses to achieve operational efficiency, mitigate risks, improve customer experience, and reduce costs. This is indeed the right time to get started with a dedicated and experienced expert.