Software Development Outsourcing 2024: What You Need to Know

People often conflate outsourcing (hiring a firm to build your software) with offshoring (having your software built outside of your country). In reality, you can outsource without offshoring, or offshore without outsourcing by using employees based in another country. We’ll be addressing software outsourcing. Then we’ll address outsources that operate in the same country, another country (offshoring), or a combination of the two (hybrid).

Outsourcing certain work or tasks is actually extremely common. You might outsource printing because they have invested in printing equipment. You might outsource legal or tax advice to a firm that has specialized expertise. There are a lot of reasons for outsourcing, but it often comes down to gaining expertise or specialized equipment.

Specialized expertise is something that is honed with experience. They claim that it takes 10,000 hours of focused practice on anything–a musical instrument, chess, tax law, software development, etc.–to become an expert. In other words it requires repetition or reps, to develop expertise. Firms that specialize provide far more exposure to those reps. For example, a tax attorney working for 100 firms sees 100-times more tax law than a general counsel at a company.

Software development offers some unique attributes that make it extremely well suited for outsourcing.

  1. Exposure to Technologies: Software evolves incredibly quickly. Every software development effort involves assembling the right tools or tech stack and then building on top of that. New tools can provide huge advantages in security, development efficiency, performance, scalability, features, and more. Software developers are typically heads down doing their work and cannot evaluate different tools. Software outsourcing companies have people focused on this function who cross pollinate technologies and expertise between projects. They also work with many clients who often introduce new tools that can be cross-pollinated to other projects.
  2. Specialized Expertise: Like any specialized expert, e.g. tax, law, etc., outsourcing will see common issues and remember how they were solved before. Instead of encountering each problem the first time, a software outsourcing company will often say: “We’ve seen this problem before, let me show you how we’ve solved that problem before and see if it works here.” Then they may be able to reuse the design concepts and even the code to accelerate the process.
  3. Efficient Processes: Unless your company’s core expertise is software development, you’re better served using an outsourcing company. If you’re an oil and gas company, legal firm, etc. Your leadership doesn’t spend their time thinking about process efficiency, executives at software development firms do. By focusing on process optimization you start to find how you can run multiple processes simultaneously, resulting in faster time to market and lower costs.  Process efficiency is a big part of the advantage of outsourcing software development.
  4. Code Reuse: Depending on the ownership model for your intellectual property (IP) some want total ownership, others are fine with a shared ownership model. If you choose the latter, the software outsourcing company can often use existing designs and code to dramatically accelerate product development.
  5. Design Expertise: When you have a team of designers sharing their designs, their learnings, and also sharing designs for the common plumbing–e.g. User registration, lost password, role-based access control (RBAC), etc–it makes each designer and each design better and faster.
  6. Testing Expertise: There are various types of QA testing. Developing experts in each type who can float between projects while building institutional knowledge raises the level of expertise across the entire group.
  7. Business Insight: Most contract development shops 

Most businesses outsource their printing to companies who have invested in high-quality and high-volume printing. This leverages

Before jumping to software development outsourcing- we might want to start with understanding what outsourcing means. As defined, Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally. It is sometimes mistaken as offshoring which means employment or work is being done from another country. Although not synonymous, they can be integrated: you can outsource within your country and you can also hire an in-house team in a foreign country.

According to a Deloitte insights survey in 2020, cost reduction is the primary reason why businesses turn to outsourcing as shown below- no wonder it has become a global trend for the past decade:

Now that outsourcing is clear to us, let’s dive in and explore why this has become a business strategy in software development.

What is software development outsourcing?

Software development outsourcing is a strategy to engage an external software development company for a specific project within the terms of your agreement. Instead of you hiring your in-house software development team, you leverage an experienced team from another company to do the job for you- and again, this can be onshore or offshore depending on your preference or availability.

Why should you outsource software development?

  • Cost

Outsourcing is definitely cost-efficient than hiring your in-house software development team. Most software development companies have talents off-shore, offering flexibility and scalability at a reasonable price. And as a matter-of-fact, regardless if you do inshore or offshore outsourcing, savings from infrastructure (hardware and/or software), recruitment, training, and not to mention the salary difference, will certainly be significant.

  • Expertise

Some software projects require a specific skill set which may be difficult to find using limited resources and time. The companies offering outsourcing have a pool of experienced developers in their domain expertise. Some can even include services of various support teams (digital marketing, customer success etc.) who can aid in fast and efficient results. According to the US Bureau of Labor Statistics, employment of software developers, quality assurance analysts, and testers is projected to grow 22% from 2020 to 2030, much faster than the average for all occupations. Looking at this projection, outsourcing will remain to address this demand in the country.

  • Proven and Streamlined Operation

If you need to jump-start a project on a tight schedule, outsourcing is most likely the best way to go. You do not have to worry about the tedious internal implementation which definitely requires time and effort. Software development companies have built their best business practices over the years, proven effective in improving productivity while maintaining quality of output.

Any challenges to look out for and how to address them?

  • Security and Privacy risks

As soon as you decide to outsource, keep in mind that you will be sharing sensitive information about your business. Confirm that the software development company has a clear and strict policy on security and privacy to make sure that clients’ confidential data are well protected. 

  • Quality Concerns

Prior to outsourcing to a software development company, you might want to look into their credibility in the market. Check their website and portfolio, read through testimonials and reviews to validate the quality of their work. If you think it is necessary, you can also reach out to their previous clients to make sure you are dealing with a legit software company.

  • Communication issues

Since most outsourcing companies have teams working offshore, factors like language, culture and time zone differences are to be considered. In most cases, outsourcing companies like MPH International already have internal processes in place to address this, but if you are still seeing such, just be transparent so they can deal with it right away. Leverage collaboration tools to oversee their processes and maintain the relationship by meeting with them regularly.

There is no doubt that outsourcing has become popular because its advantages are clearly significant more than the risks which can be minimized, at the least. So, If you have tried outsourcing software development and had challenges that were never addressed, you can share it with us and we will have our clients answer them based on their experience working with MPH International.

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Mike Hogan

Mike Hogan

My team and I build amazing web & mobile apps for our companies and for our clients. With over $2B in value built among our various companies including an IPO and 3 acquisitions, we've turned company building into a science.

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