Why Outsource Software Development? - Benefits and Insights
Tags: softwaredevelopment, outsorce, management, productivity
Published: 2024-06-12 11:52:54

As a business owner, I've found that outsourcing software development has become a vital strategy in today's fast-paced world. Many companies, including mine, have turned to third-party vendors for essential solutions to ease the burden on in-house staff. Beyond software development, outsourcing extends to accounting, customer support, social media marketing, and payroll processing.

The global market for outsourced services is valued at an incredible $92.5 billion, and it's only set to grow as more companies realize the benefits of leveraging external teams' expertise. But why exactly do businesses like mine choose to outsource software development? Let's explore the key reasons.

## What is software outsourcing?
Software development outsourcing involves hiring a team of professionals, usually at a lower cost than building an in-house team. It allows businesses to access specialized skills and resources without the overhead associated with full-time employees.

## What does software outsourcing look like?
When you outsource, the team functions much like your employees, but without the complexities of legal issues, infrastructure, employee benefits, and onboarding. The outsourcing vendor handles these aspects, leaving you to focus on finding a reliable partner and agreeing on the terms of cooperation.

## 5 Main Reasons to Outsource Software Development

### Reduce Business Costs
For many companies, including mine, the primary driver for outsourcing is cost reduction. Research by Deloitte shows that nearly 59% of companies outsource to reduce or control costs. By outsourcing, businesses can save on overheads and hiring expenses, freeing up funds for other areas such as personnel, hardware upgrades, and office expansions.

## How WhatsApp Cut Costs Using Software Outsourcing?
WhatsApp outsourced the development of its iPhone app to a freelancer. This decision, driven by technical issues during the beta stage, was more affordable than hiring a local specialist. The result? WhatsApp now boasts over 1.5 billion active users monthly.

### Gain Access to World-Class Capabilities
Outsourcing enables access to top-tier specialists worldwide. Companies can collaborate with experts for specific projects without long-term commitments. This global talent pool can enhance product quality and innovation.

### How IKEA Powered Up with Staff Outsourcing?
IKEA's Home Smart initiative required expertise beyond its in-house capabilities. By outsourcing, IKEA tapped into the brightest technology teams globally, driving its smart home vision forward. This strategic move allowed IKEA to accelerate its development timelines and bring innovative products to market faster. By leveraging external talent, IKEA could focus on core business activities while ensuring that their smart home products were cutting-edge. This approach not only enhanced product quality but also fostered a culture of innovation within the company, as in-house teams collaborated with top-tier external experts.

### Save Time on Hiring Specialists
Hiring new developers is a lengthy process. Outsourcing simplifies this by allowing businesses to quickly engage specialists for specific projects, bypassing the extensive hiring process. This can be particularly advantageous in fast-paced industries where time-to-market is crucial. By outsourcing, companies can avoid the administrative burden of recruitment, onboarding, and training, enabling them to focus on strategic goals. Additionally, outsourcing provides access to a broader talent pool, ensuring that businesses can find the right expertise for their specific needs without geographic limitations, ultimately leading to more efficient project execution.

### How GitHub Saved Time and Money by Outsourcing Developers?
GitHub outsourced development to expert Scott Chacon, who later became the company's CIO. This approach saved time and costs associated with hiring a full-time developer. By bringing in a specialized professional for critical development tasks, GitHub could focus on scaling its platform and expanding its user base. This strategic move not only reduced operational costs but also enhanced the quality and reliability of GitHub’s services. The success of this outsourcing decision demonstrated how leveraging external talent can lead to significant organizational growth and efficiency, positioning GitHub as a leader in the tech industry.

### Increase Flexibility in Scaling Projects
Outsourcing provides the flexibility to scale projects quickly. Businesses can adjust resources based on project needs without the hassle of hiring and training new employees. This adaptability is crucial for responding to market changes and meeting client demands effectively. By utilizing outsourcing, companies can ramp up or down their workforce in alignment with project timelines and budget constraints. This approach ensures that businesses remain agile, capable of handling varying workloads without the long-term commitments associated with permanent hires. Ultimately, outsourcing allows for more strategic resource management and improved operational efficiency.

### Decrease Project Risks
Outsourcing to experienced teams can mitigate risks associated with new product development. These teams often have established workflows and proven success in delivering high-quality applications.
How Slack Reduced Risks with Staff Outsourcing
Slack used outsourcing for beta testing and design, which contributed to its success as a leading communication tool with over 1 billion weekly messages.
Software Development Outsourcing Models

### Project-Based Model
In this model, you hire a company to complete predefined work within a set budget and timeline. While it offers budget predictability, it provides less flexibility. This model is highly effective for projects with clearly defined requirements and scope. It ensures that all deliverables are agreed upon in advance, reducing the risk of scope creep. However, any changes to the project scope can lead to additional costs and delays. The project-based model is best suited for projects where the objectives are clear and unlikely to change. It allows for meticulous planning and resource allocation, ensuring that the project is completed on time and within budget. Companies often use this model for software development, construction projects, and other initiatives with a well-defined end goal.

### Dedicated Team Model
This model involves hiring a team to work closely on your project. It's ideal for long-term projects with evolving requirements, allowing direct communication and control. The dedicated team model offers flexibility in managing the project's direction, accommodating changes and new features as they arise. It fosters a collaborative environment where the team becomes deeply integrated with the client's processes and culture. This model is beneficial for companies needing sustained development efforts and continuous improvement. The dedicated team can quickly adapt to new priorities and technologies, ensuring that the project remains relevant and competitive. This approach is particularly effective for complex, large-scale projects where ongoing support and development are crucial, such as enterprise software systems or long-term research and development initiatives.

### Outstaff Model
The outstaff model hires professionals to cover specific expertise gaps. It reduces hiring and onboarding costs, providing needed skills for particular tasks. This model is highly advantageous when specialized skills are required for short-term or intermittent projects. It allows companies to access top talent without the long-term commitment and overhead costs associated with full-time employees. The outstaff model is flexible and scalable, enabling businesses to ramp up or down their workforce based on project demands. It ensures that companies can maintain productivity and quality without overextending their resources. This approach is ideal for tasks like IT support, software development, or specialized engineering roles, where the expertise needed may not be available in-house. The outstaff model supports efficient resource management and helps companies stay agile in a competitive market.
Where to Find Software Development Outsourcing Providers
Reliable outsourcing companies can be found on platforms like Clutch, Goodfirms, LinkedIn, Dribbble, and Behance. Reviews and profiles on these sites help gauge the company's capabilities and expertise.

## Software Development Outsourcing Cost
Outsourcing costs vary by region, project complexity, and team size. Eastern Europe, where hourly rates are $25-50, offers cost-effective solutions compared to Western Europe, the U.S., and Canada. For instance, developing a mid-level web app with a team of five specialists at $40-50/hour can cost $48K-$60K over three months.

## Conclusion
 
Outsourcing software development can significantly benefit businesses by reducing costs, accessing global talent, saving time, increasing flexibility, and mitigating risks. By choosing the right outsourcing model and provider, companies can achieve their goals efficiently and effectively.