In modern conditions, under the constant pressure of the market, those who conduct their business in the most efficient way survive and succeed. Trying to reduce operating costs and at the same time maintain the high quality of goods and services, a company comes to the necessity to use software development services provided by outsourcing agencies.
Information technologies are developing quite rapidly, this has served as the basis for the rise of outsourcing, which has gained popularity all over the world in recent years.
The Essence of the Notion
Outsourcing is an organizational decision to transfer some of its business functions or parts of the business process of an enterprise to third-party agencies.
The essence of outsourcing comes down to the following principle: I keep to myself only what I can do better than others, I transfer to an external performer what he/she does better than me.
Some define outsourcing as a new management strategy: “It is better to buy what is profitable, rather than do what you can do best.”
What Programs and Products are Outsourced?
It is possible to outsource the development of any software products, most often these are:
- web applications;
- mobile applications;
- process automation systems;
- analytical software;
What Companies Use These Services?
Different companies, regardless of the direction and scale of the business, resort to utility development outsourcing. This allows businessmen to create specialized, unique software that, in its turn, allows increasing the level of information security and sales, automating business processes, etc.
Also, IT companies that develop and distribute software products under their own brand are often used to optimize costs, reduce risks, and obtain high-quality software outsourcing.
Current Trends in Outsourcing
As for the global trends in IT outsourcing, today, this format of organizing new product development is more relevant than ever. It is difficult for young and small companies to stay “afloat” in a niche where competition is high enough, to follow new trends and technologies, and to introduce innovations. Therefore, they shift their IT strategies towards outsourcing, which allows them to solve important problems in conditions of high competition and limited budget. The involvement of an external team of professional programmers allows managers to save 20-60% of software development costs.
What are the Positive Sides of this Type of Cooperation?
Turning to outsourcing allows a business to solve the most important and urgent problems efficiently and professionally. Here are 5 reasons to use utility development outsourcing.
- Reduced product costs
Minimizing costs directly affects the efficiency and profitability of the business. Thus, companies use every opportunity to find hidden reserves. Keeping qualified, talented developers as a part of the staff on a regular basis is not always rational, especially if we are talking about an IT firm. Saving on the organization of the workplace, wages, insurance, taxes, training of programmers is significant. For many businesses, this is enough to start thinking about outsourcing software development.
- An opportunity to focus on the main purpose of the business
The concentration of internal corporate attention on the main goals of the company by delegating secondary functions to outsourcers is extremely important. The company can focus on customer satisfaction and the development of new technologies. And a company that focuses on core functions can do optimal reengineering to improve its operational efficiency by improving metrics such as cost, quality, service and time.
In modern business, the ability to be flexible and adapt to the changing conditions of the external environment is very important. The company can use software development outsourcing when needed to solve certain (one-time) tasks. If it is beneficial, third-party developers are involved in performing certain operations; it is possible to engage several companies to work on different projects. This allows managers to achieve goals with a minimum investment of time and resources.
- Accelerating the software development process
A hired team of developers is already trained and has extensive experience in this area. Thus, practically no time is wasted on adaptation, preparation, training. Involved specialists effectively organize their work; they can work 24/7/365 to launch the project on time.
Specialized outsourcing companies have not only experienced, highly-qualified programmers on their staff, but also advanced technologies, competencies in software development, which allows them to quickly and efficiently solve tasks set by the customer.
- New experience and competencies
By attracting outsourcer teams to cooperation, which include highly qualified, talented developers from different parts of the world, the company can not only be confident in the result but also gain new experience, introduce new projects, which allows it to level up, develop faster and more dynamically.
Cons of Outsourcing Development
Despite a number of undeniable advantages, outsourcing still has certain disadvantages.
- Risk of poor service
The desire to save money may turn into the fact that the customer is faced with low productivity of outsourcing developers, delayed deadlines, and problems with solving tasks. To minimize risks, it is important to choose a reliable outsourcing company and check its reputation.
- Security threats
There are always risks associated with the disclosure of confidential information that external developers gain access to. However, both parties sign contracts, in which all rights and obligations towards data confidentiality are set.
- Language and cultural barriers
Hiring developers from another country or continent is a common practice. But this can lead to misunderstandings between parties due to language and cultural barriers.
What are the Models of Cooperation with Outsourcing Companies?
The customer can use different programming outsourcing models. The parties can choose any model of cooperation, change it in accordance with their own requirements and objective necessity. Depending on the chosen model and the specifics of cooperation, services can be paid fixed and by hours. The organization of the workflow is possible in the format of outstaffing or a dedicated development team. The following variants are found in the sphere.
- Personnel hiring
A dedicated team of developers, the number and competence of which is sufficient to work with the project, is hired. The team is managed by the customer.
- Team under management
The contractor not only provides personnel but also supplies equipment and other resources to work on the project. In fact, a new department is created for a certain period of time. Management is carried out by the service provider, and the selection of processes and control is carried out by the customer.
- Creation of a full-fledged dedicated center
In this case, the software outsourcing company not only supplies personnel and provides the necessary resources but also manages the process of developing a strategy, project implementation methods, managing development processes, etc. The customer only sets the task and receives the final product.
Cost of Outsourcing Services
The cost of outsourcing software development varies, depending on a number of factors:
- place (countries) where the developer is located;
- status, the reputation of an outsourcing or IT company;
- project complexity;
- skills and qualifications of specialists who are involved in the work on the project;
- set development timelines.
The most expensive outsourcing services are provided by companies from North America. On average, its price ranges from $95 to $170 per hour. In South America, the cost of such services ranges from $ 30 to $50 per hour, in Eastern Europe services cost from $25 to $50 per hour, in Asia and Africa, the range of outsourcing services varies between $18 to $40 per hour.
But, as mentioned above, these prices are approximate and can be both lower and higher depending on the above-discussed criteria.
Is Outsourcing Management Profitable?
The advantages of outsourcing are obviously more prominent than some shortcomings of the service. This is what ensures its growing popularity all over the world. The main advantages of outsourcing management are the reduction of gross costs and the freeing up of company resources for conducting core activities.
The contractor performs the same functions as its counterpart in the form of a full-time division of the enterprise. However, as a well-grounded specialist in its field, the agency does it more efficiently, simultaneously taking the responsibilities of the client on its shoulders. Outsourcing risks are potential. With careful selection of a reliable partner with a good reputation, they can be excluded.
The most popular spheres of activities for outsourcing are finance, jurisdiction, personnel, logistics, marketing, IT services. The obvious benefits of personnel outsourcing are associated with the delegation of HR administration processes. Skilled managers prefer outsourcing to maximize the efficiency of the company.