Software Outsourcing Definition

Software outsourcing is not just a trend, for some companies it is a necessary step of their growth strategy. Essentially, software outsourcing is the practice when a company hires an outside partner to develop a customized software, tailor-made to fit their unique needs. By doing so, companies that seek to outsource their software development can entirely focus on different tasks such as business development and marketing while their software solution is prepared. The practice of working with an outside vendor is also famous for reducing costs significantly while at the same time having access to talented expert IT teams dedicated to your project’s success.

From my experience working in a bespoke software development company I learned the importance of partnerships with clients. To get the best out of outsourcing, your company should treat the software vendor of choice as part of your own team. Although you may be in different countries or even continents, experienced and motivated IT specialists put great effort on creating a high quality software product to improve your business and accelerate company’s growth. That is why it is crucial to choose your right partners after you have defined your main goals and have had a couple of meetings with the dev team that will be responsible for the project. 

Why is it Important?

Outsourcing brings various benefits with it like time-saving, cost-efficiency, flexibility and diversified skill set. Some of the biggest companies worldwide use outsourcing services: Google outsources major parts of its products all over the world, Maps was created in Sydney, Australia. Asian teams work on Docs, Gmail etc. Whatsapp (before Facebook bought it) hired Eastern European development teams and the Chinese giant Alibaba hired US software developers. 

Globalizations makes it so much easier to work with talented IT professionals worldwide, who will contribute to your success. But what about small and medium sized enterprises (SMEs), can they benefit from outsourcing and how? According to Forbes during the pandemic it is especially important to be able to delegate non-core workloads to skilled professionals, instead of trying to accomplish everything by yourself. If you attempt to do so, you risk losing focus and therefore hurting your business in the long run. 

When you choose to outsource your software project to another company you free up enough time to deal with management, sales or improving client’s satisfaction. This doesn’t only shift the focus on your own business processes but also ensures you a competitive advantage. Last but not least, outsourcing allows you to benefit from a wide variety of programming languages which is useful when your custom software has specific functionalities. The IT team will choose the best option for your project depending on your product’s complexity.

Types of Software Outsourcing

Onshore Outsourcing

Onshoring also goes by the term “homesourcing” means that your company hires another vendor within your national borders to work on a software project. Reasons to choose this outsourcing type may be related to reduced labour and operational costs in a different location. Another popular one is to compensate for skill shortages in your in-house development teams as it saves you both time and resources to delegate projects to already experienced professionals. 

• Example: A Swiss watch manufacturer chooses to onshore its custom software development project within Switzerland. 

Offshore Outsourcing

Offshoring refers to delegating projects to a firm that is usually geographically far away from your own company headquarters. Some companies choose the offshoring alternative when physical distance is not essential to a good project outcome, as it is often the case in software development. Ideally, the location of the vendor you choose to trust with this task should offer strong and fast internet connection as well as excellent English communication skills along with high IT expertise and broad experience. 

• Example: US-based fintech company hiring offshore vending partners in Bulgaria to offshore the development of their next software tool.

Nearshore Outsourcing

Nearshoring has a lot of touchpoints with offshore outsourcing with the main difference that here a company chooses a closer location, e.g. a neighboring country as an outsourcing partner. This option is related to minor time zones differences (usually no more than a couple of hours) and it is more convenient if the partnership will require visiting each other often. Neighbor countries near one another also share similar cultural heritage which may be another important factor for consideration.

• Example: A German real-estate firm outsourcing their software development project to Romania.

Major Benefits of Outsourcing

• Faster Development

The time factor is not to be neglected in a world with a fast pace of product development and launching and stronger competition than ever. If you don’t have an in-house development team or they are occupied with other tasks, it will cost you valuable time to develop your desired software. An easier option would be to delegate the project to an outside outsourcing company and concentrate on core business processes depending on the nature of your industry. 

• Lower Costs

One of the main reasons companies choose to outsource software development or even entire business operations like technical support is connected to saving a lot of financial resources. Typically, hiring an offshoring outsourcing IT firm to work on your software projects will cost you less than using a vendor within your borders. You can check and compare the average cost of remote software development services depending on the location. Due to different currencies that have a fixed value, it is still less expensive to outsource in developing countries like South America, Eastern Europe or Asian countries. You should also check the tax rates in different countries as you can additionally reduce overall project costs.

• Third Party Professional Feedback and Advice

No matter what software product you opt to create it is always a good idea to hear an outsider’s opinion about additional features, further possibilities or enhancements of existing functionality. When you work with an outsourcing partner you get both an outsider’s perspective and what is more important you receive professional feedback and advice on what could be done better and how exactly this could happen to best suit your needs. 

• Access to New and Emerging Technologies

It is often the case that off-the-shelf solutions are not exactly the newest available. Thus some of them may still use outdated technology which tends to slow down over time. An undeniable benefit of outsourcing represents the opportunity to have access to new and emerging technologies such as AI, 3D printing or that in-house developers may still be unfamiliar or not proficient with. 

Author Biography Aleksandrina Vasileva 

Aleksandrina is a Content Creator at Dreamix, a custom software development company, and is keen оn innovative technological solutions with a positive impact on our world. Her teaching background, mixed with interests in psychology, drives her to share knowledge. She is an avid reader and an enthusiastic blogger, always looking for the next inspiration.