Everything you always wanted to know about outsourcing
Learn everything you need to know before you decide to outsource your software development projects. Read about the different types of outsourcing and find out about current outsourcing trends. Get useful tips that can help you in perfecting your product.
Before You Decide to Outsource
Outsourcing seems to be the word that entered IT for good. Let us start by briefly defining what it really is.
What Is Outsourcing?
Outsourcing is the cooperation between two companies, usually from different countries, where one company is the provider of services or processes on the other company’s behalf.
Over the past 35 years it has immensely developed and has been noticed as an excellent solution to vastly reduce costs and time (that otherwise would have been spent on e.g. recruiting new personnel), yet still sustaining quality.
In the era of widespread Internet connection, outsourcing comes into sight as an easier way to do business. It frees management time, letting companies concentrate on their core competencies.
Outsourcing, Nearshoring, Offshoring: Different Words, the Same Meaning
Let’s now take a closer look at the 3 most popular types of outsourcing, depending on your partner’s geography:
It is assigning services or processes to another, usually external, company rather than conducting them internally. It frees you from many actions connected with managing your project. From planning, through supervision to market analysis. That is why, outsourcing has become popular, especially in the IT sector.
It guarantees flexibility and can save you unnecessary expenses, because companies pay only for the services they require. Also, it eliminates the need to hire and train new employees.
Offshore outsourcing is a type of a classic outsourcing model. It is an agreement between two companies, where one agrees to provide services for the other one. It is usually in a distant country. Its biggest advantage is lower price, in comparison to in-house services.
Nearshore outsourcing is understood as an outsourcing to a neighbouring or nearby country or a region with similar, or a very close time-zone. It is based on exactly the same principles as offshore outsourcing, with the possibility of more frequent visits due to geographical proximity. Each can bring you high cost-effectiveness, while delivering tailor-made products.
While choosing your outsourcing partners, always bear in mind political background of their country. Also, try to look for the country with similar culture, as this will make the cooperation easier and more pleasant.
Outsourcing… but where?
When you finally made that crucial decision and decided to outsource, you must choose from the best.
We consider location to be an important factor for successful software development outsourcing. According to Rule Financial, Poland is a top nearshore IT outsourcing destination for UK and other European companies that consider outsourcing their software development.
So, let’s take a look at why Poland is such a good choice:
- economically and politically stable country,
- similar time-zone as a large part of Europe gives us the advantage to quickly respond to any challenges and meet our Clients in person,
- we don’t need a visa to travel around Europe,
- our working (and leisure) culture is not that different from our clients,
- technical skills are incredibly strong in Poland, with many international award-winning developers, and
- well-established member of the EU, meaning it not only follows, but also enforces European Union copyright and other laws.
Everything goes through changes, the same is with outsourcing. Do you ever wonder if it will be the best and most innovative solution for your company?
The Report: Software Development Outsourcing Trends
Outsourcing has taken a giant leap forward since it helps you make the most of your company’s budget and resources, without hiring additional programmers to implement your ideas.
Mixing cost-effectiveness with remarkable quality? Yes, this is exactly what outsourcing can provide you with.
We can easily observe the impact that growth of social media, mobility, analytics and cloud (SMAC) has on IT. These new technologies initiated a change in business strategies. The focus will now move to delivering better customer service experience. Outsourcers will go with the odds and use the SMAC model to stand out against the competition.
Managed Service Model (Msm) Used To Cut Costs
Another change will be visible in measuring the effectiveness of sourcing relationships. The traditional client-vendor relation is changing into a partnership. It is no longer only cost-efficiency that matters, but also the impact that outsourcing has on the overall business. Managed Services Model allows the Client company to focus on their core business, whereas the outsourcer, being more independent, can manage the investment, benefiting the Client.
Software As A Service (SaaS)
SaaS caters to businesses of all sizes. It is a type of a managed service, working on a usage subscription model, paid regularly. All customers can effortlessly enter their data over the network, wherever they are. What is more, users pay only for the software and features they need and don’t have to worry about additional costs. Since SaaS is used in the multitenant environment, scalability is much faster and highly beneficial for your Clients.
Internet Of Things
Internet of things (IoT) is the trend with the broadest prospects to flourish. In 2006 there were 2 billion IoT objects, whereas in 2020 it is predicted to grow to 200 billion.
IoT is the network of things connected to the Internet that interact with each other, completing tasks when you work or rest. It might be everything, from things that seem really obvious, like smart-watches or tablets, to unbelievably tiny and innovative stuff like smart dust.
How to Make the Most of Outsourcing: 5 Cs to Successful Outsourcing of Software Development
How to combine success and cost-effectiveness without compromising on quality? Read this section to find an in depth answer to this very question.
With outsourcing comes the greatest advantage – lower price. This is why it is obvious you want to know everything about it.
If you are after a delivery of tailor-made products, close and regular contact with your developers and high cost-effectiveness offshore outsourcing is for you. However, how to make it right? Are you afraid there’s too much to take in? Are you scared your outsourcing process won’t go the way you wish it to? Or, you simply don’t know where to begin? We’ll try to help you in this endeavor.
Concentration on the Goal
Allow your outsourcing partner to implement their own way of working. Trust that they are the ones who want what’s best for your business. Concentrate on what you want to achieve with outsourcing your software development, not how you want it to be done.
It is important that you look for someone with knowledge and expertise, who will always try to deliver software developed according to industry’s best practices. Look for outsourcers with vast expertise, who have similar goals and will understand your business.
No matter how good your vendor company is, no matter how much expertise they have, you still need to remain involved, because nobody knows your business as well as you. Your commitment can have very tangible effects on the final product.
Appropriate business agreement can be crucial to the success of outsourcing your software development. The contract must reflect what was agreed on during the negotiations, specify the scope of the project and focus on business outcomes that both sides want to achieve.
For outsourced relationships to really succeed, the clients should clearly express their expectations, which will empower the supplier to deliver the best service. Be specific about what you want to achieve.
Cost-Effective Outsourcing, Is it Possible?
Software development outsourcing is not a new concept and you would hope that suppliers and customers alike have learnt from the mistakes of previous deals.
However, reading the trade press, this is not necessarily the impression one gets. On both sides of the outsourcing relationship companies seem to be making the same mistakes again and again. It appears that one of the biggest slip ups is around achieving real cost savings.
Companies need to take a long hard look at how focused they are on cost cutting and why. If you push cost savings too hard, the quality and innovation in your software will suffer.
1. Invest in Testing
Look at testing for example. This is the area that most frequently gets cut when customers put downward pressure on prices. Yet it is one of the most important elements of best practice in software development.
Avoiding testing or not taking time to incorporate QA testing results may cause bug-ridden code and greater problems when the software is to be upgraded or further developed. But what is even worse, it may result in the product being not used or not suited to user’s actual needs.
Additionally, a lack of testing can end up costing more as it takes much longer to fix poor code in the future than to release it correctly initially.
We urge offshore developers and outsourcers of all types to resist pressure to cut testing time or at the very least to explain the consequences to customers. We also urge these customers to question their suppliers closely about testing and make sure that they feel satisfied that there is sufficient testing in the outsourcer’s development process.
2. Avoid Body Shopping
Here is another example of what can happen if you look too hard for cost savings: some companies decide to outsource just to build up teams at a lower cost.
Recently this practice has received a fair amount of negative press in the UK. In terms of best practice it is certainly not the way to go. Most outsourcers have developers with fantastic skills.
If customers are just body shopping they are not taking advantage of them or of the general knowledge and experience of the supplier.
Again, body shopping usually gives the developers themselves no control over their work and can become boring and demotivating. This does not result in the best code being produced.
As we know, fixing poor code costs much more than doing it properly in the first place.
3. Establish the Relationship
So, if extra press on cost is a poor practice and not the way to save money, then what is?
This is the lynchpin of any outsourced project, whether it be software development or something else. It has the single biggest influence on the success or failure of the project, one that really can save you money in the long term. If you have a relationship based on openness, the outsourcer is more likely to tell the customer as soon as a problem occurs, rather than brushing it under a carpet.
Equally, without regular communication the project cannot progress. Openness and trust both make communication much easier – there is no doubt about that. Indeed the most successful second- and third- generation outsourcing deals are based more on a joint-venture, equal relationship than a standard contract.
Evidently there are other factors that can help relationships succeed. Primarily among these is the fit between outsourcer and customer
Following these steps may result in a better end product, which will in turn result in the partnership continuing. And this is where the real savings come in on both sides – no time and money wasted trying to find a new software development outsourcer or customer, much less time required to brief the team, no steep learning curve, an understanding of how to work together from the outset and a willingness on all sides to produce a good end product.
Success at Outsourcing
The most important thing that has to be done in order to succeed in outsourcing is believing and trusting your developer. However, are there any other aspects that should be taken into account? How can you make this process as smooth as possible?
1. Believe Outsourcing Is a Good Choice
It is a great solution due to extensive cost reduction that goes hand in hand with excellent quality and economics of scale. Outsourcing helps to control the funds for two reasons. First of all, it limits the need to spend money on specialised crew, equipment, technology and licences.
Companies gain competitive advantage because they can focus on their core business and activities like building their brand awareness. Secondly, it improves the resource exploitation and may also increase the value of outsourced activities.
2. Use Iterative Development Approach
There are many advantages of introducing them to your project, although you will need to make time to be engaged in the process.
Feedback is delivered regularly because the teams work in sprints, which are usually 2 or 3 weeks long. This guarantees that if any issues appear, they are addressed quickly. During the sprint, the scope of work is fixed, so that the team is focused only on the tasks agreed to be done.
Because of that, it is easier to plan and adapt to changing business environment. Flexibility of the process helps preventing potential threats that may endanger the final product and supports faster time-to-market.
All this put together results in a better end product and higher customer satisfaction. Projects develop and evolve on a daily basis. Sometimes the final products differ from the initial version that you had in mind. However, changes should be embraced because they are crucial in order to develop the right, fully-functional product.
3. Put Emphasis on Quality
Not only does it reduce the unnecessary reworks, but also it is more time efficient. The sooner the defects are found and fixed, the lower costs your company will face. What is more, high quality of your product guarantees Customer’s trust, which in turn may result in long-lasting cooperation.
The above graph shows the relation between costs and the development phase. In brief, the later you fix a bug the more expensive it is.
4. Trust Your Partner
Look for an outsourcing partner that is focused on long-term collaboration, but will let you build up the scale of your commitment or exit, if you’re not satisfied with the outcomes.
It is certainly easier to achieve your business objectives if you base your cooperation on trust, rather than getting caught up in micromanaging.
You should let your partners work according to their processes and leave the room for them to define how. Since, relationships rarely work well from the get-go, take time to consider issues from your outsourcing partner’s perspective.
If you have a strong relationship, both outsourcer and customer are more likely to work harder at resolving any problems that occur, simply because of the emotional investment on both sides. It has the single biggest influence on the success or failure of the project, one that really can save you money in the long term.
Once these conditions are met, do not hesitate to rely on the knowledge, experience and expertise your partner brings to the table.
5.Choose the Location Well
Choosing Poland as a destination for software development outsourcing, it is possible to be cost effective, compared to domestic markets. Despite increases in salary, you are still likely to outsource to Poland at very competitive rates. Overzealous bargain hunting can, in fact, cost you more.
Poland is also known for having a vast talent pool of IT professionals with unquestioned competence in their field. An outsourcer needs to be compatible with its customer’s corporate culture communication and working style.
Employees from both organisations will be working alongside each other and they need to fit in. Poland is a constantly growing country with stable economic and political situation. Our working culture is similar to our Clients’. This, in addition to being a member of European Union, makes us a secure choice.
The most common challenges of outsourcing – do you recognise them?
Choosing your outsourcing partner isn’t easy. However, since everybody makes mistakes, who not learn from them? Read through the list of the most common challenges the most beneficial solutions.
Changing Business Needs
Well-chosen outsourcing partner will help you adapt to the changes that may arise during the development process. Find a company that works using iterative development approach, which not only embraces the modifications, but also makes the development process more effective, since it is based on mutual trust and frequent communication.
Negative Experience with Outsourcing
Finding the right outsourcing partner is like finding a life partner. This important decision must be well thought through. You should be given access to the most experienced engineers, to make the development process professional. Also, you should focus on choosing a partner in similar time zone, which will make it easy to keep communication frequent.
It is crucial to use the latest, well-established technologies in your project. Protecting yourself from technical debt will be beneficial for your company in the future. Your outsourcing partner is there to keep track of the latest technologies and help you during their implementation. All done to help you stay ahead of the competition.
Too Big Expenses
In these hectic times, we are aware that your company must watch its spending. Choosing Poland as an outsourcing location will help you be cost-effective and simultaneously not compromise on quality. The rates are competitive, in comparison to those in the UK.
Lack of In-House Resources and Experience
Sometimes in-house options are impossible and not cost-effective, due to lack of talent on the market. In such situation, finding an external partner is the best solution.
Only a team of skilled experts, who know their job, can help you develop a fully functional product. What is more, you don’t need to invest in any resources because your outsourcing company offers the most professional equipment.