Outsourcing software development: benefits and concerns

date: 31 August 2020
reading time: 6 min

Hiring a company to deliver a product or perform a service for your business – in other words, outsourcing – can pertain to almost anything that you do in-house.

Whether you need some help with marketing, sales, legal matters, accounting or software development, you can bet on one of these three fundamental types of outsourcing: offshoring, onshoring or nearshoring.

To make a long story short:

  • Offshoring happens when you relocate one or a few business processes from one country to another, usually a distant one. For example, from the UK to India.
  • Onshoring refers to transferring those processes to a company that is located in the same country as yours. For example, from Berlin to a non-metropolitan area outside the city, where the labour costs are significantly lower.
  • Nearshoring falls somewhere in between and pertains to the act of outsourcing services to a company in a country that is both geographically close and culturally similar to the country where your business is located. For example, from Germany to Poland.

In software development, all of these types of outsourcing are pretty popular. And no matter which kind you opt for, it is certain to always bring a lot of potential benefits to your business – and also raise some concerns as deciding to trust a third party with the huge responsibility of delivering a digital product is never an easy decision to make. So, take a close look at the short overview that we’ve prepared for you below, and find out how to mitigate risks by choosing your partner wisely.

5 benefits

  1. Advanced experience
    In-house developers only support the business they work for, so the team’s professional expertise is narrower and their capabilities are limited. A software company, on the other hand, works for a number of clients, so they need to have experts in many technological areas, including security. There’s also lots of pressure for their developers to keep learning, constantly increase their knowledge, and to innovate.
  2. Cost savings
    Obviously, you need to bear the costs of hiring a software partner. However, since you won’t have to hire software engineers one by one to complete your in-house team anymore, you will notice significant cost savings related to in-house resource consumption, HR tasks and responsibilities, social packages, as well as rental agreements.
  3. Flexibility, scalability and faster time-to-market
    A reliable IT partner will always adjust to your business needs. They have enough human resources to scale up whenever needed – or down if necessary. Their flexible approach and quick reactions to any emerging issues also enable faster time-to-market, allowing you to develop in a very effective manner.
  4. Focus on your core business
    Choose an experience, trustworthy IT partner and take advantage of the benefits of delegating a project to a third party. This means that you can make your core business your priority, since you have another organisation to take care of your software development. Of course, you would still maintain full control over your project, but the vast majority of the responsibilities would be in the capable hands of a trusted partner.
  5. Post-production support
    Once the project is finished, you will not be left to your own devices, all on your own. Actually, just the opposite – you will be provided with all the help and guidance that you need, including assistance introducing the technical details of a new product to your staff.

5 concerns 

  1. Communication and cultural problems
    When you hire a team that you don’t know, especially from another country, communication problems are a risk, which can be firmly rooted in cultural differences.
  2. Knowledge transfer and security issues
    You may also be worried about the knowledge transfer procedures and possible misunderstandings that may occur during remote cooperation with another entity. Plus, there are security issues that need to be addressed very early on, in order to prevent any data leaks; some companies may not be able to provide efficient protection.
  3. Poor transparency and messy documentation
    We’ve noticed that many business owners have expressed concerns over potential chaos in development. This includes hiding crucial problems, which can result in loss of control over the project.
  4. Hidden costs
    Hidden costs that seem to emerge out of nowhere may keep you up at night as well. It’s important to know how to make sure that you won’t have to deal with this.
  5. Lack of engagement
    Every client wants their projects to be treated as if they were of the software company’s own personal design and priority. They very often worry about low engagement of the hired team, which can result in tasks that are done halfheartedly.

How to reduce these risks? 

  • Bet on nearshoring
    With nearshoring, all the potential risks that may be related to cultural differences are reduced to a minimum. Also, it is always easier to cooperate within the same time zone and have the option of meeting in person, whenever it is needed.
  • Ask about the security policy
    Familiarise yourself with a potential partner’s security procedures, verify if the company is ISO 27001-certified, and don’t forget to sign an NDA.
  • Check out all the project management processes beforehand
    You should ask about how projects are run, what it means for the company to be agile, and how they handle problems or changes when they start to appear on the horizon.
  • Find out more about the experts they have on their teams
    Check to see if they have quality assurance, system architects, UX designers, dedicated managers, and any other kind of expert who could be of assistance to your project.
  • Make sure you know what you are being charged for
    In order to avoid unpleasant and costly surprises, make sure you know what kind of details you have to include in your partnership contract.
  • Organise a joint kick-off meeting.
    If it’s possible – do it in person, if not – a video conference will do the job as well. Clearly express your needs, requirements and expected outcomes. Also, take this opportunity to get to know each other and make everyone feel welcome and comfortable.


BONUS: Update your knowledge, often!  

Remember to not only keep up with the basics but to always stay up-to-date with the newest outsourcing trends too. Our ultimate nearshoring knowledge base should be helpful here – it is packed with articles, white papers, ebooks, documents to download, videos and podcasts with a lot of insights from top IT leaders.

And in case you have any further questions – feel free to get in touch with us!

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