92% of G2000 companies use IT outsourcing. The figure nears 100%! According to a new study by Grand View Research Inc, the global business process outsourcing market is going to reach $525.2 billion by 2030, growing at a CAGR of 9.1%. At the same time, IT services make up 72% of all global outsourcing.
So the math is clear, software development outsourcing becomes quite a common practice nowadays.
However, to enjoy the benefits of it, you should partner with a reliable vendor and consider all the nuances. It’ll make your cooperation comfortable, effective, and beneficial for your business.
But, what is software development outsourcing? It’s partnering with external software developers or service providers for project fulfillment. Sometimes a part of a project can be entrusted to a third-party vendor.
Corporations outsource digital solutions creation for business automation and service delivery. Startups outsource to quickly enter the market. More than that, IT companies also outsource quite often to meet deadlines, extend expertise, or smooth things down for an in-house team on some particular project.
In this article, we made our best to supplement the software outsourcing definition with all the essential aspects in one place. So make yourself comfortable and go on reading. We’ll start with the models of software outsourcing.
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Get a Free ConsultationSoftware Outsourcing Models
Speaking about software development project outsourcing, it’s vital to mention the ways you can build a partnership with your vendor. The common outsourcing models are highlighted below. Go on reading to learn the scope of responsibility and ownership you share with the other party.
Project-based model
As it’s clear from the name, the model presupposes that you contract out an entire project to a vendor for implementation. The scope of work is defined and planned, yet it takes a huge amount of work off your hands. Your vendor team takes full responsibility for the project delivery from A to Z, making sure at the end that the result meets your requirements and initial goal.
Dedicated team model
In this cooperation model, you turn to a software development company that outsources services, providing the whole project team of the right size and expertise to carry your project out. The project scope is then defined in the common effort, but you have full control over the process of development. Your dedicated team will demonstrate more engagement compared to a project-based model and will guide you across every step of development.
Outstaff model
There are cases when you need to extend your existing team. It may be due to a lack of professionals in a certain sphere or to cover a specific scope of work. Then the outstaff model will work for you best. After the existing staff capacity estimation, you can decide what skills and expertise are needed for proper project implementation and hire either separate experts or oustaff workers to cover the gap.
Types Of Outsourcing
When you opt for software outsourcing, it’s essential to know the options you can choose from. The major types of outsourcing to mention are onsite, onshore, nearshore, and offshore. They depend on the vendor’s location and have their peculiarities. Let’s now deal with each of them a little.
Onsite
This type of cooperation presupposes inviting your outsourced employees into your office. The model works well if you lack just several specialists to extend your local team. So, the hired professionals operate from your office and become a part of your team for some time needed to launch a product.
Onshore
This term is used when the team of your contactor is located geographically close to you, it may be the next-door office, neighboring town, the same country, and the same time zone. This type of cooperation has several advantages, including shared language, culture, values, and methods of communication. It’s even sometimes referred to as homeshoring. Even though your vendor works remotely, it’s easy to control the project. Yet, you should bear in mind that it’s the most expensive form of outsourcing.
Nearshore
Nearshoring is a form of outsourcing when you cooperate with a vendor from the same time zone, yet another neighboring region. Thus, you get convenience in project management through cultural and language similarities. But you get a project done with essential cost savings because the hourly rates of developers are lower.
Offshore
The IT service world is abundant nowadays. We have the advantage of hiring a vendor from any part of the globe, either due to their unique expertise or lower rates. Outsourcing to distant locations is called offshoring. It may be extremely effective because you get superior quality at a reasonable price. However not without certain inconveniences caused by time zone differences. The difference in time can as well provide value in terms of dealing with maintenance issues and tech and customer support specialists’ work.
Yet, geographical location is not always the decisive factor in the choice of the vendor to outsource. Each offering should be well-thought-out and estimated to make the best selection.
Software Development Outsourcing Trends
Digital transformations regularly bring us innovations. We have to adopt them to accelerate the IT advancement we have in mind for our business. So, new outsourcing software development trends are also shaped, and to benefit from them in the coming year, you should be aware of them.
Modern trends reflect the present-day reality and influence the industry dynamics, some of them are new, some are rising, and some are ongoing. Anyway, you should take all of them into account to develop future-forward software for your business. Let’s check what to expect in 2023.
Blockchain technology's growing demand
The technology is secure, transparent, and independent of the 3rd parties. Statista forecast suggests that spending on blockchain solutions development will reach almost 19 billion U.S. dollars by 2024. Even though Fintech is the most active operator of blockchain, it is being adopted by many other spheres, like traveling, logistics, real estate, healthcare, etc.
AI solutions popularity
Artificial intelligence integrations keep their popularity. So this is a continuing trend for 2023. AI allows for to quick processing of large amounts of data, thus data analysis, calculation, management, and consequent forecasting can be significantly improved, and no business owner will miss the chance to accelerate operations, decrease risks, increase overall business performance and get higher profits as a result.
IoT market explosive growth
By 2024 global IoT revenue is predicted to exceed $1 trillion. This technology finds its application in many spheres: smart homes, cargo tracking, biomedical sensors, security services, and much more. As long as innovative solutions are developed in the spheres of medicine, education, logistics, and others, IoT solutions development will be a significant outsourcing trend.
SaaS, PaaS and IaaS booming
Complex software creation will always be a trend, but more and more companies are nowadays seeking for cloud solutions to ensure secure data storage and exchange. So, cloud-based software outsourcing models, such as SaaS (Software as a service), PaaS (Platform as a service), and IaaS (Infrastructure as a service), are going to be a trend in 2023.
Growing cybersecurity need
Digitization of business goes hand in hand with the increased risk of cyberattacks, thus software that prevents data leakages, theft, and unauthorized changes is highly demanded. Hopefully, 2023 will go beyond the usual tools and offer us some new software development outsourcing trends and technologies in terms of cybersecurity.
AR/VR products' rising popularity
The trend of outsourcing augmented or virtual reality development is going to top the IT outsourcing sphere in 2023, because these solutions demonstrate far-reaching opportunities and extensive scope of use. Education and interactive learning, as well as e-commerce, and many other spheres, require innovative software. So, businesses will continue outsourcing their sophisticated solution development.
Remote work solutions
The trend for remote work solutions development gained momentum during the pandemic of COVID- 2019. The world is still changing and the trend for cooperation with outsourcing companies is increasing and requiring solutions for remote collaboration. So, the requests for such software development result in a trend as well.
The tendencies are now clear, let’s look closer at the pro and cons of development outsourcing.
Outsourcing Software Development Pros
The top reasons to outsource software development are faster development, cost reduction, risk decrease, and the opportunity to open all doors, no matter where geographically you are.
Let’s look closer at the key benefits of software engineering outsourcing. They are:
Access to more profound expertise, experience, and technologies
Outsourcing is a great means to make up for resources you lack. When contracting a project out all you need to do is come up with an idea. The professionals you hire will provide you with all the services required: consulting, analysis, research, design, development, and even marketing, and support. More than that, the outsourcing company has all the equipment, tools, and technologies required to develop the most up-to-date products, because they deal with various projects and need all these to deliver cutting-edge solutions and stay competitive.
Possibility to hire the best team of professionals and its easy scalability
When outsourcing software solution development, you are not limited by the level of expertise of your local engineers. You can form the team according to your requirements, project vision, and budget. Keep in mind that for a successful product launch and release you need not only developers, DevOps, and designers, but also business analysts, QA experts, and marketers. You can choose the best available specialists either from your vendor employees or trusted experts they will recruit to fill the positions missing if there are any. As a result, you can get the team capable to deliver your project most effectively.
If the scope of the project grows or decreases in the process of development, the initial team can be quickly scaled up or down. It’s possible due to the sufficient stuff every development company has for variable project needs.
With software development outsourcing companies, increasing or reducing the team is no problem. They can transfer their team members to other projects or assignments.
Quality and reliability of the software
Quality is an important criterion for modern software solution operation because even a slight malfunction can result in serious problems and loss of income.
Outsourcing your product development, you sign a contract that among other issues regulates the rights for intellectual property, criteria to ensure quality standards, and the responsibilities of both parties. Thus, you define the penalties and protect your deal.
Quick Time to Market
The necessary development resources and stuff provided by the vendor allow providing quick time to market for products. The team that works on your project puts the necessary priorities forward to achieve the results you want to see and meets the required framework for providing the project to real users.
Now we are going to speak about the potential drawbacks of outsourcing, to check if the advantages outweigh them.
Outsourcing Software Development Cons
Unfortunately, outsourcing cannot be a cure-all. You might face certain risks, like problems in communication, delays, features implemented differently from your expectations, and some others.
Lack of transparency in the development processes and activities is also often mentioned by outsourcing critics as a drawback. Do the pros outweigh the cons, or can you just disregard the disadvantages?
Anyway, you should be aware of the challenges and risks of outsourcing to take a well-weight decision.
Finding a reliable partner
The first challenge and the potential risk is finding a reliable partner because the market is overcrowded and a wide range of services is offered. Firstly you need to understand what services exactly you need and unfortunately, there is sometimes a difference between what is offered and what is delivered to the clients. Thus, it’s vital to turn to trustworthy and reliable companies that operate on the market for years and have proven expertise. Stfalcon is one of them.
You can carefully study the reviews and the feedback from clients to choose the vendor, it will minimize risk. However, your impression matters most. So, it’s reasonable to meet and get acquainted with the team to make sure you are on the same page and the outcome will be as you expect.
Communication issues
Cooperation with people of different cultures and countries can be both an advantage and a drawback. You may have different values and the vendor team may have different corporate philosophies, so, it’s better to find a contractor from the neighboring region with a similar culture. It’s also good because different time zones create difficulties in project communication and complicate the process as well.
The competition in the market makes the developers increase their working standards. Still, the meticulous selection of a technical partner and a detailed discussion of a business process structure will bring this risk to a minimum. More than that, short-term contracts that set strict timeframes and deadlines effectively fix this issue and increase the chances for fruitful cooperation.
Product quality control
When cooperating with an overseas vendor, quality control issues may be quite common, because accepting the work you need to carefully analyze their actions and the result. It takes time. So, a good idea is to make checking in the intermediate stages of development. You could then detect and fix the issues before hundreds of code lines are created and other bugs entailed.
Risk of data theft
When outsourcing, you share your innovative ideas and data with third-party contractors, and there is the risk that they can “borrow” your idea or use data as they like. A nondisclosure agreement decreases risks, but unfortunately, you still can not have absolute control over an outsourced project. So, the advice is just to carefully phrase the contract and the NDA.
Hidden costs
Even though the primary aim of outsourcing is saving money, you should be careful not to get the bill compiled with hidden fees, especially if you source out overseas.
Mind that phone calls, additional meetings or consultations, software subscriptions as well as travel expenses may pile up. In the middle of the project you will have no backing out, so discuss it all carefully in the very beginning to put it clear and transparent for both parties.
Why Stfalcon Is the Top Software Outsourcing Company?
Stfalcon can by right be named the top software outsourcing company because 13+ years of web and mobile development and 324+ advanced projects gave us extensive expertise in diverse technologies and industries, but not only.
Our specialists are the best professionals we could reach in every sphere.
We have now a profound understanding of the outsourcing-specific processes and peculiarities of cooperation with even the most demanding customers. We are always ready to take on new challenges and help our clients achieve their business goals faster and more effectively.
Being with Stfalcon’s team is easy, we always discuss the client’s vision and requirements, and decide upon a technology stack and project structure, so that everything is transparent. We optimize the project until our customer is satisfied. High appreciation from our clients results in our estimated 4.9 rating on Clutch. You can become one of our customers and see for yourself.
Conclusion
In the modern world, software outsourcing is a perfect way to meet your business goals through cutting-edge solution development carried out by real professionals. Now you know how to avoid risks and can enjoy all the advantages of outsourcing with the right approach to a reliable vendor selection.
Stfalcon gladly offers you skilled professionals for your project. Contact us, and we can decide the best way to cooperate and answer all your questions as to prices, services, and processes.
