Pros and Cons Of Outsourcing Software Development

The approach of outsourcing software development services is widely adopted by major companies, which often outsource a significant percentage of their IT operations to offshore locations.

Nevertheless, the integration of outsourcing partnerships can lead to miracles if successfully addressed otherwise, can create consequences such as diminished staff morale, substandard code quality, failure to meet project deadlines, and ultimately, a diminished return on investment if not taken care of properly.

Hence, with this blog, we will examine the benefits and drawbacks associated with the practice of  software development outsourcing.

1. What Is Software Development Outsourcing?

Software development outsourcing is a practice where a business contracts a separate company to develop and complete specific software development projects.

Organizations engage in this type of practice for a multitude of reasons. One of the most prevalent issues is the shortage of locally trained and competent employees.

Moreover, outsourcing software development may provide significant profits through expedited expansion, while minimizing the need for extensive investments in recruiting. Consequently, for startups, outsourcing may be the sole viable alternative to ensure adherence to financial constraints. In the contemporary business landscape, both large-scale enterprises and small-scale organizations have increasingly embraced the practice of outsourcing.

2. Outsourcing Software Development Pros and Cons

The decision of outsourcing software development is majorly based on just the cost-efficiency factor. Most businesses consider it as one of the greatest reasons for outsourcing software development projects. It is a more lucrative method than an in-house software development team developing software and web applications. There are other advantages  and disadvantages  of outsourcing software development which are listed in the upcoming segment.

3. Advantages of Outsourcing Software Development

Advantages of Outsourcing Software Development

3.1 Cost Saving

It wouldn’t be correct if we say that money is the prime motivator for most businesses to outsource  software development. No. Not at all. There are other reasons too. But if we go back years then cost savings are undoubtedly an expected result of software outsourcing. Software developers from developing nations like Latin America, eastern Europe, and Asia charge less than in the United States, the United Kingdom, or Australia. This is one of the strong benefits of outsourcing to developing countries.

When you outsource, you are recruiting on-site staff of  experienced professionals  and  talented developers, as well as pay for payroll taxes, personnel training, bonuses, and a social security package. All of this may eat away at a company’s budget.

Furthermore, you will not be required to acquire the necessary software tools, and services for the team to operate with. The software development company will handle everything. So, when you outsource to external experienced services providers, you are outsourcing all of these tasks and saving majorly on the cost factor. Broadly speaking, it is one of the inevitable reasons that offer benefits from outsourcing software development projects. Outsourced project and app development will provide unique  solutions enabled with most  innovative technologies at low cost.

3.2 Access to a Wide Pool of Skills and Expertise

Choosing a business to work for you allows you to select the set of right talents that works best for you and your organization. Selection of service providers who understand the software development process and  have domain expertise is essential for digital transformation for your business. When you get to select resources for your business, you may browse their portfolio and see how they previously dealt with clients. You can choose businesses that best fit your regular business needs. They can work together and respond to your needs. There are various engagement models for businesses to partner with other businesses. This involves monthly models, annual and others as well. The businesses are paid for their work as long as they are hired, as well as for the completed project.

The most important step here is to choose the right kind of company that will benefit your business in the long run. There are millions of businesses available in the market offering almost the same type of development skills. So, making a decision of software outsourcing provider selection from the long list can be daunting. But going through the outsourcing company, they must be skilled in the services you need

A seasoned and experienced outsourcing service provider will take you through the right path of technical selections and how it will turn out to be fruitful for your business. The reason it is added as a benefit is that you get to choose a team here with extremely talented resources in less time than predicted.

3.3 Time-Saving

Imagine if there is no outsourcing firm , then you will have to do multiple things from the task list. You  have to find the right resources and interview them, negotiate salary, and onboard a new employee all take time — only to have some depart a year or two later for a better opportunity. Now imagine if all this work is taken care of by an external outsourcing service provider  then what’s a better option? 

Working with an outsourcing partner allows you to delegate a large portion of the recruiting process, allowing tech executives to devote their time and attention to higher-value initiatives for the organization. 

When your business wants rapid turnaround and comprehensiveness, work both together and frequently. If you lean too far to one side, you’ll end up with a product that was delivered on time but will be faulty and prone to errors. On the other hand, if you are inclined towards just the development process, you’ll end up with a fully developed creation but will miss your deadline. So,  neither alternative is perfect. The only thing here that can save you is to partner with an outsourcing business, which provides you the best chance of threading that needle. Outsourcing companies can take away all the processes and you can concentrate on core business operations.

3.4 Flexibility

One of the most vital features is flexibility to work. When you partner with  an outsourcing company, you are liable to just focus on core competencies of your business, other things are taken into account. Outsourcing solves capacity concerns because there is no need to hire workers for a short amount of time. You save resources and money since you don’t have to look for, employ, train, and house unique individuals for the job. Outsourcers have a flexible schedule and may adjust to the procedures of their clients.

3.5 Focus On Core Business

Although some businesses may choose to maintain software development in-house, many have found that outsourcing is a more economical choice. When compared to outsourcing, using in-house staff causes you to be limited in time and materials, but gives you access to experts that can help you succeed.

Even the best in-house teams occasionally need some outside help. Preventing this is crucial in software programs where performance must never be sacrificed. To save yourself time and trouble, don’t attempt any major mobile or web development projects on your own.

If you have another employment at the moment of progress, outsourcing is a terrific option to consider as well. As a result, nothing on both sides of the deal will be able to disrupt the process, and everything can go down without a hitch.

3.6 Rapid Market Introduction

 How long it takes to reach  your intended audience is a critical factor in software service marketing. Nevertheless, outsourcing software development can help you save plenty of energy.

Working with skilled experts may help you get your item to market more quickly and ensure that it is updated with industry requirements. They’re proficient in every stage of the development process, from planning to developing to testing.

You’ll be free to concentrate on other facets of marketing like advertising and sales as a consequence. This is why an increasing number of businesses are turning to outsourcing for their software needs. It’s undoubtedly a sensible decision if you wish to remain relevant in the industry.

3.7 Innovative Technologies Application

Outsourcing software development provides access to the entire technological stack, not just skilled programmers. Implementing widely used techniques in IT projects like AI, automation, and machine learning technologies into your own will attract more clients.

Your in-house development staff, though, is not capable of keeping up with the latest technologies, much less acquiring new skills in such a short time frame. Due to the rapid pace at which software advances, it is important to save in-house resources for fundamental business operations.

However, when you engage outsourced software developers, you can be assured that you are collaborating with highly skilled experts in the field. They’re always current on the newest advancements in your industry, giving you a leg up on the competition.

4. Potential Disadvantages of Outsourcing

After the pros of software outsourcing, let’s move to the potential cons of outsourcing  assumed by businesses. This may not be true for all businesses. Obviously, there can be software outsourcing challenges when it comes to partnering with another business. Even if there are such challenges, it will not affect the business workflow. You can consider this as one of the disadvantages of Outsourcing. However, all these cons of outsourcing can be easily overshadowed now with technology.

Potential Disadvantages of Outsourcing

4.1 Hidden Costs

Despite cost-efficiency being a key focus of the outsourcing benefits, many firms have fallen prey to extra charges. Watch out for outsourcing firms that hit you with surprise charges for things like project management, administrative help, and even power use.

These sunk expenses can soon nullify any financial gains made by outsourcing projects. All of these factors may cause projects to run over budget and behind schedule.

Get an up-front, comprehensive estimate of all your outsourcing expenses before you start working with a third party. One way to keep spending under control is to have bills that are more or less consistent from month to month.

4.2 Non-Transparency & Miscommunication

If we get into the literal definition of the term offshore development, then we would define it as a process of delegating tasks to professionals located at a distant location. It can be a different continent or country or even state and even the time zones are different. Time zone differences and working hours differences can create problems when you schedule meetings. Thus, the only thing that is at stake in such engagements is trust. If there is no trust, there is no point in developing such engagement. When the location of the outsourcing company is far, then the client cannot visit them frequently. This is when non-transparency and miscommunication step in .

If there is a cultural incompatibility with the partner firm and has issues with English speaking, outsourcing might be problematic. There can be concerns when you don’t clearly communicate the expectations. The time zone variations with little working overlap can lead to a breakdown in communication. In-house project managers in charge of an outsourced team can assist with this, as can well-organized teams.  Onshore firms make project management much easier as compared to offshore outsourcing.

4.3 Not Meeting Quality Benchmarks

Another important reason why businesses cannot think of outsourcing is that the collaborating company did not meet the standard quality expectations. The distance is already a concern, and in addition to that comes low-quality output. This leads businesses not to outsource. But you can’t judge all companies based on one past experience. This ensuring constant communication and real-time monitoring will allow you to develop products as you wish and meet qualitative benchmarks. 

When you outsource, you must have full control over your product. The communication from the client-side should be clear, even if it is repetitive. In addition, you must also ensure that you are employing the highly skilled employees that you anticipate. It’s excellent to keep expenses low, but there’s a reason why some of these outsourcing firms’ rates are so high. If you go too cheap with outsourcing, you risk employing low-quality specialists to execute your task. This will have a direct impact on the final product’s quality.

4.4 Security Risks

Security is an unsaid concern and most businesses are taking care of it. There are many cases of a data breach, financial information exposure or by any other means, data is available to the public or leaked to peer companies. This is a strong reason for businesses to not outsource their needs to a third-party company. 

To abide by legal clauses is the right of both parties. If you hire a professional outsourcing partner, they will execute agreements such as NDAs, and General Agreements. This will greatly increase the security of data. So, it is advisable to make commitments for your business with a reputable firm. Remember that picking a dependable business for essential services is one of the most responsible stages in outsourcing software. And providing assurance of all your security rights is their responsibility.

5. Conclusion

If we go by stats, then more than 78% of businesses collaborate with the right software outsourcing company and have good outsourcing terms. This clearly means a maximum of businesses have healthy relations with their outsourcing company. Although, we agree that there are certain pros and cons of software outsourcing that the development team has to face when they outsource. If you decide to do it in-house, you face more cons of in-house than outsourcing software development. Consider a good reliable partner with a good reputation, experience, talents, and abilities as a software development outsourcing business partner. Partnering with a company is not a day’s task. Your company’s reputation and services are at stake so, make sure you choose a business that’s worthy, reliable, and progressive. 

6. FAQ

Is Outsourcing Software Development a Good Idea?

The time and effort saved by outsourcing can be significant, thus, many companies do it. Hiring a third-party firm frees up in-house workers to concentrate on things like strategic planning, client satisfaction, and expansion.

Are All Projects Suitable for Outsourcing?

It is based on the degree of ownership you’d like to maintain around the project. It is suggested to go for outstaffing or merely outsourcing the fundamental day-to-day duties for those who want to keep a close eye on the projects. Nonetheless, outsourcing is not a major concern for CEOs who are capable of delegating significant responsibilities. Outsourcing firms typically employ developers with several years of industry expertise.

Itesh Sharma

Itesh Sharma is core member of Sales Department at TatvaSoft. He has got more than 6 years of experience in handling the task related to Customer Management and Project Management. Apart from his profession he also has keen interest in sharing the insight on different methodologies of software development.


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    1. Karna

      Nowadays everyone is considering outsourcing software development. But it is very important to know the ins and outs of outsourcing. Hence this article is a perfect guide if we want to know the pros and cons of outsourcing. By considering this article we can avoid pitfalls which we face during outsourcing software development services. This article will also clear many misconceptions about outsourcing.