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Outsourcing is the new jeans. Everyone wears jeans - from a countryside farmer to a city entrepreneur. Because jeans are practical, comfortable, and stylish. Jeans make people equal. So does outsourcing. Ted from NY who can’t afford to hire an in-house software development team (because he is required to pay as per the US rate standards, cover insurance, company perks, office equipment costs, etc) has the same chance to develop software for his product as Marshal from MN who can afford it. Ted needs just to take on his jeans, sit in front of the computer, and find an outsourcing vendor.  

If you’re currently looking for an outsourcing partner as Ted does, here are some tips on how to successfully outsource IT development.

But first of all, what is it?

What is Software Outsourcing?

Software outsourcing is the process of hiring a third-party vendor to manage, implement, and monitor software development tasks.

Outsourcing takes a lot of stress and responsibility off the plate of internal teams and business owners and ensures that goals are met under the previously-discussed budget and time.

Outsourcing or Not?                    

advantages of outsourcing

# Minimized Labor and Operations Costs

According to the study held by Deloitte, 59% of businesses opt for outsourcing to cut down the costs of software development. Choosing to outsource, companies literally pay just for the amount of work being done, excluding recruitment, office, equipment, perks, etc. The price is calculated based on the duration of the project, staff’s labor rate by hour, and their seniority.

# Access to a Large Talent Pool

Outsourcing takes off the limitations of finding talent exclusively in your or nearby country. There are no borders for business and you can hire tech stack from any part of the world.

# Reduced Risks

As soon as a customer signs a contract with a software vendor, the certain amount of responsibilities for project success and security shifts to a software provider.

# Concentration on Core Business

Outsourcing software services allow businesses to retain the main focus on vital internal tasks of their organizations. Practice says that everything, except the company’s core business procedures, is more cost-effective to outsource. 

Software Outsourcing Risks

outsourcing risks

The Deloitte survey shows that 78% of companies that outsource confirm that hiring a third-party vendor is beneficial for their business. But what about the other 22%?

Though outsourcing software development proves to be very beneficial for big and small companies, there are still some risks, ignoring which can lead to failure.

# Choosing the Wrong Cooperation Model

The major reason for software outsourcing is a cost-cutting factor. Though this obvious advantage can sometimes turn out to be Pandora’s box if the cooperation model is not wisely chosen. 

Choosing the right cooperation model will help you not only omit extra expenses but also get the product developed in a timely manner.

# Blurred Contract

Loosely formulated contracts, or even worse, oral agreements can lead to sizable monetary losses. All the deliverables, timeframes, payment and communication schedule, intellectual property issues, and confidentiality must be outlined in the contract. 

# Weak Data Security

The newly-coined partner receives access to the company’s valuable data and it’s vital to eliminate the slightest possibility of data breaches. You need to ensure that the security procedures, policies, and technical safeguards used by your vendor are on a high level and are fully compliant with laws and regulations in your country.

# Language and Cultural Barriers

One of the most common reasons for cooperation failure is ignoring by companies the risk of cultural incompatibility and language barriers. The survey shows that 75% of companies that have outsourced services, “would take more account of culture next time”.

Therefore the cultural differences in organizational culture between the parties and the level of English as well as peculiarities of pronunciation, accent, etc., should be carefully assessed before signing the contract.

# Quantity, not Quality

Trying to save while outsourcing can play a trick on you. Sometimes, when outsourcing companies are under the temptation to choose the cheapest service provider, it's obviously a mistake. The main drivers of choice should be: the vendor’s portfolio, reviews on independent platforms, and the expertise of engineers, only then you can compare prices.

Process for Successfully Outsourcing Software Development Projects

So, how to successfully outsource software development? 

# Put Down a Scope Statement for Your Software Project

Before opting for a certain software development model and choosing a vendor, customers should outline a clear project roadmap and define the scope of the project, its objectives, deliverables, budget, etc.

The Procedure of a Project Scope Statement Development Falls into Such Steps:

  1. Defining the key project objectives;
  2. Identifying major deliverables;
  3. Listing scope exclusions;
  4. Setting project constraints;
  5. Estimating hourly rates;
  6. Setting guidelines for change requests;
  7. Obtaining sign-off.

# Decide between Onshore, Nearshore, and Offshore Outsourcing

When deciding to outsource software development, companies face a choice of three location-based outsourcing models.
onshore vs nearshore vs offshore

Onshore Development

Simply put, onshore outsourcing is hiring professionals within your country. Usually, it’s chosen by companies that already have an in-house team involved in the project. The main advantage of this approach is the ability to communicate in person and the absence of language and cultural differences which results in a smooth and fast development process.

Though onshore development is less expensive than establishing an in-house team, its cost frequently is significantly higher than the rates of offshore development, plus, the variety of tech stack and services is limited to the talent pool available in your country.

Nearshore Development

Nearshore outsourcing is choosing a third-party vendor in a zone with time and geographical proximity to your country suitable for both long-term and short-term projects. Nearshore development stands in between onshore and offshore, as it has access to more talent than a nearshore model, and doesn’t imply any cultural barriers, though still is not as cost and talent effective as offshore development.

Offshore Development

The lack of qualified candidates and high prices make companies hire a vendor from distant countries and different parts of the world where they can choose from the best tech expertise and save sometimes even twice more than they would pay in their country or nearshore.

This model is perfect for complex and long-term projects when there is no or small in-house team. When choosing offshore development companies face two main risks: cultural incompatibility and working in different time zones. Though, from our experience, carefully choosing a vendor and setting up clear requirements and meeting schedules will eliminate both of them.

# Choose the Right Outsourcing Model

outsourcing cooperation models

Project-based Model

Startups and enterprises with small or no development teams often opt for a project-based software development model. A vendor takes full control over the whole process of software development and is determined to meet all the deadlines and project specifications agreed upon beforehand. The customer pays for the number of hours required to complete the project scope or the parties sign a fixed price at the beginning of cooperation.
project-based model
Dedicated Team Model

A dedicated team is the best option for long-term projects with a specific product niche. A software vendor compiles a team of experts that are required for your project and corresponds to your budget. It usually includes software engineers, designers, business analysts, QA engineers, and a project manager. The responsibility for all the processes lies on the vendor while the customer still remains engaged in decision-making and controls the pace of development.
dedicated team model
Staff Augmentation Model

The staff augmentation model works perfectly for companies that lack expertise in a particular technology or domain or just don’t have enough developers to ensure a fast and smooth development process. So they enlarge their teams with a number of remote professionals, keeping full control and responsibility over their project.
staff augmentation model
Fixed-Price Model

A fixed price contract allows a customer to delegate the project workload, receive a predictable development scenario, and a fixed price in the contract based on the accurate evaluation of the scope of work and timeline. If any further modifications are not pre-agreed upon arising in the process of development, they result in pricing and timing adjustments.

fixed-price model

# Research the Countries for Outsourcing

The number of countries where companies can successfully outsource software development is rather big nowadays. Though there are the most frequently chosen countries for offshore outsourcing to outline:

best countries for outsourcing

# Explore Potential Companies

Once you’ve found a vendor you feel positive about, study that company in detail: what are the industries they develop for, what technologies do they work with, case studies, customers’ reviews, company’s culture and values, and finally, does their previous experience correspond to the scope of your project. Only after that, you can arrange a call with a company’s representative to discuss the milestones of your future cooperation. Feel free to ask for the CV of any developer who is going to work on your product.

# Pick a Communication Tech Stack

Communication is a strong pillar of successful outsourcing software development. Unfortunately, it’s also its Achilles’ heel. Living in different countries and sometimes different parts of the world with your vendor doesn’t usually suit your cooperation. So, it’s important to choose a vendor with whom at least 1 or 2 of your working hours coincide. Visualize the time difference using, for example, World clock meeting planner, and arrange communication channels and regular time for meetings with the team. 

Alongside time differences come language and cultural barriers. The National Outsourcing Association in the UK states that 75% of their survey respondents said that they “would take more account of culture next time”. Evaluate if there is any difference in organizational culture between you and your vendor, do they share the same value your company does, and don’t forget to check the English level of the dedicated team.

Why Outsource with inVerita? 

  • We are a highly-ranked company gratefully to more than 5 years of hands-on experience and a big number of satisfied customers’ reviews;
  • Our software dedicated teams are composed of experienced developers who have strong expertise in building web and mobile solutions, IoT software development, Cloud and DevOps services for various industries.
  • inVerita always signs a non-disclosure agreement (NDA) with customers a document that lists the governing law, protects the information, agreement duration, and guarantees jail time, fines, and severe reputational damage in case of NDA breach.
  • We know how to deal with time-zone differences. Our managers are responsible for giving customers daily insights on the scope of the project and keep them updated about all the challenges.
  • We strongly believe that your success is our success, thus we always take responsibility for the quality of our delivery.

If you’re currently thinking of outsourcing software development, contact us directly to discuss the best IT outsourcing model for your project.
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