Advantages of Outsourcing Software Development

We’ve looked at some of the factors that motivate companies to partner with a software outsourcing partner–be it cost-savings, a lack of internal resources, or the struggles companies face trying to cope with rising consumer expectations, cyberthreats, and now, a global pandemic.

In this article, we’ll shift gears a bit and look at some of the benefits of outsourcing software development and how it can help companies capture additional business value.

Advantages of Outsourcing Software Infographics

Cost-Savings

Historically, businesses outsourced low-skill, low-wage work to the countries with the cheapest available labor. While costs remain one of the most compelling reasons companies work with an external team, the outsourcing landscape has shifted dramatically.

Software outsourcing allows organizations to hire top-tier talent at a reasonable rate.
Assuming you’re working with a reputable company, you’ll be paying local market rates for skilled labor, making it a win-win for workers and their clients.

Here, strategic companies are using outsourcing as a way to optimize costs and get the most bang for their buck. In this case, organizations are looking at each project–costs, scope of work, stakeholder involvement, skills needed, etc.–then making a decision about how to best allocate their resources.

For example, a company might use an offshore team to help them complete a project requiring little oversight because it’s the least expensive option.

However, that same company might choose to work with a nearshore company or keep a project in-house if it requires constant communication and stakeholder involvement. In that case, companies pay more for labor but stand to see a higher return on that investment (ROI).

Allows Organizations to Maximize Resources

According to our 2020 State of Global Software Outsourcing report, 24% of companies believe the biggest obstacle to scaling operations is labor and development costs.

For startups and small businesses, one of the major benefits of outsourcing software development is that it enables them to turn a small budget into meaningful growth. Done right, outsourcing can help these “underdogs” compete on a much larger scale–54% of our survey respondents said that the biggest advantage of software outsourcing was reducing costs of development, while 38% said it was providing more value to customers. Another 37% said the most significant benefit of outsourcing was the ability to increase product functionality and features.

Strategic business leaders can use software outsourcing to sustain growth and expand their reach–without the need for large investments in new hires, technologies, hardware, software, and IT infrastructure. In some cases, partnering with a good remote development team can help internal teams improve their processes, as well.

For example, working with developers experienced in Agile best practices allows companies to benefit from that experience, whether that’s passing on good habits or sharing valuable advice.

Faster Time-to-Market

In many industries, the ability to innovate quickly without compromising quality is critical to keeping pace with competitors. One of the most significant advantages of software outsourcing is that it allows companies more control over software development speed.

Rather than letting your available resources dictate the timelines, organizations can use outside talent to scale development up or down, as needed.

According to our research, 48% of the companies we surveyed said that accelerating development was the main advantage of outsourcing software development.

Access to the Latest Tools & Tech

Another key benefit of outsourcing software development? It unlocks access to technologies and platforms you might not have internally.

On a practical level, that means that you don’t need to invest in a bunch of new tools or new hires and the training required to get your team up to speed anytime there’s a new capability you’d like to use.

At this moment, brands–often already in the middle of a digital transformation–are forced to respond to customers’ changing expectations for digital due to COVID.

While companies might have made do with a few digital channels, there’s a need to step things up and branch out into new channels or offer something unique.

Outsourcing software development presents an opportunity for brands to invest in AR or VR experiences and leverage technologies like chatbots, voice, and virtual assistants to create a seamless, omnichannel experience.

Tap the Best Talent

Similar to the last point, outsourcing allows you to find the best talent for the job—when you need it. This means you don’t have to retrain existing staff or hire a new person any time there’s a specialized skill you’d like to use for a particular project.

42% of our survey respondents said the biggest strategic benefit offered by outsourcing was the ability to fill gaps in internal capacity.

Increasingly, companies are looking toward outsourcing to meet rising consumer demands, as well as tackle cybersecurity or data privacy challenges. They’re also using external firms to help them address critical challenges associated with changing IT infrastructure.

That might mean looking for providers that can help with cloud or microservices migration, IoT adoption, big data management, and other skills that might not be easy to find when you’re limited to the local candidate pool.

Strategic Partner for Transformation

We’re seeing more and more companies embrace outsourcing as a strategy, partnering with vendors and developing long-term relationships with external teams all over the world.

Obviously, not every outsourcing arrangement is a “partnership,” but working with a specialized team with knowledge and experience in your target market adds long-term value–and may be the key to realizing the advantages of outsourcing software development.

The longer you work with an outsourced team, the better you get to know each others’ working style, communication methods, and over time, your external team will feel like a remote extension of your in-house team. That closeness is difficult to achieve when you’re outsourcing projects to a team halfway around the world.

In a recent CGS report, researchers found that while outsourcing is on the rise, there’s a lot of room for improvement. Participating companies reported that poor communication, a lack of skills as advertised, and the need for improved privacy and data security measures were their largest pain points. And while those participants said outsourcing helped reduce costs, failing to address those major pain points could put the organization at risk.

In our internal State of Outsourcing report, 31% of companies said that the biggest challenge they experienced with offshoring was not meeting deadlines.

Another 29% stated that not being able to communicate effectively was their biggest pain point, while 20% cited a failure to communicate issues as their main problem.

Working with a nearshoring company can help organizations overcome some of outsourcing’s pains–improving slow response times and language issues.

In our recent employee survey, Tiempo Software Engineer Lead, Paul Estrada says, “hiring a team with cultural affinity can facilitate team interaction and help establish a bond between in-house and outsourced teams. This is particularly important if your project requires internal and external teams to work together.”

Paul adds, “the closer time zone (between the US and Mexico) allows outsourced teams to follow processes while preventing deviations from the initial plan. Additionally, there’s less of a struggle to schedule meetings and other activities.”

Wrapping Up

Outsourcing software development offers massive potential and could be used as a strategy for achieving your big-picture business goals, solving your organization’s most significant challenges.

That said, realizing the potential advantages of outsourcing software development presents isn’t exactly easy or straightforward. The best results come from developing a close relationship with your service provider and the developers working on critical projects.

To learn more about Tiempo’s nearshore business model and how we can help you unlock the biggest benefits of outsourcing software development, contact an expert today.