Introduction
Outsourcing is of two types: IT outsourcing and BPO (Business Process Outsourcing). Often businesses find it cheaper to contract or outsource software development and other IT projects locally, nationally, or globally.
With outsourcing, there is also reduced development risk. It is possible to get a specific price for a specific job. This will eliminate chances of going over budget if the in-house employees were to develop the software. Costing less and with experience in similar products, outsourcing can lead to a better product at a faster development rate.
Apart from the obvious potential cost saving, there are a number of other benefits to outsourcing software development. With outsourcing, it is possible to sometimes find a group that is accustomed to the software that is needing development. This is a huge benefit considering they will have useful experience in the type of software and can therefore produce suggestions and possibly modifications that will improve the overall quality in which the software can be developed. Another benefit is that the final product can sometimes be achieved at a quicker pace. Not having adequate experience in the software can lead to hasty development. By outsourcing it to a group with more experience, this problem can be avoided. Considering the faster the software is developed, the faster it can go to market. This can change into a huge benefit in terms of an increase in ROI.
Pros of Outsourcing Software Development
The first obvious great benefit of outsourcing is cost savings. We must assume that by cost savings, we are not talking about a decrease in the expenses of software development companies, but rather a decrease in the cost of the software development services for the party requiring the software to be developed. Software development, while a necessity for most competitive organizations, is an expense rarely gladly paid. Anything that can be done to decrease the expense of software development while not decreasing its quality is certainly a beneficial thing for most organizations looking to gain an edge over their competitors.
Outsourcing does this primarily by converting a fixed cost (the salary of the developers) into a variable cost, better allowing the organization to manage their expenses on software development. Another possible way of saving costs is the avoidance of large expenditures on IT infrastructure and support. By outsourcing, the IT support is included. This might be relevant to the organizations that are looking to make efficient use of their capital funds by avoiding unnecessary large expenditures can focus their funds into furthering other areas of the business that can lead to an increase in competitiveness.
Cost Savings
The ability to use capital elsewhere is an attractive incentive for outsourcing. So instead of going through the expenses of an expansion era and seeking capital to fund a whole other division, companies can allocate capital directly into core business activities and increase the probability of long-term viability.
Globally competitive pricing enables the company to achieve a cost savings that they would not have previously had. Software development is usually a pretty expensive undertaking, and thus cost-effective measures are usually just measures to prevent a greater loss. Outsourcing is always cheaper than regular employees. Essentially, instead of paying for training and all of the overhead that comes with a regular employee, you are just paying a fee for service which is negotiated beforehand. With the current state of the economy, it is essential for businesses to be able to offer the same services at a lower cost in order to stay competitive. This is an easy way for a company to lower the costs of its current services.
Access to Expertise
Vendors and outsourcing firms for software development often have vast experience and sound knowledge in high-quality methodologies, which is a stark contrast to the approach followed by an in-house IT department. This ensures timely delivery of the product with minimal or no defects, which is rare in software development. Such expertise and quality are hard to come by and are often the aims and objectives of many companies who invest highly in their in-house team without much result.
Another risk for businesses is when they hire someone with a Jack-of-all-trades-master-of-none kind of attitude towards software development and end up with a substandard product due to a lack of expertise in a particular area. They might be adequate for some or the other tasks but not having expertise in any particular domain. An outsourcing firm usually provides the expertise of the exact specialist required for the job, be it database administrators, system analysts, project managers, software engineers, network administrators, etc.
Software development technologies have evolved at a plant pace over the past decade, and businesses hiring their own in-house software development team often find it challenging to keep up with the speed. Outsourcing software development gives businesses the advantage of having access to expertise in the latest and upcoming technologies at a fraction of the cost of what it would have cost them to hire their own team. Outsourcing provides businesses a diverse range of expertise at quite a competitive price, which is much lower than what it would cost them to get such a diverse range of expertise in-house.
Increased Efficiency
Time-to-market is often a decider in itself; any software that reaches the market faster has a better chance of success. With the boom in technology, there has been a higher demand for various software, and often the first-to-market has the monopoly. An experienced provider will be able to complete your work in a shorter amount of time than an in-house team.
Firstly, the sheer concept of efficiency can be the driving force behind a decision to outsource. The idea that you can get more ‘bang for your buck’ is often untrue with in-house development, as employing permanent staff can be an expensive process with no guarantee of value for money. Hiring a worker is a very hit and miss process, and often a large amount of money can be spent on a project with little return. These employees will also be paid to work certain hours and may not be as efficient as hoped. In this case, the company is still incurring costs while not getting enough value in return. Outsourcing mitigates this risk, as you can often employ skilled developers for the exact amount of time needed for a lower price. Time overruns are less likely to occur due to the vast amount of expertise available, and the cost will be directly relative to the amount of work done. High competition among outsource providers will also mean a higher quality of work for a lower cost.
Advantages incurred by outsourcing your software needs are typically related to improved efficiency. The concept of increased efficiency is a broad one and can be split up into various advantages.
Cons of Outsourcing Software Development
Outsourced work may be delivered off the agreed schedule. Your in-house IT staff may require more time to educate and manage the offshore team. You can experience quality and budget overruns if you select more cost-effective, but less experienced providers. Security and Confidentiality Risks: It is not uncommon to fear intellectual property and data leaks with offshore providers. LSG’s Australian clients in government, finance, and defense have often retracted from global sourcing as a result of data security concerns.
Security and Confidentiality Risks
In the case of software development, the intangible nature of the product, combined with the rapid pace of change in web and technology industries, can make these risks even more damaging. In spite of this, it is not impossible to outsource a project securely. If outsourcing is deemed the right choice, the client and vendor can take certain precautions to minimize the security and confidentiality risks, and there are many companies who have outsourced projects successfully and securely.
There are definite risks involved in sharing the details of a private project with an outside company. It is difficult to assess the true extent of these risks in an industry where software is an intangible commodity and many legal loopholes can be found. Projects can be reverse-engineered and copied with very little effort, and the knowledge that this is a possibility can be damaging to the morale of an in-house team. If an outsourcing company goes out of business, any code, software, or development work that it has in its possession may be seized and sold off in order to satisfy debts. If this happens, the outsourcing company may not have a legal right to pass the work back to the client or to inform them that it has changed hands. Finally, it is possible that the outsourcing company could become a competitor further down the line and use the knowledge gained from the client’s work in order to gain an advantage in the marketplace.
Conclusion
As you can see, there are many positive components associated with outsourcing software development. There are many different aspects of outsourcing, and it is important to consider each in its own context. The outsourcing of coding can be very cost-effective. There is a new movement to promote the use of global resources among software developers. The general concept is that code is code, and it should not matter where the work is done as long as the product is of high quality. In many cases, this is true because good software development companies will have any code that was poorly developed or bugged re-done at no additional cost. The benefit comes from the cheaper wage of the outsourced workers, and thus the cost to the client is remote from what the cost would be to the company providing the service. This is because wages vary a great deal around the world, and there are many individuals who can do the same quality job that someone in another country can do while being paid significantly less. This concept of “on-shore price, off-shore cost” is inspiring employers to seek out the best remote resources, increasing competition among outsource service providers.
