Outsourcing software development - Pros and Cons

What is outsourcing software development?

Simply put, outsourcing software development is an arrangement between a certain organization that needs software outsourcing services and an agency that provides them. Although an organization can usually manage the development process itself, most of the time it decides to outsource. 

The question arises: Why is this so?

In order to answer this question, we need to go deeper into the topic and explain in more detail about the software development outsourcing itself.

All recent studies show that in today's world over 70% of companies outsource their software development process. The IT outsourcing market size globally reaches a staggering amount of 66.5 billion U.S. dollars. The prediction is that this amount will go over 100 billion dollars in the next 4 years.

These statistics tell us that the demand for software development services will continue to grow. More and more organizations are deciding to digitize and optimize their business processes in order to remain relevant in the market.

Technology is advancing rapidly. Sometimes a new technology becomes obsolete in just a year. In order for companies to keep up with the strong competition they need to adapt to the new business trends and to reduce their costs. Outsourcing software development proved to be a great cost-effective business model and solution.

Due to its many benefits, outsourcing software development became very popular among big companies and organizations. It surely helps them with gaining competitive advantage and better market positioning. 

What are the alternatives besides outsourcing?

A company or organization can always rely on its IT team to do the software development. This way of doing the job is called insourcing or In-House software development.

What is In-House software development?

In-house software development is a process where an organization uses their own experts and professionals to finish the task or the project.

There’s no external help and all the job is done by the employees. Management just has to choose the right people, from project leaders to know-how experts. At the end of the day the success or failure completely falls on the company.

Assembling a perfect insource development team is a process. It can take some time and be tiring but in the end management will have a loyal team they can count on. Best of all, they will be able to count on that team in all future projects and tasks regarding the software development.

Now the question arises which of these two approaches is better? Should a company or organization, if it has the people, resources and knowledge, do the software development on its own or outsource all the work?

Before we come to the answer, it is necessary to consider the pros and cons of both In-house and outsourcing software development.

So, let us begin.

Advantages of outsourcing software development (Pros)

There are a number of benefits that outsourcing software development brings. However, the following are the most important for business.

Here’s a list of Pros when outsourcing software development process:

Lower Cost of Development

Perhaps the most important thing in today's business operations is to reduce costs so a company can grow and scale up. Outsourcing software development enables that because it’s usually more affordable than the In-house development.

By hiring the software development agency, management can reduce companys’ labor costs. It can also reduce various benefits that employees have such as insurance, leaves, studying, training and more.

Software development agencies are determining their cost based on the hourly rate of developers. Senior developers have higher prices per hour unlike Junior developers. In the end even if a company hires senior developers for a project, the final cost would still be lower than insourcing their own team.

More Flexibility 

When an outsource company is hired there is no need to be in contact and meet face to face. All the meetings are done online so management can give instructions to the remote team. The location of remote staff of developers is practically not important in this age and hiring a remote team is easier than ever.

Another plus is that with a remote staff there’s no need for a long term contract. Business cooperation and payment lasts as long as the project lasts. It can happen that the employer is not satisfied with what has been done so that he can terminate the cooperation at any time.

This is a better option in comparison with hiring full-time in-house developers all year round because very often their expertise is not required after the project is completed. At least not until the next project.

Focusing on Core Competencies

When a company is outsourcing software development it has more time to focus on things that distinguishes them from its competitors. This is especially true for companies that are not in the IT industry, so their employees can focus on sales and marketing and leave software development to an agency that specializes in it.

The outsource company has extensive knowledge in the field of software engineering and IT. They often work with the latest technologies such as Blockchain and Artificial Intelligence so by hiring them and focusing on core competencies, the company can gain an advantage over its competition.

Since the remote team is specialized, well-coordinated and well acquainted with the technology and tools needed for the development process, there is no need to hire an in-house team that would probably need additional education and training, which consumes a lot of time they can use to enhance business growth and productivity in other ways.

Disadvantages of Outsourcing Software Development (Cons)

Lack of Quality

One of the most common fears with outsourcing is not meeting the quality standards. Outsource companies are often attracting clients with low prices which are paired with a lower level of quality.

The inability to directly control the staff working on the project is challenging because there is no possibility to have full visibility into the process as well as giving guidance and providing feedback. All of this can result in a lower quality of the final product.

Communication Problem

When working with an outsource company there is the possibility of a language and cultural barrier. Therefore, some information and advice may be misinterpreted, which may lead to the project not turning out the way the management wanted.

The remote staff is often located on the other side of the world with different time zones, which makes it much more difficult to arrange meetings and further guidelines related to the project. Project setbacks can extend its deadline, which can be problematic for both parties. 

Security Risk

Providing company’s personal data to a third party can be very risky. In this IT era, data is the most valuable asset so when a company is outsourcing it can put its business at risk. 

Many software development projects include customers' private and confidential sensitive information. This can lead to a potential leak or theft of intellectual and personal property.

That is why it is important that when hiring an outsourced company to choose the one that attaches great importance to security and that respects all laws and regulations.

Conclusion

Every company or organization is faced with a choice - Outsourcing Software Development vs. In-House Software Development. Which one is better?

Considering everything we know so far the choice is quite clear and obvious. Outsourcing Software Development is by far a better option most of the time. By hiring an outsource team, a company can grow, prosper and make more profit, which is often the main reason for its existence.

Code Bears is one of the leading software development companies and it has vast experience in this industry. Its developers have knowledge and expertise in various niches and industries so they can carry out any project regardless of size, budget or difficulty.