Outsourcing - Weighing Opportunity and Project Costs

Simply put, outsourcing is the process by which one firm hires a third-party to fulfill one or more of its business needs. In the world of software development, outsourcing is on the rise. As you'd imagine, the right vendor can provide an enormous advantage to your company. However, choosing a development partner that fits your organization isn't a simple, straight-forward process.

For example, there are factors such as offshore versus onshore, costs versus expertise, outsourcing versus outstaffing, and many pros/cons upper management should weigh before a final decision is made.

OUTSOURCING VS OUTSTAFFING

Outsourcing to a software development firm provides organizations a great deal of flexibility. Some advantages include lower costs, fewer employees, and freeing your company from the burden of recruiting, hiring, and managing IT staff.

In contrast, outstaffing means you're responsible for talent discovery and maintenance, however, since workers are hired on a contractual basis, you're not choked by high annual salaries, health benefits, and performance bonuses. Obviously, outstaffing is a bit more hands-on than outsourcing, nevertheless, it should certainly be a consideration, especially for startups and small businesses.

OFFSHORE VS ONSHORE

As the name implies, offshore firms are those outside of your home country, typically located overseas. The primary benefit of offshoring is bargain-basement pricing. Such firms often have rates that are far below market value, regularly as low as $10 - $15 per hour. But as we'll soon discuss, hiring offshore has its drawbacks, including hidden costs, greater potential for data theft, and time zone issues.

Onshore firms, on the other hand, are located within the same country. Though you should judge each development partner on an individual basis, it's not a stretch to say onshore firms tend to produce higher quality projects. But as you'd expect, the improvement comes at a cost, with some firms charging more than $100 per hour. Nevertheless, going with an onshore partner affords greater fluidity, access to first-class talent, and more control over your project.

COSTS VS EXPERTISE

In the tech industry, it's not uncommon for software development firms to lure in customers with attractive rates. While outsourcing tends to be cheaper than hiring an in-house team, suspiciously low offers should always raise an eyebrow. This is even truer if the developer claims to be immediately available to take on your project.

Often is the case, firms that engage in such tactics tend to be lacking in one or more of the following areas: expertise, passion, or quality. In truth, it's hard to accurately assess a firm's passion for crafting top-tier software products, however, expertise and quality can be qualitatively measured.

We'd advise organizations to thoroughly vet each prospective firm's competency and true value before paperwork is signed. A competent development firm should have no issue providing examples of similar projects, in addition to insight regarding the level of talent that will be assigned to your project.

- OUTSOURCING PROS -

FOCUS ON YOUR CORE BUSINESS

If you desire growth, there's no way your company can handle all the challenges that pop up along the way. For true growth, your organization must learn to focus in on its core product or service, while auxiliary tasks are properly delegated.

Let's use chocolate bar manufactures as an example. The largest, most profitable brands are solely dedicated to crafting the best candy bar possible. They don't venture into farming, nor do they lease fleet vehicles for shipping. Instead, they simply do what they know best and work with other companies to fill the gaps.

In our present era, no industry is immune to the influence of technology. For many companies, building software in-house is akin to the candy bar maker growing coca or buying delivery trucks. Rather than bog down your staff with illogical tasks, it's better to seek professional assistance from a credible software development partner.

INSTANT ACCESS TO TALENT

As mentioned above, one of the biggest advantages of hiring an outside firm is the instant array of talent that becomes available. Rather than embark on a never-ending journey to find the perfect talent for your organization, well-run software development companies already have a slew of highly-trained engineers ready to tackle the challenges you set forth.

Your greatest asset as a company is your staff. When working exclusively with in-house talent, just one departure has the potential to derail an entire project. What's more, Glassdoor says it takes an average of one month to hire a new employee in the United States. Even then, it can take up to two years before the employee is fully up to speed. Hiring an outside development partner virtually eliminates the pain of talent turnover.

FLEXIBILITY

Scope changes can wreak havoc on your budget and deadline. By taking advantage of a knowledgeable software development partner, your company can rest assured that the ideal technologies for your particular project are chosen from the start. This means adding new functionality or features won't cause massive rewrites.

What's more, unlike traditional hires, payouts to your development partner end the moment the project is finished.

QUALITY ASSURANCE

Responsible development partners tend to be as invested in your project are you are. Firms that don't offer an ironclad quality assurance agreement should be nixed from your list. Any tired-and-tested software development company will readily agree to terms that set penalties for missed deadlines, substandard quality, and IP violations.

- OUTSOURCING CONS -

TIME ZONE / LANGUAGE DIFFERENCES

Time zone and language differences can be a huge hurdle for companies looking at offshore software shops. Unsurprising, the latter is becoming less of a problem as more and more countries adopt English as the official language of business. Nevertheless, even when language isn't an issue, there's little that can be done about time zone discrepancies. More often than not, the sparkle of an attractive offer can dim if time zone differences become more costly than the savings.

DIFFERENT CULTURES

Whether you realize it or not, during the course of running your business, a certain culture is fostered. Both explicit and implicit orders are carried out according to the rhythm set forth by upper management. When an outside firm is hired, norms can erode as the two cultures learn to mesh in accord. While this is often temporary, if care isn't taken, the change may not fall in line with your best interests.

IP THEFT

Anytime you share your ideas with an outside firm, you run the risk of IP theft. A nondisclosure agreement is often the go-to for companies looking to minimize their risk, but in practice, there's very little you can do protect your idea once it's "in the wild."

HIDDEN COSTS

When deciding on a software development partner, be sure there's a crystal clear understanding of all potential fees and charges.

Though dealing exclusively with onshore firms lessen your chances of unscrupulous billing, it does happen. Before signing an agreement, you should know if the developer charges for calls, meetings, travel, training, or other seemingly trivial expenses. Unfortunately, it's not uncommon for unwitting companies to discover camouflaged fees once the first invoice arrives.

AUTHOR - Jinal Shah

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