The Benefits and Risks of Outsourced Software Product Development

The Benefits and Risks of Outsourced Software Product Development

In the software industry, outsourcing has been a common and widespread thing during the last few years. No wonder it’s predicted that the outsourcing market will reach $5.50 trillion by 2028, with a compound annual growth rate of 22.9%. Companies resort to outsourcing when they require custom software development, mobile app development, web development, cloud computing, IT consultancy, etc. And the size of the project doesn't even matter: founders outsource both small and large projects, the whole project, or only a part of it.

However, just like any cooperation model, IT outsourcing has its pros and cons. So, is it really worth outsourcing your project to a software product development company, or is it better to search for another way to bring your software product idea to life? In this article, we will explore the advantages and risks of outsourced software development. In the end, you will have all the information you need to decide whether outsourcing will work well for your project or not.

What is outsourcing?

Outsourcing is the practice of hiring a third-party to complete the project, or certain tasks within the project, or to obtain a service. Founders usually resort to outsourced development services when they don’t have the necessary expertise in-house, don’t have time to manage the project on a daily basis, or when their onboard team is busy with other work.

Companies can choose outsourcing services onshore (within their own country), nearshore (to a neighboring country), or offshore (to a distant country).

Benefits of outsourced software product development

There are a lot of advantages that you can receive when deciding to outsource your project to a third-party software development company. Let’s take a look at the key reasons why this cooperation model can increase your chances to succeed with your project:

1. Focus on your business

If you're a small company or startup, managing the various stages of software development can be distracting and time-consuming. Maintaining an in-house development team might stretch your resources thin. That's where outsourcing becomes a vital strategy. It allows you to focus on other aspects of your business. All while still having access to the expertise of professionals who are well-versed in the stages of software development and know what they're doing.

When outsourcing the development of your software startup, the daily overseeing of the development process is off your shoulders. Typically, outsourced teams come equipped with everything needed for both project management. This includes a project manager, and the stages of the software development process, including front-end/back-end developers, business analysts, UI/UX designers, QA engineers, and so on.

As a product owner, your communication will primarily be with a project manager, providing updates on the progress of the development process as frequently as you desire. Hence, you won't have to invest excessive time and energy into managing the process, thereby enabling you to focus on your core business tasks.

2. Hire high-skilled developers for less money

One of the key reasons why many companies choose outsourcing is the reduction of development costs without losing in terms of quality. Hiring developers from some overseas outsourced product development company often costs less than hiring people locally. Even if those local developers have more experience and/or better skill sets than their foreign counterparts.

3. Save money

According to Forbes, cost reduction is the primary reason why companies resort to outsourcing IT services. Differences in salary rates across countries are not the only way you can save money when resorting to outsourcing services. When it comes to in-house workers, you are paying for the hours of work. But, when it comes to outsourcing, you pay only for the job done.

In addition to that, you become free from the need to spend money on recruiting hassles. The vendor will provide you with the most suitable specialists for your case without any extra costs. All you have to do is find the right IT outsourcing partner (as usual, it takes from one to two weeks).

It also should be mentioned that, when choosing an outsourcing model, you don’t need to exend your office space, buy additional equipment and software, etc. All you need is to have the opportunity to keep in touch with your vendor.

4. Access specialists that are not available within your city and region

Outsourcing allows accessing specialized skills that would otherwise be unavailable locally. Many companies don't need full-time employees for their software projects — they just need someone with certain technical abilities who can get something done quickly. And finding someone like this is easier when looking abroad than within one's own country.

The pool of specialists within your country or region is definitely not as variable and large as the talent pool within all the other countries. You can outsource your project or a part of it to any software development company around the world that provides IT outsourcing services and, this way, reach out to specialists that are not available in your city.

5. Speed up the time to market

It usually takes around 66 days to hire an in-house specialist that will meet your expectations. Imagine how much time it will take to gather the whole team. With outsourcing, you don’t have to search for any specialists. The product development service provider will take care of that. All you will have to do is sign a contract.

This way, you will be able to start and finish the development process much faster and gain an advantage over your competitors.

Risks of outsourced product development

Along with all the sweet benefits, there are also certain risks associated with outsourcing custom software development. In this part, we will take a glance at the most common risks of IT outsourcing and talk about the ways to avoid or minimize them.

1. Possible leaks of your intellectual property

It’s always a risk to entrust sensitive data about your company to a third-party that may use it against you. Even if the company is popular and has been on the market for many years, it still may be dangerous to entrust information about your company to your outsourcing partner. If you want to make your cooperation safe, don’t violate legal regulations. Ensure you sign a non-disclosure agreement (NDA). This should specify the consequences of using private information about your company against you in the contract, etc.

2. Language and cultural barriers

In the majority of cases, outsourcing implies cooperation with a remote team from another country. As per Entrepreneur, the top countries for cost-effective IT outsourcing are India, Poland, Ukraine, China, Brazil, Malaysia, and a bunch of other non-English-speaking countries. This results in another challenge associated with a language barrier.

If you are about to outsource your software development project to a country where English is not the native language of the majority of citizens, this may also lead to problems with communication.

Besides, it also should be mentioned that people from different countries have different attitudes to work. Furthermore, they have different habits which may become a reason for misunderstanding between you and your vendor.

If you want to avoid both of these problems, ask your potential IT outsourcing service providers about the values, level of English of the workers, and working principles of the company. You may also interview all or some of the future members of your outsourced development team if you wish so.

3. Time zone difference

It’s hard to establish normal communication between you and your outsourced partner when you have significant difference in time. The time difference of more than seven hours definitely creates some discomfort and makes it difficult to communicate and solve upcoming problems together.

If you want to avoid this, try to choose an outsourcing destination in the country that is located in a close time zone with a time difference of no more than 4 hours. However, it also should be mentioned that the majority of software product development companies are accustomed to communicate with their partners from overseas and have developed a system that allows for convenient communication even in spite of time differences.

4. Problems with software product management

You can’t control your remote outsourced team like your in-house team. For sure, a lack of control may lead to missed deadlines, unfulfilled expectations, and other unpleasant surprises. If you are searching for ways to minimize these risks, tell the vendor that you want to see some result or progress biweekly, for example. Or discuss the ways how you can make your cooperation safer and more reliable. For instance, develop a product management plan together, etc.

5. Mismatched expectations

When you are not a part of the development team, you can’t be 100% sure that the final product will meet your expectations. This is because you don’t know if the team has the same vision of the future product as you do. As a result, you may require a lot of additional time and money to rework your project to make the final product compliant with your expectations.

If you want to avoid misunderstanding, you have to clearly specify the software product needs. Create a project brief, and provide your team with an SRS (software requirement specification) document and other documents. This can make the understanding of your future product clearer for your outsourcing partner. It’s also vital to regularly keep in touch with your team to fix any misunderstandings as soon as they appear.

And, of course, you should check the reviews from your candidates’ previous clients when choosing an outsourcing partner. This will help you find out if your potential vendor can really understand the client's needs.

Bottom line

Software development outsourcing has a lot of benefits:

  • Lets you focus on other aspects of your business.
  • Allows you to save money, time, and resources.
  • Can help you reach out to the most experienced and talented developers around the world.
  • Allows you to launch your software product faster than your competitors.

However, outsourcing also has some risks:

  • Threat to your sensitive data when handing sensitive information to third parties.
  • Language and culture differences.
  • Lack of control.
  • Time zone difference.
  • Mismatched expectations.

In general, all of these risks can be minimized and outsourced software development is rather beneficial. We recommend outsourcing a project that is not core to your business. Something that doesn’t require your full involvement in each step of the software development life cycle (SDLC).

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