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The Pros and Cons of Outsourcing Software Development

The Pros and Cons of Outsourcing Software Development

Doing all your software development in-house just doesn’t make sense. Finding, retaining, and managing talent is slow and expensive. And nearly one in three IT (Information Technology) positions never get filled. 

This is why 92% of multinational companies outsource IT services, including software development. And if you’re thinking of joining them, you’re in good company, even if you’re a small or medium-sized business (SMB).

But before you make the dive, you may be wondering what the upsides and downsides are. Lucky for you, we’re staffing experts who’ve helped over 250+ businesses save and successfully find tech talent. We know the costs, benefits, risks, and alternatives like the back of our hands.

So read on to learn all about the pros and cons of outsourcing software development!


What Is Outsourcing Software Development?

Gartner forecasts worldwide IT spending to grow in 2023. It will reach $4.6 trillion, a 5.1% increase from last year’s spending. And the projected growth for software development is the highest compared to others at 11.3%.

Now, what is outsourcing software development

Outsourcing software development is hiring external experts to help you design, develop, and maintain software applications for your business. Instead of relying solely on your in-house teams, you can hand over tasks and projects to them.

A more critical question is: should you outsource software development? To help you reach a decision, here’s what you need to know.

Let’s Discuss: The Pros and Cons of Outsourcing Software Development

Businesses often find themselves at a crossroads when it comes to software development. One of the options that frequently surfaces is outsourcing. While outsourcing can bring various advantages, it presents its fair share of challenges.

What are the pros of outsourcing software development?

Ready to discover the key advantages that make outsourcing software development a go-to strategy for many businesses?

Reduce costs

Cost reduction is an expected driving force behind outsourcing software development. In-house development often involves bigger expenses, including salaries, benefits, infrastructure, and equipment costs. But with outsourcing, you can tap into regions where labor costs are lower, allowing you to slash your expenses to 70% or more!

Consider a small startup in the United States. By outsourcing their software development to India or the Philippines, they access skilled developers at a fraction of the cost of hiring locally.

Access to a skilled team

The software industry is one of the most promising sectors this year because of the increasing reliance on digital technologies. But, with the shortage of skilled tech talent, it has become more challenging for businesses to find the ideal software developers for their projects. Outsourcing allows you to tap global talent pools, giving you a higher chance of finding candidates.

Save time on hiring

Recruiting and onboarding new employees can be time-consuming. According to new data from The Josh Bersin Company, employers are taking 44 days on average to make a hire.

Moreover, time-to-hire rates have been growing yearly and will be challenging for recruiters this year, as if recruitment isn’t hard enough with job listings, conducting interviews, and training. 

Through outsourcing, you don’t have to worry about the hiring process. Let your partner handle the sourcing and vetting, and just focus on kickstarting your projects.

Work with a managed team

Many outsourcing companies offer project management services. With this, you can focus on your core business activities while a dedicated project manager oversees the development process.

Your chosen outsourcing partner can assign a project manager for you. This person will help keep your project on track, align the team with your vision, and deliver within the specified timeframes. 

Focus on your business

65% of Deloitte’s Global Outsourcing Survey respondents said outsourcing helps them focus on core functions. The following reason is cost-cutting at 63%

True enough, outsourcing software development allows your internal team to concentrate on innovating, strategizing, and improving your company's products or services. Instead of splitting your team's time, you can allocate their efforts solely to areas where they excel. This approach can lead to greater efficiency and growth.

What are the cons of outsourcing software development?

Now that you know the pros of outsourcing software development, let’s touch on the cons you may face (and some possible solutions).

Communication and cultural issues

Outsourcing often involves working with teams in different geographic locations and time zones. This can lead to challenges in communication and understanding due to language barriers and cultural differences. Miscommunications can result in project delays or misunderstandings regarding project requirements. 

To address these issues, implement:

  • Clear communication: Establish clear and frequent communication channels. You can use many remote management tools like Slack and MS Teams. Video conferences and instant messaging platforms can bridge the gap.
  • Detailed documentation: Create comprehensive project documentation, including requirements, milestones, and expectations, to minimize misunderstandings.
  • Cultural sensitivity: Promote cultural sensitivity within your teams. Encourage open dialogue to address cultural differences, fostering a collaborative atmosphere.

Get charged with other costs

While outsourcing can reduce labor costs, it may introduce other expenses. These include management fees, travel costs for overseeing the outsourced team, and potential rework if the initial results do not meet expectations.

So, to manage costs effectively, have:

  • Transparent budgeting: Develop a transparent budget that includes labor costs, potential management fees, and travel expenses.
  • Regular cost assessment: Continuously assess your project's financial health, monitoring expenses and ensuring they align with its progress.
  • Strategic travel: Plan trips to the outsourced team's location when necessary. Focus on crucial project milestones to maximize the impact of on-site visits.

Difficulty managing remote teams

Managing remote teams can be challenging, especially if you’re unfamiliar with remote work. Maintaining productivity, team cohesion, and effective collaboration can pose difficulties.

Adapt to remote work effectively with:

  • Remote work training: Train your team members on best remote work practices. Include project tracking, digital collaboration tools, and efficient communication.
  • Performance metrics: Have clear key performance indicators (KPIs) for remote teams, fostering accountability and productivity.
  • Regular feedback: Maintain open lines of communication with remote team members, encouraging feedback and addressing any challenges promptly.

Experience quality drawbacks

While outsourcing provides access to talent, the quality of work is not always guaranteed to meet your standards. Roughly 59% of businesses are happy with outsourcing work, mainly because it is an effective cost-cutting tool. Differences in understanding or expectations can lead to a product that falls short of your requirements.

Ensure quality deliverables by having:

  • Detailed project specifications: Develop comprehensive project specifications, leaving no room for ambiguity. Clearly outline requirements, objectives, and expected outcomes.
  • Quality assurance processes: Implement robust quality assurance and testing processes. Regularly review and evaluate work to catch and rectify any discrepancies early in the project.
  • Feedback loop: Establish a feedback loop where your in-house and outsourced teams can communicate openly about project progress and concerns.

Struggle with back and forth

Geographical distance and time zone differences can lead to delays in communication. Quick issue resolution and real-time collaboration become more challenging, potentially slowing project progress.

Overcome geographical and time zone differences with:

  • Overlap hours: Identify overlapping working hours between your in-house and outsourced teams and schedule critical meetings or discussions during these hours.
  • Flexible schedules: Encourage flexible work schedules to accommodate different time zones. Consider asynchronous communication tools to ensure continuous collaboration.
  • Task prioritization: Prioritize tasks and issues, ensuring that urgent matters are addressed promptly, even in the face of time zone differences.

Factors That Affect Software Development Costs

Understanding the factors that impact the cost of software development is crucial whether you're a budding developer or a business owner planning a software project.

To give you an idea of the work that entails with software development, here’s a sample computation from Sean Peek:

1. App type and complexity

On average, software development projects take up to four and a half months. The type of application you want to build and its complexity play a significant role in determining development costs. 

Apps can be broadly categorized into three types:

  • Simple apps: These are basic applications with limited functionality and straightforward user interfaces. Examples include to-do list apps or simple calculators.
  • Moderate complexity apps: These apps have more features and may require integration with external services or databases. A restaurant booking app or a weather forecasting app falls into this category.
  • Complex apps: Complex applications involve intricate functionalities and intricate user interfaces. It often requires extensive back-end development. Social media platforms like Facebook or e-commerce giants like Amazon are prime examples of complex apps.

The more complex your app idea, the higher the development costs will likely be. Complex apps demand more time, effort, and specialized skills to build.

2. Platforms 

The choice of platforms can significantly affect development costs. Platforms include:

  • iOS: For Apple devices like iPhones and iPads.
  • Android: For a wide range of Android smartphones and tablets.
  • Web: For browsers on desktops and mobile devices.
  • Cross-platform: Developing for multiple platforms simultaneously using tools like React Native or Flutter.

For instance, developing iOS and Android requires more resources, increasing costs. On the other hand, opting for cross-platform development can save money and time as you're essentially building a single codebase for multiple platforms.

3. UI/UX requirements

Your app's user interface (UI) and user experience (UX) design are critical factors influencing development costs. A well-designed and user-friendly interface enhances user satisfaction and can affect how quickly your app is developed.

Consider the difference between a minimalistic UI design and a highly detailed one. The latter often needs more time and effort, which increases costs. Moreover, if your app needs custom animations, complex transitions, or personalized graphics, these will add to your development expenses.

4. Backend processing

The backend of an application handles data storage, user authentication, and processing logic. The complexity of backend requirements can significantly impact development costs. For instance:

  • Simple backend: An app that primarily displays static content with little or no user accounts or interactions may have a straightforward back-end. This has lower costs.
  • Complex backend: Apps like eCommerce platforms or social networks require intricate back-end systems to manage user data, transactions, and real-time interactions. These complex systems drive up development costs.

5. Contractual agreements

The terms and conditions stipulated in the outsourcing contract can influence software development costs:

  • Payment schedules
  • Penalties for delays
  • Inclusion of intellectual property rights clauses

These can have financial implications and should be negotiated carefully.

To safeguard your interests and expectations, make sure to have:

  • Detailed contracts: Ensure that your outsourcing agreement is comprehensive and covers all aspects of the project, including scope, timelines, milestones, payment terms, and dispute resolution mechanisms.
  • Legal expertise: Seek legal counsel to review and validate contractual agreements. Make sure they are fair and legally binding.
  • Escalation procedures: Establish clear escalation procedures in the contract to address any disputes or issues arising during the project.

It is crucial to carefully review and negotiate the contractual agreements to ensure they align with the project requirements and budget. This can help mitigate potential cost overruns and ensure a smooth outsourcing experience.

Alternative Ways To Make Your Software Dream Come True

Whether you're an aspiring entrepreneur with a groundbreaking app idea or a business owner aiming to streamline operations through custom software, there are various routes to turn your vision into reality.

1. In-house development team

Hiring an in-house development team is the conventional approach to building software. This team typically works from your company's office and is fully dedicated to your project. While in-house teams offer direct control and collaboration, they come with some drawbacks:

  • Higher costs: Maintaining an in-house team involves expenses like salaries, benefits, and office space. In 2022, the median annual wage for software developers was $127,260 ($59.71 per hour).
  • Limited skill set: Your in-house team's expertise is limited to their skill set, which may not cover all the technologies or frameworks your project requires.
  • Slower scaling: Scaling up or down can be time-consuming and expensive when you rely solely on in-house staff.

2. Freelancers and independent developers

Hiring freelancers or independent developers offers flexibility and cost-effectiveness. You can find specialists for specific tasks or short-term projects. However, this approach has its own set of considerations:

  • Varied quality: Freelancers come with varying levels of expertise, making it crucial to vet and select the right individuals carefully.
  • Limited availability: Freelancers may not always be available when needed, leading to potential delays.
  • Lack of team collaboration: Coordinating multiple freelancers can be challenging, as they may not work seamlessly together.

3. Remote staffing

Remote staffing, a subset of outsourcing, involves hiring dedicated remote developers through a remote staffing company like MultiplyMii. By partnering with us, you combine the benefits of outsourcing with a stronger sense of ownership and collaboration. Team up with us and enjoy:

  • Cost-efficiency: Like traditional outsourcing, remote staffing can lead to significant cost savings compared to in-house teams. Get to save up to 83% on labor costs. Download our FREE salary guide to check how much you stand to save.

  • Direct control: You have direct control over your remote team, fostering a sense of ownership and alignment with your project goals.
  • Efficient collaboration: Collaboration tools and technologies make working seamlessly with remote teams easier than ever, regardless of geographical distances.

Remote staffing is a valuable option when pursuing software and web development projects. But here's the crucial question: How can you ensure you're doing remote staffing right? Here are some tips to get you started:

There are multiple avenues to bring your software dream to fruition. Whether you opt for in-house development, freelancers, outsourcing, or the increasingly popular remote staffing model, each approach has unique advantages and challenges you should look into.

Carefully assess your project requirements, budget, and goals, and you can choose the path that best aligns with your vision and sets you on the road to software success.

Build Better Software With Skilled Remote Developers

Need skilled professionals to help you bring your digital visions to life? 

If you're ready to tap into the global pool of software expertise, consider partnering with MultiplyMii

We are a leading remote staffing firm with dedicated recruiters to help you hire the right tech expert. 

With our help, find skilled software developers who can build better software, boost productivity, and turn your software projects into success. 

Let us help you take your software development to new heights.

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