Why You Should Outsource Software Development

February 13, 2018

By Steve Mezak

Software development outsourcing is a proven method for companies to address their programming needs. In fact, the options for you have never been better.  Software development outsourcing goes beyond simply addressing programming needs - it also accelerates business operations, drives up profitability, improves your market competitiveness, and improves customer experience.  

Software development outsourcing is a well-known strategy for product development - often not wholly embraced in the industry. But, it should be. For any business looking to cut labor costs, gain speed to market, reduce software bottlenecks and tap emerging technologies (such as AI, machine learning, IoT - and more) global teams are the solution. When done right, that is.



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The merits of global teams far outweigh the negatives. If you’re not experiencing great results from outsourcing software development… well… frankly… you’re doing it wrong. Software development outsourcing is a well-known strategy for product development - often not wholly understood by companies, who, in contrast would readily consider outsourcing other business activities.

Here are the real reasons you should outsource software development.

All companies outsource (software development) something

All companies use outsourcing for a variety of business needs. If you’re leasing office space, using a payroll service, or using an accounting firm to do your taxes, then you’re outsourcing! In a study conducted by Deloitte, the main reasons given by companies for outsourcing were:

  • Cost Cutting Tool (59%)
  • Focus on Core Business (57%)
  • Solve Capacity Issues (47%)
  • Enhance Service Quality (31%)
  • Access to Intellectual Capital (28%)
  • Manages Business Environment (17%)
  • Drives Transformational Change (17%)

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These are also good business reasons your company should outsource software development. Let’s examine these reasons in more detail.

Labor Cost Savings

 


Labor Cost Savings is not the ONLY reason you should consider software development outsourcing, but it’s definitely ONE of the most common reasons companies pursue this strategy.

 

In your cost evaluation, be careful not to decide that outsourcing is “too expensive” because of an incomplete comparison to your company’s internal labor costs. You cannot simply divide a programmer-employee’s weekly wages by 40 hours and compare this to outsourced programming rates. In-house employee costs include much more than their base salary. Your costs to have a programming staff will also include expenses for:

  • Employee taxes and benefits (insurance, paid vacation, etc.) - these costs, when added to the employee’s compensation, give you their “fully burdened cost”.
  • Computer hardware and software (including initial licenses and maintenance).
  • Supervisory time: for the management of the employee: one-on-one meetings, mentoring and coaching, scheduling work assignments, managing time reporting, etc.
  • Allocation of office space to an employee in a company-provided work space. For many companies, office work space and meeting room space is perpetually in short supply.

You must account for all of these expenses in your comparison of software development outsourcing rates versus the use employees.

Focus on Core Business

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Successful companies understand what they’re good at, and focus their organizational efforts and energy accordingly. Your portfolio of business software applications have a very important role of supporting your business goals - but these applications might not be  your core business.

Software development outsourcing can become part of your company’s overall strategy to maintain focus, whether is by using a third party service for logistics, engineering, or software development. Having a partner for software development outsourcing should be part of your IT department’s plan.

When you partner with a Software Development Outsourcer, you align your business with a company whose core business IS SOFTWARE DEVELOPMENT. That means that their growth strategies, investment dollars (business development, recruiting, training, etc) and business processes are all laser-focused on developing high-value software for you.

Capacity and Speed

Your company is already thinking about ways to scale without incurring prohibitive costs. As software development needs change, your company should be able to expand or contract your ability to “produce software code” rapidly, in a cost effective and predictable manner.

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Every IT department manager struggles with finite capacity of the programming staff. Each software developer on your payroll probably fills many roles - working a combination of remediation, enhancement, and new system development assignments all at the same time. It’ll be difficult for your IT department to re-prioritize the list of current commitments to focus more attention on a new development project. No IT manager wants to tell the company leadership team that growth and revenue are hindered by a limited software programming staff and the overwhelming pile of current commitments. The ability to scale (up or down) only matters if you can do so QUICKLY. Recruiting and onboarding new programmers can take months.

With a software development outsourcing partner, you can quickly ramp up a team of fully qualified programmers. Just as importantly, you have full control of the team size and/or technical skill mix, as demand fluctuates, or new technical skills are needed on projects. Most outsourcing companies can assemble or resize a project team within 24 hours.

Intellectual Capital

Businesses will often look to a third-party partnership to access expertise (“intellectual capital”) that exceeds the expertise of employees on a particular topic. Similarly, a software development partner provides your company with a pool of talent that you may not possess internally, or have access to through traditional employee hiring strategies.

By outsourcing software development, you can easily select skilled programming teams based on your particular needs. The expertise of your partner can include:

  • Programming skills that are in high-demand in your area -- creating a scarcity of hiring options.
  • Niche technical skills that are needed for your project, but not a skill that you want to commit when it comes to a full-time hire.
  • Technical certifications which don’t exist on your staff.
  • Subject matter expertise which has come from developing similar applications for dozens of other customers.

Not only can your outsourcing partner provide the necessary expertise, they also own the responsibility for having solid contingency plans for backfill, if the need arises. In fact, many companies that provide outsourced software development have “players on the bench”, shadowing other already-engaged developers as a normal course of business operation. This bench strength means that a qualified developer can immediately cover for responsibilities if a team member is suddenly unavailable due to illness or other circumstances.

You Should Consider Software Development Outsourcing

Software development outsourcing gives proven benefits to companies - and your options for outsourcing have never been so good as they are today. At Accelerance, we have relationships with companies in more global locations that have skilled teams to help you successfully address your next software project.

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