Why Do Companies Outsource Software Development?

Accelerance Research Team

Accelerance Research Team

Sep 30, 2023 | Accelerance Blog

Why do Companies Outsource Software Development

There are two things that tech-enabled companies need more than anything else: speed and control. Speed to get a product to market fast, and control to keep costs within budget and ensure that resources and capabilities are effectively managed.  Simply put, business organizations want projects done quickly and efficiently, ultimately putting them in the best position to succeed. 

In today’s globally competitive landscape, achieving desired results, when you need them, often calls for proactive measures. It’s essential for companies to continuously evaluate and adjust the way they work toward a cost-effective, time-efficient, AND operational business model.  If you want to stay ahead in the game, maintaining the status quo just won’t cut it. 

When struggling to find the sweet spot for maximum productivity, common questions often arise;

  • Is software development outsourcing a viable solution?
  • When should my company take the leap and outsource software development?

In this article, you will learn the five most important reasons why software-dependent enterprises opt for software development outsourcing. While the arguments presented below apply to software outsourcing in general, keep in mind that there is no one-size-fits-all model. There are several ways to collaborate with a service provider.

In general, software development outsourcing is the way to go when your organization wants to:


Explore cost-efficient strategies and reinvest your savings

An in-house IT staff is expensive, no question. As developers gain more experience, rates increase, and the staff becomes far too pricey. Other than staff expertise, company location also plays a role in the pay scale that an IT professional commands. For example, a junior developer in the US costs more than a senior developer in the Philippines. 

In addition, consider that developing software is costly in more ways than just a programmer’s salary. Development tools, licensures, insurance, hiring, onboarding, employee retention programs…the list goes on and on. These expenses will only grow as the team expands.

By contrast, there aren’t many overhead costs involved when outsourcing custom software development to third-party contractors. Often, these vendors offer full-cycle development services at attractive rates, especially in cost-effective destinations like South Asia, Latin America, and Eastern Europe. This allows a company to deliver more with the same budget, using a pool of project-specific resources without compromising on proficiency level.

Keep in mind that this is not a short-term financial fix. It's a long-term strategy with a fixed budget that allows you to explore cost-efficient strategies (Outsourcing projects will actually cut internal costs up to 70% compared to hiring in-house) without compromising on quality.


Access a wide range of skill sets

Rates aside, software-dependent companies also require a more knowledgeable workforce. Developers should be able to adapt to emerging technologies (such as AI, machine learning, IoT, etc.) and/or quickly learn new languages to keep their technical skills up to date. Having this higher level of skill and experience is essential to staying competitive in today’s world.

Unfortunately, not many tech enterprises have these skill levels in-house, and hiring talent is difficult. In fact, searching for a particular skill set in a local labor market may yield zero results, creating recruitment bottlenecks. Calling on a software development company’s personnel resources allows the procurement of rare IT talents.

Outsourcing is not just about finding eccentric tech skills. In many cases, companies provide extra talent organizations need such as Software Engineers, Scrum Masters, or Software Testers. Plus, external minds with varied backgrounds and expertise levels allow for further innovation and drive the final product to heights beyond what an internal team can accomplish. After all, two heads are always better than one.


Speed up development while staying flexible

The success of a tech business often depends largely on its trustworthiness—both to shareholders and customers. This is why launching a product on time is one of the most important challenges. 

Why? Well;

  • The costs associated with a prolonged hiring process can add up quickly 
  • The need to eliminate risks associated with product delays is a must.

Operating like well-oiled machines, third-party contractors are able to counter emergency situations and allocate new resources to projects in a flash, so you can still reach completion despite tight deadlines. Outsourcing providers have the best setup to anticipate potential risks and eliminate them due to a fast-paced development cycle, effective development methodology (Agile methodology is the most popular, based on the 12 fundamental principles of the Agile Manifesto), proper documentation, and the right technologies. Some can even bend further and adjust working hours to optimize project delivery.

Substantial flexibility with the option to scale a team up or down as needed is typically available in a long-term dedicated team model (depending on your specific SLA, of course).


Leave your development in trustworthy hands

So why do companies outsource software development? It’s a given that outsourced providers offer much-needed tech talents, heightened expertise, and a vast knowledge base as they continue to work with specific industries and various software products. 

For example: You’re building a web app (say, a payment processing system) and you need to build a team that can actually create what you need when you need it. Maybe you have a very competent in-house team, but if a project requires a distinct set of skills, you must seek out those team members elsewhere.

Partnering with an outsourcing provider allows your company access to IT talents that have deep industry knowledge of complex technologies. Senior architects, UI/UX designers, and business analysts who already have the technical understanding, skill sets, and experience you need are on hand so that your core team won’t go in blind. Plus, outsourcing means that you don’t have to hire these specialists on a full-time basis — only for the duration of your project. 

When choosing your outsourcing partner, it’s imperative that you don’t just consider the capability to provide the right technical people––reliability matters just as much. Be sure to include a background and track record check as a crucial step in finding the right software development partner.


Focus on your core competencies

Development work takes up time; time that could prevent you from focusing on core business activities that drive revenue. If you see that building your tech projects takes hours away from your main business, outsourcing some of the work in software development should help keep your priorities back on track. 

Think of it like this: your software development outsourcing partner is a branch of your organization. It is possible to run all the branches yourself. However, having a trusted employee manage the different departments offers a path to greater efficiency. Delegating brings you the best of both worlds; keep control over what happens and when, without wasting time on laborious routine management tasks such as recruitment, payroll, and training efforts. 

Now, of course, you can’t outsource 100% of the work: your involvement as a client is essential for the partnership to succeed. Entering into a partnership thinking you can just delegate a project and let the outsourced development team blindingly execute the tasks sets things up for failure. As a client company, you need to have at least one technical lead who has a solid knowledge of your software products and can be involved in the day-to-day collaboration with the outsourced team. This is what you would normally do with your core team, and you should treat your extended team no differently than yours.

That said, the time saved on managing and hiring can be used to help you establish leadership in your industry—innovating and creating better products for greater customer satisfaction. 


Is outsourcing the way to go?

If you’ve given a check to most or all of the reasons above, then software development outsourcing is a good fit for your enterprise. And why not? It’s a solution for businesses looking to save money and time, and to fill in their expertise gaps. It allows you to focus on growing your business while lowering your time to market. Your product remains in capable, trustworthy, professional hands, while you get to focus on running your business.

Outsourcing should be considered as a strategic partnership, not a simple hand-off of duty to a third party. With our certified network of partners, you are able to build collaborative relationships where you feel no difference working with an expert, whether across the table or thousands of miles from you. Contact us to get connected today.

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