Have you ever wondered what the secret behind a successful business strategy is? Well, there can be a number of factors but choosing the right software development outsourcing model is the main driver. Software development outsourcing has been around for several decades. It is the prominent strategy businesses use to leverage external expertise for various services.
Software development outsourcing means hiring external professionals or teams to complete your entire software development project or a part of it. It has become popular in recent times as it is the ultimate solution for problems like developers’ shortages, increased wages, skills shortages, and lack of resources and infrastructure.
Now the question is How to determine what type of outsourcing model is right for your business? Most of the time business owners fall prey to outsourcing providers that provide very basic services and have less knowledge about catering to the unique needs of a specific business. Also, the market is full of IT outsourcing service providers with unique plans and endless options. This can also mislead business leaders.
In this blog, we have explored four different types of outsourcing models and help you choose the right one.
Let’s get started.
There are three main types of IT outsourcing models for software development projects. These IT Outsourcing Engagement Models are based on:
There are 4 types of outsourcing based on location. These IT Outsourcing Types Includes;
Offshore outsourcing is a software development outsourcing model in which a company hires an offshore software development team or individual offshore developer from another country to handle the entire project or some parts of it.
Why you should consider it: This is a cost-effective way to access a global pool of talent and can allow companies to scale their development efforts quickly.
When is the right time for it:
If you are a company looking to:
Then offshore software development is the right option for you.
In this type of outsourcing model, the software development team is located within the same country as the company that is outsourcing the work.
Why you should consider it: This can be a good option for companies wanting to maintain close communication and control over the development process and access specialized skills or expertise that may not be available in-house.
When is the right time for it:
If you are a company:
Then you should definitely go for this option.
In Nearshore outsourcing, the development team is located in a nearby country, typically one that shares a similar time zone or language.
Why you should consider it: This can be a good option for companies that want to take advantage of lower labor costs in another country, but still want to maintain relatively close communication and collaboration with the development team.
When is the right time to consider it:
If you are a business looking for low-cost labor but also want to maintain control over the project and work in the same time zone, then this outsourcing model will work for you.
This is when a company combines elements of offshore, onshore, and nearshore outsourcing to create a customized solution that meets their specific needs. For example, a company may use a team of offshore developers for some parts of the project, while using onshore or nearshore developers for other parts.
Why you should consider it: There are certain projects that can’t work on a single outsourcing model. So, hybrid outsourcing helps businesses leverage the advantage of all the three outsourcing models and create a customized solution that caters to their needs.
When is the right time to consider it:
Hybrid outsourcing should be considered for projects:
There are 4 outsourcing types based on relationship. These relationship based outsourcing types includes;
Managed Services mean delegating the entire management and control of an IT project to a third party also known as Managed Services Providers (MSPs). These MSPs also provide servers, networks, desktops, and other storage systems. So, organizations short on infrastructure and resources prefer to work with MSPs.
Why consider managed IT services:
Businesses choose managed IT services to cut down unexpected costs, cost of hiring and training resourcing, avoid managing and arranging IT equipment and handle security threats. Also, MSPs provide insights and expertise at a manageable monthly cost rather than an upfront cost.
When is the right time to consider it:
Managed IT services are best for companies:
IT Staff augmentation means hiring additional IT personnel to support an organization’s existing staff.
Why you should consider it: IT Staff augmentation services provide additional expertise and fills a skillset gap. This model also helps businesses effectively handle an increased or seasonal workload. The augmented staff can work onsite at the organization’s facilities or remotely, depending on the organization’s needs.
When you should consider it: Staff augmentation is for you if you:
The dedicated development team model provides a complete team to businesses including developers, designers, managers, and businesses. This team is allocated to one single project for a given time.
Why you should consider it: The dedicated development teams work like an in-house team since the team can be controlled directly by the client. It is a customized and collaborative approach to software development
When you should consider it:
Hiring dedicated development teams is best for:
Project-based outsourcing is a type of software development outsourcing model where a company outsources a specific project to external providers. It is a temporary engagement depending on the size and period of the project. Once the project is complete the engagement ends unlike managed services.
Why Consider this model:
This is one of the best outsourcing strategies if you are looking to retain ownership of the project while outsourcing. Also, it focuses on achieving project-specific goals providing optimized outcomes.
When you should consider it:
Project-based outsourcing is for businesses that:
There are four different types of IT outsourcing pricing models these are following;
As per the fixed price model, the client and the software development outsourcing company agree upon a standard rate. This rate is charged monthly, and the deliverables are pre-decided in accordance with the rate.
Why you should consider it:
Here are some of the reasons to consider this type of software development outsourcing model:
When you should consider it:
The fixed price outsourcing model is suitable for small companies, usually start ups with limited budget and short-term projects. Although the quality of work is compromised a bit but at least you do not have to bear the burden of cost management in the long run. Also, this model can become expensive for long term projects.
In the time and Material outsourcing model, the client only pays for the time spent on the project and the number of developers/resources deployed on it. It supports agile methodology where changes or iterations are performed as per the client’s demand.
Why you should consider it:
The time and material model provides maximum control over the project with transparency of payment.
When you should consider it:
If you are a business:
A build operate transfer is a type of agreement between the client(recipient) and the outsourcing company(builder) in which the latter builds and operates an IT or businesses process for the client and after some time handover the ownership.
Why you should consider it:
The BOT model helps businesses with low upfront investments for big projects. The builder is responsible for kickstarting the project on behalf of the client. Also, the client gets an advantage of risk sharing with the service provider.
When is the right time to consider it:
The BOT model of IT outsourcing should be considered:
There are a million software development companies around the world. But why have only a few hundred made their mark? The answer is they are working with top software developers and qualified specialists. Therefore, outsourcing is always the best option to work with top talent and stand out in the crowd.
Hiring and training software developers can be expensive, and you need proper infrastructure in place. Also, hiring in-house is time consuming since you will be looking for ideal candidates while managing other tasks. Software development outsourcing companies save you from the hassle by providing pre-vetted teams to start working right away.
One of the major benefits of software development is that you get high-quality software. How so? You certainly have service level agreement (SLA), metrics and other performance indicators in place, right? This way you regularly monitor the performance and make sure the service provider understands the level of quality you want to attain.
Niche experts help companies understand technical perspectives better. So, by hiring software developers from outside having diverse skillset helps you explore your project from another perspective.
The third-party vendor takes care of all the expenses related to HR operations. You just get a tailored and readymade team as per your convenience.
Need ‘on-demand’ service? Outsource your software development project using any of the IT outsourcing models. This is the only way to enjoy the freedom of choosing the resources and the number of resources and scale the teams up and down according to the project requirements.
The stress related to the development process can impact on your other business processes if you are handling it on your own. The software development outsourcing companies liberate you from such worries and help you focus on core business operations and generate the desired return on investment.
Now that you know about different types of IT outsourcing models, there are some protocols to follow and mistakes to avoid while software development outsourcing. Here you go:
This is the first step of hiring an outsourcing partner and most of the businesses do it wrong. Doing thorough research about the outsourcing company can save you from troubles like:
So, to avoid these issues at the later stage of the project. It is important to make sure the outsourcing company has a good brand image, a clear and trackable history, positive customer reviews and a strong portfolio.
Cost shouldn’t be the main driver when hiring a software development outsourcing company. Cheaper is not always better. If you must compromise on the quality of your software just to save some bucks.
Then it’s better to avoid opting for software development outsourcing in the first place. Make sure the company is best at what it does and then negotiate the price, not the other way around.
Another mistake to avoid while choosing the right types of software outsourcing development model is rushing the project requirement discovery phase. If the project scope and requirements are not identified in detail, then how would you communicate it to the outsourcing company? Here are some steps that can help you with the discovery phase:
Outsourcing your software development project doesn’t mean you must blindly trust someone. Sometimes things do not go as planned.
This can result in undesirable outcomes that can be a blow to your reputation. So, it is always a good idea to have a plan B at hand.
The onboarding step is crucial to the success of the project. If you have a solid onboarding process in place, it will be easier for the outsourced team to grasp the requirements and successfully drive the project to completion. No matter what type of outsourcing model you opt for onboarding step remains the same. So, for successful onboarding, you must:
Having a poor contract can lead to frequent changes within the project. It can also waste time since the resources are moved back and forth or changed sometimes. It can result in delays and an extended project timeline. To avoid such inconvenience, have a solid contract from day 1 and regular updates and audits.
Maintaining control over the quality of the code is important for a successful IT project. How can you achieve this control? The answer is simple. You must have well-defined coding standards and a long-term performance vision. This is what differentiates a high-quality code from a low-quality code.
Before choosing the right type of outsourcing model, there are a number of factors to consider. For instance, what rare skillset is your team lacking? Or how much flexibility is required? Here are some questions to ask before you opt any of the above-mentioned outsourcing models:
When you answer these questions, you ultimately get a tailored outsourcing solution that fits your business needs.
Once you choose the right type of IT outsourcing model for your business, the next step is finding the right outsourcing partner as per the model. Here is the process of finding the right software outsourcing company:
You can find them at many freelancing sites and portals such as Good Firms, Clutch, Upwork, etc. And jot down the ones you think are offering value to your business goals.
By sending RFP, you can better know the selected vendors that can fulfill the project requirements and expectations. Also, ask around your business circle for recommendations.
Get in touch with the clients mentioned in the company’s or vendor’s reference portfolio to get unfiltered review of the company.
Never opt for companies that offer rock-bottom cheap rates for their software development services. Never sacrifice quality for cheap rates. Although, you may get good service at reasonable rates from some regions of the world.
A vendor offering software development services should have secure servers for the protection of sensitive information. Look for strict security policies if they are mentioned on their official web pages.
Verifying company certifications and accreditations is vital while vetting for the vendors since it’s another area where you can find red flags.
Don’t forget to investigate the technology stack of the vendor sometimes, they are not good in the technological area which you wish for your product development.
The IT outsourcing models can be used for outsourcing a number of IT services. Here is a list of these IT outsourcing services:
Custom software development has a defined set of requirements. It involves the process of designing, creating, deploying and maintaining software for a specific set of users.
Cloud computing and services include hosting applications, storing data and managing resources. Usually companies outsource services like Paas, SaaS and IaaS.
These services include designing, developing and maintaining these applications.
Companies hire outsourcing companies to maintain their servers, networks, databases and storage systems. The outsourcing company takes care of the maintenance and security and recovers the data if it’s lost.
To ensure that the IT projects are delivered on time and on budget, project managers are outsourced to monitor and execute these projects.
These services are outsourced to make sure the software application is reliable. Testing may include functional testing, performance testing and security testing.
If a company needs expert advice in areas like technology strategies, digital initiatives and system design, IT strategy and architecture consulting services company is hired.
Codeninja is a leading software development outsourcing company dedicated to delivering top-notch outsourcing services in Pakistan and around the globe. We provide you with the flexibility and expertise to unlock the full potential of software development outsourcing. To take your business initiatives to new heights, explore the IT outsourcing models offered by CodeNinja:
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Software development outsourcing enables businesses to take advantage of benefits related to it like reduced cost, external expertise and increased efficiency. The above-mentioned different types of outsourcing models help businesses choose the right software outsourcing model and strategy as per their objective and needs. No matter what option you choose, always assess your requirements, risks and challenges and select your outsourcing partner wisely.
Usually, outsourcing IT services is considered best practice but there are certain services that should be kept in-house. Here is the list of those services and reasons:
If you are a product-based company, it is better to keep the solution in-house. This is because it’s your core expertise and makes you unique. Although you can outsource the code writing for the product to a third party.
Outsourcing services like technology road mapping, strategic decision making and defining technology structures is a big no. The reason is the outsourcing company cannot take decisions for you as it is not aware of the internal working of the organization. Also, if someone from the outside starts taking decisions for you, you are no longer in control.
Research and development are a never-ending cycle. Companies promoting research and innovation should keep these services in house to maintain control and provide room for experiments.
Companies should not outsource Helpdesk services to outsourcing companies to provide personal experience to their customers.
Everybody is running like a hamster on the pinwheel of technological evolution. Do you know what matters the most to stay ahead of this game? Efficiency, of course. Now how do you achieve optimal efficiency? The answer is simple. You can’t handle all the aspects of your business alone. A helping hand from outside can do you good. This is where outsourcing comes in. Earlier in the days, outsourcing was known just for the cost reduction factor but today there are other factors that will compel you to consider it.
Here are some of the reasons why outsourcing is right for your business:
The cost of outsourcing a software development project can be determined by the following factors:
Outsourcing software development projects can save you from the following expense:
Building a strong relationship with our outsourcing partner is very crucial to the success of any project. Here are some of the tips to keep in mind for a smooth collaboration:
Technical Content Writer
Ayman Mehreen is a seasoned technical content writer who is driven by a passion for breaking down complex concepts. She has been instrumental in generating reader-friendly and engaging content for Code Ninja. From exploring the latest trends or unraveling intricate technical topics, Ayman’s expertise shines through in her writing. Connect with Ayman on LinkedIn to stay updated with her latest articles and industry insights.
Ayman Mehreen is a seasoned technical content writer who is driven by a passion for breaking down complex concepts. She has been instrumental in generating reader-friendly and engaging content for Code Ninja. From exploring the latest trends or unraveling intricate technical topics, Ayman’s expertise shines through in her writing. Connect with Ayman on LinkedIn to stay updated with her latest articles and industry insights.
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