Over the last two decades, software development project outsourcing has become the norm. In fact, we’re now a long way away from the days when outsourcing was used primarily to cut costs (although it still remains an essential factor).
As the race to release new digital products heats up, outsourcing is now more important than ever to businesses across industries. This is because almost every enterprise is now transforming into a technology company by expanding their digital offering.
As the competition within this space becomes fierce, when should you decide to outsource your software development projects? What about the criteria? Let’s take a look.
You Lack Top Talent In-House
As the demand for technology grows exponentially, businesses from startups to multinationals are struggling to attract, hire, and retain top tech talent. From skilled software engineers to highly experienced project managers, it’s a struggle to put bodies in seats from North America to Western Europe.
According to a recent survey of over 3000 technology leaders, 65% stated that hiring challenges were hurting the industry (a 6-point increase from the previous year). Whenever demand far outpaces supply in the labor market, the best minds in the business will be snapped up by companies that can offer the most attractive remuneration and benefits packages.
This creates a situation where enterprises are faced with the grim reality of not having enough staff to focus on new projects and existing projects. There’s just not enough bodies in the building to get things done on time and on budget.
Whenever this is the case, the time to hire will slow down projects while diminishing your competitive edge in the marketplace. In this scenario, outsourcing is a viable option that helps fill the gaps quickly. It also ensures that your business keeps pace with the competition.
Money Matters
Before embarking on a software development project, you have to first choose your project management model. Fixed price, time and material, or hybrid?
In this scenario, you have to consider the fact that you don’t know if your new digital product will be successful or not. So if you hire a whole new team of software developers, you’ll also have to consider the costs of employment contracts, equipment, and rent.
So if things don’t go according to plan, businesses stand to lose a lot more when they follow this approach. On the other hand, when you partner with an established outsourcing provider, you won’t take on such a risk.
If we take the Time and Material model, for example, your company will simply agree on a partnership which can be scaled up or down based on present needs.
How to Manage IT Outsourcing Risks In Different Engagement Models
In the early days, the primary idea behind outsourcing software projects and other businesses processes across continents was to cut costs. While it’s no longer the only reason why we engage in this activity anymore, it still plays a critical role in software development.
For example, an average software developer in San Francisco or New York City will command over a $100,000 annually. However, in a country like Ukraine which has a high concentration of top tech talent, the average salary for a software engineer is $24,824.
You Need Access to Project Specific Expertise
Established software development outsourcing providers have extensive experience working on a wide variety of projects. As a result, these companies boast a wealth of rare expertise that you might not be able to find in your local area.
So if you’re building a unique and innovative product that demands highly sort after skills and experience, you’ll probably stand a better chance of succeeding by looking beyond your borders.
If you’re not comfortable with nearshoring or offshoring the entire project, you can also embrace an extended team model. With this approach, you can get your in-house developers to work together with your outsourcing partner by taking advantage of the latest project management and communications tools.
In this scenario, remote developers will be transformed into a full-blown branch of your company while you continue to function as the head office.
You Need a Long-Term Strategic Partner
The problems with supply and demand when it comes to top tech talent aren’t going away anytime soon. So if you’re thinking of releasing updates, patches, and new versions of your digital product, it’ll make sense to get into a long-term strategic partnership with an outsourcing partner.
This approach will help you hold on to many of the same software engineers who worked on the first incarnation of the product so you won’t have to waste time getting a new software development team up to speed. When you get into long-term partnerships, it will also make it easier to ensure enhanced security and privacy.
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