3 Reasons Why Outsourcing Software Development is a Good Idea

Software Development Outsourcing comes in many guises and various options. From large scale governmental programs to tweaking additional features for an existing mobile application.

For the sake of relevance, this article focuses on mid-sized organizations — who perhaps employ up to 10 in-house developers — toying with the idea of extending capacity through outsourcing.

Cost

The key reason you would consider outsourcing is cost. Not just direct costs, but in-direct and opportunity costs need to be factored in.

Direct Cost Savings

The easiest thing to compare is direct costs. For a CTO this will include

1. Wages / Resource
2. Tools required to perform the job
3. Training costs
4. Deskspace
5. Management Overhead

In-direct costs

Quite often not on the radar to an IT Director would be In-direct costs. These are often not a direct concern to the budget holder.

1. Tax, NI and Legal costs
2. Benefits — e.g. pension, healthcare
3. Equipment (e.g. computer hardware), deskspace and other HR overheads
4. Induction and employee onboarding costs (e.g. security clearance)
5. Recruitment Fees
6. Employee attrition — bad hires and leavers

Opportunity Cost

Opportunity cost is the least thought about but by far the most important cost.

Opportunity cost is defined as the loss of the other alternative benefits when an alternative is chosen.

These could be:

1. The cost to the business of delaying a project due to time taken to recruit a new team
2. The cost/pain of not carrying out Business As Usual (BAU) tasks — such as maintenance or support — as the resource is seconded to a project
3. The cost of time spent learning new technology, code or methods to complete the project

Opportunity cost is the least considered, but the most important aspect when deciding to outsource software development.

For many larger organizations, the direct costs of outsourcing may actually be higher than hiring or using an internal team — they outsource strategically due to the opportunity cost savings.

With the end goal in mind, a budget holder needs to account for the implications of adding additional team members and the risks in re-allocating resources to a new initiative.

Capability

The next reason to consider Outsourcing Software Development is capability.

The question: “Does my team have the skillset to carry out this work?” needs to be asked

An internal team may well have all the skills in-house. However it’s also true they may not have the skills but will say they do anyway.

A comfortable, full-time position, internal employees may not consider the risks or a project delay that would concern the wider business. The opportunity to learn a new technology or excitement of learning something new (what engineer wouldn’t get excited over this!) may drive skewered optimism in the ability to deliver.

Outsourcing to a partner who does similar work day in, day out will ensure all the gotchas and corner cases are covered, without having to be learned from scratch.

Capacity

Rather than outsourcing to save cost, or obtain specific skills, a client may have both budget and skillsets in the house — but not enough resources to meet demand. Outsourcing enables organizations to scale up — and just as importantly — scale down development resources to suit peaks and troughs.

Engagements driven for the need for additional capacity — from an outsourcers perspective are the easiest to deliver. These can be delivered on a Time & Materials basis based on schedules outlining headcount and skillsets required — all wrapped in a neatly pre-agreed Master Services Agreement.

A key point to consider is the relationship held with the outsourcer. A trusted partner, with dedicated internal resources and known processes, is essential to gain benefits from outsourcing to scale up and down. You want to be able to call upon a trusted resource pool who understands your systems and business — without having to re-invent the wheel every time you need additional resources.

The downsides to Outsourcing Software Development

So there you have it, three solid reasons why outsourcing software development is a good idea.

However, there are also the downsides — the negatives to consider when outsourcing;

Control

There is a perception that a department will lose control and/or more critically, the IP. If the engagement is core to the functioning of the organization, why hand the keys over?

This is a valid concern, which should be discussed at an open table with your chosen outsource partner. A flexible, honest services partner will ensure there are legal and operational safeguards to protect your data, IP, and access. These concerns should be pre-agreed and aired and if they can’t be met, don’t sign the contract.

Communication and Culture

Outsourcing Software Development will involve working globally, with teams not in the same time zone and English may not be their first language. Again, these need to be ironed out during the bidding stage.

At Corner Case Technologies, our team is based in Vilnius, Lithuania. All our team are fluent English speakers and versed in western etiquette. In addition, the cultural Eastern European traits do have their benefits over Asian or Latin American service providers — Eastern Europeans are known to be direct, honest, and committed to achieving the end result. A direct, honest approach to project timescales and costs can be a welcome trait if you’re used to a ‘Yes-to-everything’ type partner.

Accountability

If a project goes wrong, who’s to blame? Some may say owning a project internally, you have control of your own destiny or downfall. However, an Outsourcing Partner must be seen as an extension to your team — not a fall guy to shift blame to. At Corner Case Technologies, we work through the night to meet deadlines, achieve targets, and are rewarded when the goals are met. We find our long term clients learn from our team and when projects do overrun, our team is as committed as any payrolled employee.

Summary

Corner Case Technologies offers local contact with near-shore outsourcing services to the mid-market. Our team is fun, committed, and advanced in technical capability, whilst our commercials and working practices make us a flexible partner to work with.

If you’re looking to outsource software development, contact us via email hello@cornercasetech.com to see a different approach with a relationship based development partner.