Outsourcing Software Development: Pros, Cons, and Fixes
The demand for outsourcing software development—from online shopping platforms to ERP solutions and AI-aided apps—continues to gain significant momentum in the global business market. Gartner’s latest report pegs worldwide spending on software to reach $1.08 million and $1.23 million in 2024 and 2025.
Hiring a third-party provider for custom software development offers scalability and shorter time-to-market while saving on hiring expenses and onboarding time.
If you want a fuller picture of what’s involved in collaborating with a software development firm, look no further. This article will explore the pros and cons of outsourcing enterprise software product development and discuss how to mitigate risks.
What Are the Advantages of Outsourcing Software Development?
Companies of various sizes, from financial services and retail to manufacturing and healthcare, are outsourcing their software development needs for several reasons.
Cost Savings
Building an in-house developer team requires budgeting for job vacancy advertising, salaries, benefits, taxes, platform subscription/licenses, equipment, and infrastructure costs. However, you can save on these expenses by working with a company specializing in enterprise product engineering services. You also gain access to your partner firm’s cutting-edge technology.
However, fees vary based on several factors, such as project scope and complexity, timeline, platform (web, iOS, Android, cross-platform), back-end processing, user interface requirements, your partner’s experience, and hiring model (time and material/T&M, hourly rate, project-based, dedicated team).
A Bigger Pool of Expertise
Outsourced development teams are seasoned professionals whose ongoing learning of new techniques and technologies for new projects makes them highly innovative. These teams can work for you on a project basis, as augmented staff to fill skills gaps in your department, or as a dedicated team for long-term projects. Whether web development, cross-platform app development, or AI integration, their skill range contributes to your project’s quality.
Speed
Assembling a team from scratch and ensuring quality output can take months. In contrast, third-party service providers follow well-established workflows refined over years of managing multiple projects. Moreover, outsourced teams are unaffected by internal politics, which may restrict internal IT staff from exploring new ideas or progressing more rapidly. As a result, you can get a first-mover advantage as your enterprise data management system or other custom solution receives a dominant market share earlier than others in your niche.
Product Excellence
Outsourced teams with a proven track record in your niche often invest in staying updated with the latest methodologies, enabling them to deliver quality work. Of course, clear expectations and effective communications also ensure the resulting tool meets your workforce or client’s needs.
Risk Management
Your outsourced partner can mitigate risks associated with your project through effective contingency planning, testing/quality assurance services, and expertise in regulatory compliance.
Flexibility
With a third-party solutions provider, you can add more people and resources for a new project or cut back after a launch. Some companies offer various enterprise software pricing models, from hourly contracts to fixed-price projects and managed services.
Increased Productivity
You and your internal staff can pour your energy and effort onto your core or primary functions while a dedicated project manager oversees the software development process. This setup can boost your in-house team’s morale and engagement.
What Challenges Come with Outsourcing Software Development?
Outsourcing has potential risks alongside its benefits. Here are some possible drawbacks to be aware of and how to avoid or overcome them.
Intellectual Property and Security Concerns
When collaborating with a third party, you share sensitive information. If your partner’s systems get hacked, malicious actors can steal or replicate confidential data like trade secrets and customer details.
The fix: Conduct due diligence on your prospective vendors’ security credentials and protocols. Have them sign a non-disclosure agreement. Include data security and IP provisions in your contract, including a termination clause for disclosure or unauthorized use of confidential information and mechanisms for resolving disputes. Then, regularly monitor your partner for compliance. Establish an internal safety plan featuring access controls, encryption, secure transmission methods, and regular security audits.
Hidden Costs
Potential partners may underbid projects and just make up the margins when you identify new requirements and request changes.
The fix: Fully document your requirements and specifications at the outset. Negotiate a transparent pricing structure. Most importantly, ensure your contract outlines all costs, including additional charges and potential variables. Ask your external team to submit reports on their expenses regularly during your partnership.
Communication Issues
You may encounter some language issues when working with an offshore vendor. If the team is in a different time zone, scheduling meetings and calls can be problematic.
The fix: Select candidates fluent in your language. Set up clear communication channels. Clearly define roles and responsibilities, and use a project management tool to record requirements, expectations, and milestones.
Quality Assurance
You’re bound to experience inconsistencies in error handling, naming conventions, and coding practices if your geographically dispersed teams don’t have quality assurance standards and a strict code review process to abide by.
The fix: Choose a partner with a proven track record—one that follows software coding standards and conducts regular code reviews. Search for reviews of your candidates on websites, such as Clutch.
Establish a feedback loop in place that allows your internal and outsourced teams to openly communicate about project progress and any concerns. Routinely review deliverables against benchmarks and evaluate work to spot and correct any discrepancies early.
Choose Consistent Quality Delivery, Onshore or Offshore
To outsource within your borders or overseas is your choice. If proximity, English language compatibility, closer collaboration, and data security are your priorities, partnering with a US software development company is a logical choice. Sectors that are subject to high regulatory scrutiny, such as healthcare and finance, tend to favor onshore services, knowing that providers are familiar with the same legal frameworks and compliance standards to which they adhere.
However, outsourcing isn’t an either-or situation. Companies are now employing hybrid models, where some partner developers are within the same country while others are offshore. An onshore team manages sensitive data and complex tasks, while overseas developers focus on scalability projects that don’t require access to such data.
If you’re looking for a highly rated, reliable software development outsourcing partner, consider Taazaa. We leverage emerging technologies and proven development practices that promote rapid delivery and a tailored fit to your business. We’re agile. We’re high-empathy and low-friction. And we make great software. Contact us today.
