9 Benefits of Outsourcing Software Development (2024)

Outsourcing Software Development
9 Benefits of Outsourcing Software Development (2024)
Article by Szabolcs Szecsei
Last Updated: October 02, 2024

In today’s corporate landscape, where tight project deadlines, budget constraints, and talent shortages are common, outsourcing software development has become the norm across several sectors. Companies often entrust part or all their development projects to external providers for various reasons but with a similar goal: improved software solutions and revenue.

So, what are the benefits of outsourcing software development besides the obvious cost savings? We asked our development professionals to shed more light on the benefits of outsourcing development projects to other companies.

What Is Outsourcing Software Development?

Outsourcing software development is a strategic business tool that enables companies to hire external development experts who can finish the project at a lower cost than hiring and training a fully-fledged in-house team.

In essence, the outsourcing team acts as your staff, with a few exceptions:

  • Legal concerns, such as taxes, are different.
  • Infrastructural differences since your partner team will be working at a different office — often on a different continent — with different tech equipment.
  • Different employee benefits
  • Different onboarding process
  • Improved product quality and security

Naturally, all of these are taken care of by your outsourcing vendor. Your main responsibility here is to find the right partner and establish a mutually beneficial agreement.

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9 Key Advantages of Outsourcing Software Development

The global IT and development outsourcing market is huge, with an estimated global value of $565.6 billion in 2023. Within this market, software development outsourcing is expected to grow at a compound annual growth rate of 11.5% between 2023 and 2028.

Source: Genesis Law Firm

While many companies view outsourcing as a last resort, most organizations opt for it by default to accelerate the development of innovative solutions and drive business growth. According to data, in 2023, only 9% of the surveyed companies stated that they were looking to establish in-house teams to handle their development needs.

So, what are the benefits of outsourcing software development? Below are nine reasons corporations opt for these partnerships:

1. Reduced Project Costs

Data suggests that companies can reduce their development expenses by 60-70% by partnering with external vendors. Here’s why: when developing an app, your company will have to address several areas of the development projects. For starters, you’ll have to provide the necessary office infrastructure and equipment. You will also have to set up the team and address salaries and other legal obligations that come with hiring and keeping new staff.

By partnering with a service provider, you can cut back on operational costs. The outsourcing company covers employee salaries and necessary taxes. Vendors also take care of infrastructure and equipment and charge an agreed-upon fee, which facilitates cost efficiency on your end.

This arrangement can be extremely beneficial for small- and medium-sized businesses that simply can’t allocate the necessary funds to set up in-house teams. Additionally, if you opt for offshore outsourcing, you may find highly skilled talent at a lower rate due to different economic labor costs.

For example, Vietnam is a great outsourcing country, with average hourly rates for development ranging between $20 and $50.

2. Access the Global Talent Pool

Whether you're outsourcing a single project or your entire DevOps processes, partnering with external vendors gives you access to experts on a global scale, instead of being limited to your own company or even your continent.

You can tap into the global talent pool and compare different work cultures, hourly rates, experiences, and more. You can gain access to world-class experts who have experience in a wide range of solutions or niche technologies, which can be difficult to find in an in-house team.

3. More Knowledge and Better Ideas

If you partner with a highly skilled team, you may find that their fresh perspective, innovative approach, and creative ideas can offer a revamped project proposition, potentially transforming a basic software concept into a cutting-edge solution with advanced functionalities.

Usually, these experts bring their vast experience from having worked on various development projects to the table. They possess the knowledge and equipment needed to handle your business needs and may even offer valuable insights and recommendations to tailor the final product to your specific requirements.

4. Flexible Team Structure

Development cycle lengths can vary and may consume more resources than expected. Several variables can affect it, such as market trends, project scope, customer expectations, and the work process. Complex and lengthy software engineering projects often require staffing adjustments, whether upscaling or downscaling your team.

These in-house staff changes can lead to additional delays and expenses for your project and business, resulting in unnecessary headaches and paperwork. Outsourcing partnerships enable you to adjust team models and sizes on demand, with the possibility of scaling down or up during any stage of the development cycle based on your needs.

This flexible team structure allows for temporary staffing or long-term contracts, reducing the risk of idle staff, avoiding unnecessary layoffs, and saving your in-house experts from overload and burnout.

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5. More Time on Other Business Priorities

When your project is being taken care of by an external team, you have more time to concentrate on core business processes with confidence that your software is being developed by experts. For starters, you don’t have to interview and hire specialists and can also save time on staff training. With these tasks handled externally, you can focus on business growth and use your in-house development team to take care of other essential tasks for optimal company performance and product success.

6. Faster Development

Partnering with an external team can shorten the development cycle, especially if you’re starting from scratch without the necessary infrastructure and staff. Apart from that, you can leverage these teams’ expertise, experience, knowledge, and best practices to speed up the development process even further.

By outsourcing, you can avoid dealing with human resources, infrastructure, staffing, and more. This allows you to focus on setting the stage for launching your solution to the market faster. Being able to market your product quickly avoids potential revenue loss, missed market opportunities, decreased customer satisfaction, and possible damage to your brand reputation.

7. Leverage New Technologies

Keeping up with technological advancements is quintessential for business to survive. Partnering with an external development team allows your corporation to leverage the technical skills and domain knowledge of the vendor’s team and access to the latest technological solutions.

Technology is evolving at breakneck speed, and yet some businesses and corporations are still facing challenges when transitioning from legacy systems to more modern digital infrastructures. Having outsourcing at your fingertips enables you to stay relevant in your industry, even if there are still gaps in your company’s digital capabilities.

8. Improved Product Quality and Security

Leveraging the latest technology also means taking advantage of the external partner’s advanced software testing, security, and quality assurance processes. Security testing ensures that software code can withstand cyber threats, while other testing processes ensure that the software will be reliable, compatible with the required systems, scalable, and will perform optimally without any bugs.

Apart from getting a secure, bug-free solution that protects against destructive data breaches and other vulnerabilities, you may also negotiate a deal with the vendor for ongoing maintenance and software updates.

9. Minimize Risks and Maximize Success

Even with a highly skilled and experienced team, the risk of failure in software development is never zero. Communication gaps, unrealistic deadlines, budget overruns, unclear or conflicting requirements, and delays can derail even the most experienced teams.

Collaboration with external experts can provide guidance, practical tips, and professional advice to address potential issues during development. If nothing else, these experienced teams might have the right contingency plans to help you keep your project on track. While risks can’t entirely be eliminated, having more experienced teams on the project can speed up problem-solving and offer new perspectives on solutions.

4 Software Outsourcing Examples

While the advantages of outsourcing software development are promising, real-life examples bring these benefits to life. Below are a few stellar examples of well-established companies working with external teams to improve their development needs:

1. WhatsApp

In its early days, WhatsApp outsourced its software development needs to polish the app’s features. Specifically, the company outsourced the app’s beta version development to an experienced team to address the several technical issues the app faced during its initial stages. This partnership was a more cost-effective solution than creating an in-house team or hiring local experts to take care of the issues.

The decision paid off, as WhatsApp is now the leading messenger platform worldwide, with a global monthly user base of nearly two billion people each month.

Source: ReadWrite

2. Slack

Slack also relied on development outsourcing to refine its beta testing, concentrating more on app design and copy. Today, Slack is one of the most popular communication platforms, with over one billion messages sent every week.

3. IKEA

IKEA is a leader in furniture, but software development is not its primary strength. To leverage smart home technology, it partnered up with an external team to create a smart home app and hub. Although the company had previous initiatives to join the smart home revolution dating back to 2014, it took quite a few years to find the right partner to deliver a polished, bug-free system capable of handling the challenges and features of smart homes.

4. GitHub

When GitHub wanted to develop the first iteration of Gist, they sought to hire Scott Chacon. At the time, the company couldn’t afford him as a full-time employee, so they hired him as an independent contractor.

The partnership worked out because Chacon eventually became the company’s Chief Information Officer. Not only did the project become a success, Chacon eventually became not just a part of the team, but a leading figure in the company.

Outsourcing Software Development Benefits: Wrapping Things Up

In today’s interconnected world, where technological trends and user preferences continually shift, most companies can greatly benefit from partnering with specialist vendors by creating modern, reliable, scalable, and user-friendly software solutions.

Apart from the flexibility, knowledge, and experience these teams offer, you can also leverage their cost-effective business models. This allows you to save time and resources, enabling you to focus on your core business activities while leaving your innovative processes in expert hands.

Outsourcing Software Development FAQs

1. Can outsourcing be beneficial?

Yes, in most cases, entrusting external teams to take care of different aspects of your processes can be a rewarding endeavor. For instance, many well-known brands entrust external teams with various aspects of their processes, such as digital marketing. With their experience, external experts can often come up with engaging marketing strategies that drive awareness and conversions.

2. Are there drawbacks to outsourcing?

Sometimes, the different time zones, cultures, traditions, and language barriers can lead to miscommunication and differing expectations. However, most offshore teams understand the different cultural nuances of the Western World and have proficient English–speakers to minimize these issues.

3. Can you outsource projects if you have an in-house team?

Of course. In some cases, it makes sense to outsource a project or a part of it, especially if your team is overwhelmed, understaffed, or lacks the necessary infrastructure. External experts can also help by giving recommendations and advice.

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