Key Benefits Of Software Development Outsourcing
“The important thing about outsourcing or global sourcing is that it becomes a very powerful tool to leverage talent, improve productivity and reduce work cycles.” said Indian tech magnate, Azim Premji.
In this article, we’ll review research, case studies, and the opinions of industry experts, to gain a better understanding of the benefits of software development outsourcing.
Cost Savings
According to Andy Hilliard, CEO of software development company Accelerance, companies can save between 30% to 70% by outsourcing software development compared to maintaining an in-house team. This substantial savings is primarily due to lower labor costs in outsourcing destinations like Latin America, Eastern Europe, and Asia, where the cost of living and consequently, the salary expectations are lower compared to North America and Western Europe.
Moreover, outsourcing eliminates the overhead costs associated with hiring, training, and retaining full-time employees, as well as the expenses related to office space and equipment
Access To Global Talent Pool
Outsourcing allows organizations to leverage the talent and experience of their service providers, which can accelerate project timelines as well as improve project outcomes.
By accessing a larger talent pool, companies can collaborate with experts from different geographies, bridging fresh perspectives and specializations that may not be available in-house. Such a diversity in talent can provide an edge in today’s fast-paced technological landscape.
Scalability & Flexibility
When outsourcing software development, you hire a third party agency to take over the hiring, training, and management of your development operations. This eliminates the need to invest in in-house resources and the responsibilities that come with it. Without this burden, organizations gain more flexibility, allowing them to scale their operations as needed.
In an outsourcing case study by KDCI Outsourcing with tech solutions company, Accesso, the offshore development team scaled up by 100% in two years and produced 7 apps, showing the scalability potential of outsourced development projects and the impressive project outcomes that may arise from such flexibility.
Faster Time-To-Market
Outsourcing to leverage efficiency of outsourcing partners can accelerate the development projects, allowing companies to market their products or services more quickly.
In the research paper "Exploring the outsourcing relationship in software startups: A multiple case study", one of the significant benefits of outsourcing for software startups is faster time to market. Through outsourcing development, startups can bypass the time-consuming process of building in-house capabilities, enabling quicker product launches.
This strategic approach allows startups to access specialized skills that they may lack internally, enhancing the quality and efficiency of their development efforts. Additionally, outsourcing provides a cost-effective solution, reducing the need for substantial upfront investment in hiring and training new employees.
Enhanced Focus on Core Competencies
In the same study mentioned above, researchers also found that outsourcing allows startups to focus more on their core competencies and strategic goals by offloading non-core activities. This focus enables them to allocate more resources to areas that directly contribute to growth and competitive advantage.
Access To Advanced Technologies
On top of gaining expertise and leveraging an outsourcing partner’s efficiency, partnering with specialized external teams through outsourcing can help organizations leverage the latest technologies and industry best practices, further enhancing their innovation capabilities and market responsiveness.
Risk Mitigation
According to "A Case Study on Risk Management Practice in Outsourced Software Migration Projects", researchers highlight the improved risk management in outsourced development projects, as vendors often employ advanced risk management practices and tools that can significantly mitigate potential risks in software migration projects."
Moreover, the case study found that outsourcing allows for the transfer of certain risks to the vendor, who may have more experience and better capabilities to manage those risks." This provides companies with a low-risk strategy for handling complex and high-stakes software projects.
Compliance & Security
Software development outsourcing companies observe key practices that ensure compliance and security in their outsourced development projects. For instance, at KDCI Outsourcing, we adhere to international standards, ensuring all legal and regulatory requirements are met.
We also implement robust data security measures, which include encryption, secure access controls, and regular security audits for safeguarding sensitive data, as well as conducting coding reviews. And to prevent security vulnerabilities in software, we adopt secure coding standards and conduct coding reviews.
By outsourcing software development projects, companies pass on the burden of compliance and security, allowing them to focus on their core business.
2024 Trends in Software Development Outsourcing
Software development is one of the fastest growing and also evolving industries in outsourcing today. To help companies plan their strategies for outsourcing, below are leading trends in software outsourcing, identified by key players and industry leaders.
Demand for Disruptive Technologies
Top analysts at Gartner found that the majority of software engineering leaders are investing in disruptive technologies to meet their business objectives.
According to VP Analyst of Gartner, Joachim Herschmann, technology trends (software engineering intelligence, AI-augmented development, green software engineering, platform engineering, and cloud development environments) are “already helping early adopters to achieve business objectives… enabl[ing] software engineering teams to deliver high-quality, scalable AI-powered applications, while reducing toil and friction in the software development lifecycle (SDLC), improving developer experience and productivity.”
Consequently, these trends are making software development outsourcing more attractive and viable, as companies can leverage these advanced technologies to enhance their development capabilities and achieve faster, more reliable results.
Increased Demand For Software Outsourcing
The demand for disruptive technologies in software engineering is expected to drive demand in software development outsourcing. As Global Newswire reported, there will be an increased demand for software outsourcing, as the IT and outsourcing market is predicted to grow at a rate of 8.06% from 2022 to 2030.
This urges software outsourcing companies to offer advanced technologies and expertise to drive innovation and give companies a competitive advantage. Such tech advancements shouldn’t only increase flexibility but also minimize the need for physical infrastructure. As these technologies enhance efficiency and productivity through automation, improve quality and accuracy with AI-driven quality assurance, and provide scalable resources on-demand, thereby reducing operational costs and offering financial flexibility.
Increased Scalability & Flexibility
In NDC London 2023, Richard Campbell talked about the transformative impact of cloud computing on outsourced software development, saying that “[c]loud services are transforming the way we approach software development, providing unparalleled scalability and flexibility. This shift is crucial for managing resources in outsourced projects.”
Particularly, such a shift is making the full-time-equivalent (FTE) based outsourcing model obsolete, promoting instead a volume-based approach that permits organizations to efficiently manage workloads by leveraging cloud infrastructure to provision and deprovision resources as needed.
Streamlined DevOps Workflows
In the advent of AI and machine learning, it’s become easier to streamline workflows and improve operational productivity in software development outsourcing.
According to research director Charlotte Dunlap of GlobalData, DevOps tools are democratizing access to advanced analytics that were previously restricted to data scientists, while MLOps extract insights from dark data, which are data collected but not effectively utilized.
Srini Kadiyala, CTO of OvalEdge, explains that AIOps is a “time- and resource- saver for software developers” as it enhances speed and accuracy during coding by replacing manual IT operations with automated platforms that handle data collection, event identification, and issue remediation without human intervention.
A holistic approach using MLOps practices encompass the entire machine learning lifecycle, from data collection and model development to deployment and monitoring, ensuring that AI models are scalable and reliable (McKinsey & Company). This allows for more efficient management of resources and quick adaptation to project needs, ultimately enhancing the quality and speed of outsourced software development projects.
Outsource Software Development to the Philippines
The Philippine software development outsourcing industry is one of the fastest growing in Asia. As a top outsourcing destination with world-class developers, the country is quickly gaining market share in the industry, and is solidifying its reputation not only for software development but also IT.
As one of the top outsourcing service providers in the Philippines that offer customer software development outsourcing services, KDCI Outsourcing builds offshore software development & IT teams that not only have the skills and experience required, but also seamlessly integrate with any environment, ensuring smooth adoption and migration of systems, applications, and processes.
Learn more about software development outsourcing. Contact us today!
