Software Outsourcing Services: Everything You Need To Know

Today, with such rapid changes in technology, business seems to move more smoothly than ever. It can create intense competition among companies.

• How to deliver products to the customer in the fastest and most economical way?
• How to be a successful business and stay at the top of the competitive environment?
• How to deal with the shortage of software developers in the IT industry?
• How to develop a software project within budget yet bring more profit?

The answer to these tough questions is software outsourcing services.

What is software outsourcing service?

In short, software outsourcing services are the practice that hires the skills and expertise from a third party to handle complex tasks relating to software development.

The demand for outsourcing software is increasing due to the competitive market and digital transformation needs. According to a report for the IT outsourcing industry by Statista, it shows that the global outsourcing market amounted to 92.5 billion U.S dollars. Comparing to the market size years before that dropped down to 76.9 billion U.S. dollars, this number/statistic in 2019 has shown how strong the demand for outsourcing services.

This increasing demand is understandable due to the rapidly changing of technology. Business owners need to constantly evaluate their systems and adapt to the technology trends for further development. And software outsourcing will be a doorway for organizations to stay updated on these trends by digitizing and optimizing their business processes. Moreover, it can allow you to access the talented pool and the chance to work with tech talents across the globe.

By approaching outsourcing services, business owners/entrepreneurs will get the various IT functions to ensure the best outcomes for their clients. Beyond that, it can release them from the burden of money, time, and many other things which the in-house team can’t offer.

Types of outsourcing services.

There are three main/common types of software development outsourcing services as below:

Nearshoring

It means that business owners will hire a third party in a neighboring country. For example, the company is located in China and forms a partnership with a software outsourcing company in Vietnam. In this case, Vietnam will be a nearshore outsourcing to China.

Because of the closing in geography and time, there will be no gap in time zone, culture, and communication. Besides that, it can be easy for clients to visit and meet the outsourcing development team in person. This convenience can help to figure out the crucial issues relating to the software outsourcing development process (if any).

Onshoring

It means business owners will hire a third-party company within the country. For instance, the company is in the United States and hires a software outsourcing company locally. Hence, the United States will be an onshore outsourcing destination to the US companies.

No language barriers can be the advantage of this type of outsourcing because both parties speak the same language. It can help outsourcing become more effective. Yet, clients may have to pay for development costs higher than nearshoring and offshoring.

Offshoring 

Offshoring outsourcing services means that business owners will hire a reliable software outsourcing company from distant countries. For example, a US-based company will collaborate with or hire a software outsourcing provider from another country such as China, India, or Vietnam. Hence, China, India, or Vietnam will be offshore software development destinations for the US company.

In this term, India and China are well-known as outsourcing hubs. Yet, Vietnam can be another great destination for the company to choose. Here, cost-effective will be the first mention for offshore outsourcing because of its low labor costs. Besides that, multiple resources are another advantage of offshoring. 

However, language and cultural differences might bring issues to both parties. Regular meeting and researching culture before outsourced software product development would help in some way.

Outsourcing models

What mentions above is based on location or distance. Now let's look at the outsourcing models that will identify the different ways to utilize these services based on the relationship between the clients and the vendor. In the many types of outsourcing models involved in the IT software outsourcing services, three primary outsourcing models would mention below.

Staff Augmentation Model

The staff augmentation model means the client hires temporary developers by contracting with the software outsourcing provider instead of hiring a permanent developer. This model will help to fill the gap within the in-house team, especially skill sets. Thus, they can accomplish the project.

In this case, the IT outsourcing company will provide the clients elite ones who have specific skill sets that meet the needs of their clients. They will work along with the client for the best quality outcome. In this case, the clients are still in control of the project from start to finish. They have to take care of distributing tasks and responsibilities, even providing a workplace.

However, once the outsourcing contract is signed, the software developers are part of the client’s human resources. And they have the responsibility to ensure the tasks are completed and reported to the team on time. With this model, the clients need to choose talented and skillful ones that fit the needs/goals of the project.

Dedicated Development Team Model

The Dedicated Development Team Model is a model where the client will entrust the project to a software outsourcing partner who will, in return, provide a high-quality and professional team to take care of it from start to finish. The professional development team might include every single role that a project needs for bringing the project to fruition, such as software developers, project managers, business analysts, quality assurance, etc.

Providing a professional team here also means that they will take care of matters relating. Such as recruitment, IT infrastructure, vacation, team-building, sick leave, administration, etc. In turn, the clients will discuss with the software outsourcing provider some criteria of the project. For example, the team size, skill sets, time for launching, adding some more requirements, and their involvement in the process.

Once this model is applied, the dedicated development team belongs to the clients. They have the right to be directly involved in project management if they want. Or they can trust the project manager from the software outsourcing partner who will help them stay up-to-date with tasks and how the project is progressing.

The Dedicated Development Team Model would be a choice for a company to purchase the best business outcomes. However, this model should be invested if it is a long-term, dynamic, and complex project.

Project-based Model

The Project-based Model has different names like the software outsourcing model or outsourced development team model. In this model, business owners will hire a software outsourcing company and allow the end-to-end development team to take full responsibility for following the client’s requirements and expectations. It means that the client will be hands-off on all things relating to the project and focus more on core business or business strategy.

This model gives the outsourced team flexibility in the whole process from beginning to end. For example, define and taking care of the process, providing a skillful team to manage it, applying the most suitable technology, etc. What is expected to see in this model is the result rather than the process.

Why outsourcing?

IT software outsourcing services would be a great strategy to start for businesses during this challenging time. Some reasons for that are cost savings, time-saving, the cutting edge of technology, etc. This service will help the company stand out from the market, increase productivity, and boost business outcomes. Below are the top 8 reasons or top 8 benefits that can provide a clear vision of why outsourcing programming services would be a good choice.

When to outsource?

The answer may be simply depending on business needs. However, the eight reasons below will help the company know whether they need software outsourcing services or not.

Criteria for Selecting an Effective Outsourcing Partner

There are hundreds and thousands of IT outsourcing companies around the world. Choosing among these companies is always a challenging task. A business owner/entrepreneur can’t simply say that ‘I like this one’-even they have the right to do that. Picking up randomly a software outsourcing provider is easy. Yet, to ensure that they can bring the best quality products or the best outcomes is another story.

Here are a few steps to select the right software outsourcing services company.

Define goal/goals clearly

It is a significant step because you can’t go anywhere if you don’t know where you are going. Before reaching out to the software development company, business owners should define the goal/goals that they want to achieve in business terms.

For example, build a better/new management system for the enterprise, add new ideas to the software product to boost business profit, integrate the IT/technology to improve service quality, or optimize the business processes.

The assessment will help business owners to decide to outsource or not. Beyond this, this can help them know what exactly they want to outsource. Remember that a clear vision can give you a clear direction.

Then, spending time with the business team or whoever might be involved in the next project to evaluate internal resources. Some aspects need to consider such as budget, business field, skills, or new technology in the IT project, even competitors. This evaluation will narrow down the number of potential partners and helps select the right company.

Besides that, some other aspects of in-house developers like the experiences, competencies, and technical skills also have to be examined. It will provide some ideas such as what technical skills needs, whether the in-house team can handle the project or not, and how many software developers might get involved/added to the project.

By doing so, this review will be a guaranteed source to decide on IT software outsourcing models for the project- whether it is staff augmentation, dedicated team, or project-based development.

Beyond this, it also helps the IT outsourcing provider to bring the best outsourcing services at cost-effectiveness, providing skillful one and suitable team size that meet the business needs and goals. Remember that the clearer the information and requirements provided, the better the software outsourcing company can estimate.

Even though this is a vital step and influence in the whole project, it should not be too rigid. Once the contract is signed, business owners are stepping into the ‘win-win’ relationship. As a reliable software outsourcing company with experience in multiple outsourcing software development projects, they have built a strong foundation at the business view.

Hence, they can discuss and figure out the best software outsourcing solutions that bring the most business profits. Such as giving IT consulting, proposing to improve the requirement features, recommending the development team size, or the latest/suitable technology for the software product.

Decide the type of outsourcing services

Whether choosing onshore, nearshore or offshore outsourcing, each of those will have advantages and disadvantages. The decision has to base on the internal resources and the careful consideration of other factors. For example:

• The different time zones

• The pay rate per hour for each developer

• The communication skills

• The size of the project

• The time needs for the project (long-term or short-term).

Make a list of potential company

After deciding on types and models of outsourcing, now is the time to look for potential partners. Shortlist at least 5 to 7 prospective software development outsourcing companies. There are multi-ways to do this. For example,

• Ask referrals or recommendations from friends or partners if they were in partnership with the IT software outsourcing company. It is a secure channel because friends and partners already have experience working with those software development companies. Thus, they will know which one to partner, and how expert, professional, and experiential these companies are.

• Check social media tools, especially LinkedIn and Twitter. These social media channels will show who they are and their culture. Of course, these channels can’t give 100% right about what businesses want. However, this will at least provide some ideas and options to sort out.

• Approaching B2B companies might be another choice. Some companies that listed the best outsourcing development companies like Clutch, Upwork, Goodfirms can be a place to select. The shortlist can base on the category such as software development services, custom software development, BPO outsourcing, software outsourcing services. Even though this is a great source to find out, business owners should choose carefully.

Do thorough research on their background

The next step when having a list of best software outsourcing companies is to check the companies background. The following questions and criteria will help to select the right outsourcing company.

• Reputation

• How professional they are

• What are their skills and domain knowledge? It is an essential question because it will filter suitable companies for the project. If the company has a good reputation for particular skills/knowledge but has no online profile, the business owners should contact them personally.

• Check the case study. A case study will project how the company solves the problems and whether this case's similar to the client's project or not.

• The length have they been serving in the market?

• How large the company is

• What is the feedback from their clients?

• What types of development methodologies are they using? Scrum, Agile, or Waterfall?

Typically, when having a list of IT outsourcing companies in hand, business owners can go forward to contact the software outsourcing company. Of course, this list must be the outcome of careful research and consulting from trustworthy sources. However, this step is not redundant. It will reassure the company and help to know who is handling the project.

Contacting potential partner

At this point, after completing the research, the clients can contact potential outsourcing partners. Then, arranging a meeting to discuss further the project.

Explaining the problems/expectations of the project would be helpful. If possible, requiring the solutions or ask for technology consulting or asking for the CV of developers to certify that the software outsourcing business gets the best talented and skillful one. References from previous projects and clients can be a trustworthy source at this critical moment.

Finally, if that company fits the expectations and requirements, the business owners are on the right track. And if everything is going well, let’s wait for the results and see how quickly the business grows.

Bonus Tips to avoid the pitfalls during the software development process

To ensure high-quality for the project, here are some tips for successful software outsourcing services

Looking for value beyond cost-savings

Cost-savings are the fundamental reasons for a business to turn into outsourcing. However, cost-savings should not take for granted as cheap service, and it should not be the only reason to outsource.

Many businesses accept the cheapest quotation from vendors without hesitating. Yet, it is a big mistake and could destroy the whole process of carefully looking for outsourcing vendors. Beyond, business owners are putting their products at a quality risk.

What other factors that the company should pay attention? It could be the experience and competencies of the software developers, portfolios, work quality, and the ability to communicate well in English besides technical skills. These will help clients define approximately the rate that they might have to spend.

The great benefits of software outsourcing services are that it allows the clients to access the talented pool of developers who have experiences and skills in the software development industry from all around the world. Reliable software outsourcing companies will provide skillful and experienced developers to ensure that their client gets high-quality outsourcing services and more value to their project.

On the contrary, by outsourcing to the cheapest one, inexperienced developers might take care of the project. And it can affect the quality of the product in some way. Hence, before accepting the quotation from vendors, the employer should deliberately consider other factors.

Avoid miscommunication

Communication will define the success or failure of the IT project. If a company is hiring onshore outsourcing services, communication might not be a big deal. Both parties are speaking the native language.

However, for the nearshore and especially offshore, English is the second language. It can be challenging for the client or their in-house team and extension development team to understand each other.

Hence, to ensure the software project is going well and bring the most value to the business, checking and verifying the English-speaking ability of the outsource development team is necessary. Conducting the interview, having a look at the CV of developers would be the option to filter out the skillful ones.

Establishing the communication channel and scheduling regular meetings with the team is another way to keep the software project going on the on-pace. Many communication tools could use during the software outsourcing process like Skype, Zoom, Slack, Jira. Setting up the daily, weekly, and even monthly meetings can assure that the client and the outsourced team are always on the same ground. Besides that, if there are any changes or any vital information that need to inform, the development teams still follow up.

Regular communication should happen during the entire development process from the beginning to the end. It will ensure a good outsourcing relationship and both parties-business owner and software outsourcing partner-on the right track.

Where to find the top software development company?

The answer that readily comes to mind is India and China. These two countries are well-known and are leaders in the outsourcing field. However, this article will mention Vietnam as a new attractive destination in the software outsourcing firm.

Recently, Vietnam has been becoming a rising star among Asian countries and becoming the top leading country in technology, especially and software outsourcing services.

Many reasons can affirm that Vietnam will be a top destination and the right choice to invest in. According to AT Kearney, by their 2019 edition of the Global Services Location Index (GSLI-this index edition means to identify locations that can best provide information technology (IT), business process outsourcing (BPO), Vietnam has been moving up one position comparing to the 2017 edition-from the sixth to the fifth position.

It shows that Vietnam is day by day becoming a promising offshore outsourcing destination for technology investment. In other words, Vietnam is becoming the tech hub among Asian countries.

Besides that, cost-effectiveness is also a great advantage when investing in Vietnam. Compared with India and China, outsource software development to Vietnam can save 50% cost-operations. And compared to the US, this can save 90% in costs, according to CIO Magazine.

The quality of the developers is also increasing in skills and knowledge. An abundance of universities and training centers have opened and invested in information technology courses and courses relating to the IT field. According to Hackerrank, Ho Chi Minh City University of Science of Vietnam stays in the top three universities that have the best coders in the world.

Those above and a significant number of other reasons can assure that Vietnam will be an excellent choice for software outsourcing. Assuredly, this will be the right place for finding the top software outsourcing companies.

In conclusion

This article has presented to give general information relating to software outsourcing services. The guidelines above for choosing a partner will help business owners/entrepreneurs to find the best software outsourcing company that fits the requirements and expectations.