February 17, 2021 • 20 min listen
Outsourcing software development can greatly decrease costs; no doubt about it. But we also know that lower rates don’t always translate to an overall better deal, and that’s the very challenge of outsourcing. I mean, who has never heard of IT outsourcing gone bad? Unclear roles in the outsourcing process, inadequate development skills, poor planning and communication, project deviation, lack of transparency, or just a lack of trust—the list of contributing factors could go on.
Fortunately, most organizations looking into outsourcing do realize the dangers of making cost their number one priority. As much as possible, they try to include value into the equation to get the most benefit out of every dollar they invest.
But how do you balance this equation and identify the best opportunities for your business? And what does "value for money" really mean in software development outsourcing anyway? In this post and podcast, we discuss how software development outsourcing could be your best option and how you can find the best value for your money in this endeavor.
It goes without saying that outsourcing needs to be more cost-advantageous than in-house development. Otherwise, there’s no point in even considering it. The costs are considerably less when you outsource, primarily because you can hire developers from cost-efficient countries–i.e., lower salaries and a lower cost of living than in your country.
It also adds flexibility to your project: you don’t have to create a large and costly team if you don’t see your company needing one for the long term. This is in contrast to hiring and maintaining your own in-house development team where your software development costs remain high regardless of the volume of work. With the right outsourcing development partner, it’s usually easy to scale up and down within a few weeks.
For a complete global comparison and detailed hourly rates for software outsourcing and offshoring in the most popular locations, check Accelerance’s 2020 Global Custom Software Development Rate guide. (Accelerance is the largest consulting firm that lists, verifies, and vets software outsourcing companies.)
A partnership with the right software development service provider can give you so much more mileage out of your investment. These benefits include:
There is no one-size-fits-all solution in outsourcing. Every project and contract can have a different approach to match your needs and budget. That said, there are generally two patterns used in software development outsourcing:
Whether in B2B or B2C, the term "value for money" is by no means a new one. It’s how people or organizations evaluate services acquired in terms of overall cost, quality, and sustainability. In software development outsourcing, finding the best value for money can be done by balancing the following three factors:
The massive investment needed to hire and maintain an in-house team is one of the biggest hurdles a company could face when there are software projects to be developed. Outsourcing software development projects to a service provider firm has been deemed a very viable solution to this problem because of the established cost benefits it offers.
For instance, when you partner with cost-advantageous countries like the Philippines and those in Western Europe, you get more hours of code done within budget. This translates to having more code delivered even while working with the same financial resources.
Now don’t get us wrong here. We're not saying you should make a beeline toward the provider that offers the cheapest rates. Rather, we’re talking about securing the right quality of work at the best price. More than saving money, you want your project to succeed with developers that have a significant portfolio and the appropriate expertise, and team managers who know what they’re doing and can bring projects to completion.
By itself, the cost of development means nothing if it's not comparable with the value you’re getting. The difference in costs can only be evaluated objectively when using the same considerations—like comparing apples to apples. For instance, at similar rates, two providers could deliver very different results, performance, and reliability. This is where the value comes under consideration. “Value for money” therefore implies spending the minimum development costs while getting the maximum efficiency and outcome from the outsourcing partnership.
As soon as the project starts, the ultimate goal is clear: get your product developed. That’s why you need to make sure your development team is competent, willing to give their highest quality of work, and can collaborate well with you in achieving your business objectives. Your developers are the core. They keep the engine running, so choose them carefully. How? We look at two general criteria:
For more practical tips on how to assess providers’ capabilities, culture and more, go check out this series of videos: 2021 Guide to Evaluating Software Development Outsourcing Firms
Little things make a huge difference. When you put all these extras together and are rewarded with a project that performs in the best possible manner with the least waste of time and effort, then that’s efficiency. It’s what makes your investment worth it, and then some. All these best coding and management practices ensure everything runs smoothly. It's the trust you build with your provider, as well as the provider’s ability to see the big picture in your business, and prompts them to offer you a complete solution that may require machine learning, IoT, or Artificial Intelligence.
You can also get more for your investment with your partner’s add-on services, from design to software testing to AWS monitoring— anything that will help you ship your product faster, safer, and better. Efficiency is also evident when your team members are proactive and bring fresh ideas to the table. It's the company culture that delivers a higher degree of satisfaction for your developers, and therefore, for you. You got it. It's everything that brings you maximum output in exchange for a given input.
When you’re clear with all that (i.e., efficiently balance the three E’s above), and you’ve found the sweet spot with a software outsourcing firm that you trust, there’s still one thing you need to remember: outsourcing does not mean simply handing over your project to the chosen software company. In a team extension model or dedicated development team model, you must consider your outsourced team as your own. You would have to collaborate with them as much as you would with an in-house team.
This means that you continue to hold major responsibility in the success or failure of the project. The good thing is, with the right provider, close collaboration with your provider and the outsourced team can come with great rewards. Here is a series of areas to evaluate and questions for potential software providers to help you pick the right partner.
If you prefer bite-size videos, check out our related series here.
Partnering with a software development outsourcing company that does not fulfill the expectations we’ve set above can result in two things: 1) you lose out on getting the best value for your investment. 2) you deal with substantial expenses. They may initially be hidden, but they can become damaging enough to make or break your project. These costs are:
Dealing with crappy code can turn into a costly problem because it’s hard to maintain, hard to set up, and hard to understand. When you need to change developers, and the new team takes over a complex code base, it could get to the point where they would rather rewrite the code instead of working on the old one. This could also lead to a lack of motivation for the team and greater pressure to produce good output based on substandard work.
Bad code and a generally inefficient and disorganized project can ultimately result in a ton of missed deadlines, and these can also be expensive. We’re talking about launch dates that have to be pushed back, sales and marketing teams that need to rework their strategies owing to the delay, failure to keep up with the competition and more. To say that this could be detrimental to your business is an understatement.
A company needs to bear the costs as well when developers leave. Hiring, onboarding, and training new employees will incur additional expenses. That’s not counting the time you will have to allow for the new member’s learning curve, plus the cost of disruption in your project development. Of course, this won’t be as huge an issue if you work with software development providers (as discussed earlier). But if your outsourcing partner cannot keep their developers happy and doesn’t have a deep pool of IT talent, it could still cause delays in your project.
Warren Buffett, who is not only one of the most brilliant speakers ever, but also one of the most successful businessmen in the world today, once said, "Price is what you pay. Value is what you get." This particular quote is relevant whether you're buying his words, books, or stocks. And we've all come to know this over time: the price of something is not always directly proportional to its value. More often than not, you need to look beyond the price tag and learn more about the product you're getting to understand its true value.
This couldn't be more applicable when looking for a software development outsourcing partner. With your product development and, ultimately, business goals at stake, it pays to take your time in choosing your provider. Consider all the factors, evaluate all the E's, and determine whether you're really getting the right value for your money.
Fred had been working on IT and operational projects in the finance and software industry in Switzerland for 10 years before co-founding Arcanys in 2010. With nearly 20 years of experience in the industry in Switzerland, Hong Kong, and the Philippines, Fred is now leading the worldwide sales and marketing efforts of Arcanys.