Reasons to Outsource Software Development: Key Benefits for Your Business

Software outsourcing has become a popular way for companies to cut costs, innovate, and meet their project goals. Around 20%¹ of US companies fully outsource their IT support, while many companies at least partially rely on outsourcing.

This article will cover some of the software outsourcing advantages for small businesses:

• How businesses can use software outsourcing to save money
• How companies can access skilled developers by outsourcing
• Some of the limitations that companies should consider

What are the Benefits of Outsourcing Software Development?

There are many IT outsourcing benefits that small businesses can take advantage of. Most businesses may already be familiar with the lower costs, but there are many other benefits. Outsourcing your software development process can help you gain access to skilled developers and improve your operations.

Cost Reduction

The software development cost reduction is one of the main benefits companies should consider. If you are a smaller company on a budget, outsourcing your IT processes can help cut costs. According to Hire with Near, companies may be able to save up to 70%¹ on their software costs by outsourcing software development. This can be a great strategy for startups that want to keep costs low before expanding. However, many large companies still choose to continue offshore development.

Access to Global Talent

There is no reason to limit your talent pool to one country. Many countries have a solid reputation for software development, and the wages in many of these countries are much lower.

Being open to new countries can help companies access skilled developers who may also have unique knowledge about the global software industry. Regions like Eastern Europe, Asia, and Latin America are attractive because of the lower software developer wages.² Leading countries like Poland, Ukraine, and Singapore are just some of the few popular options out there.³

Faster Time-to-Market

One of the greatest challenges that many companies, especially start-ups, face is finishing projects on time. According to Haystack, around 70% of software development tasks are not delivered on time.⁴ These types of delays can also lead to the software development costs exceeding the original budget.

Luckily, outsourcing software development can be one tool that helps companies complete projects on time. In some cases, your core team may need extra assistance with tasks. Outsourcing some software development steps can help your employees focus on the most critical tasks.⁵

What are the Disadvantages of Outsourcing Software Development?

There are many cases where it may not make sense to outsource software development. Below are some important factors to consider.

Project Control: In some cases, you may need to exert greater control over a process, in which case, outsourcing would not be the best idea.

Communication and Time Zone Differences: Communicating across different cultures can be challenging, especially when there are tight deadlines. Moreover, the time difference can be a challenge for some companies. Companies will have to deal with a 6-12 hour time difference when hiring software developers in Europe or Asia.

Sensitive Information: Moreover, your company may want to safeguard some of its information and processes. Because of this, it may be best to keep some parts of your software development internal.

Finding an outsourcing partner can be a time-consuming and stressful undertaking for companies. Companies will need to adapt to the new changes and find a partner they can trust. It is best to consider these common issues before committing to outsourcing software development.

How to Choose the Right Software Development Outsourcing Partner

One of the first steps you can take is to read various reviews about outsourced software development companies. This can be a great starting point. After researching several options, you should focus on how this partner could potentially address your project and meet your budget. It is also important to ensure that all of your information remains confidential.

Once you have your budget and project set, it is important to thoroughly research your options for an outsourcing partner. You can often find reviews and testimonials from these companies’ clients on their website or other platforms like Upwork or Clutch. It is also important to look at their specific areas of focus to make sure they are a good fit. This process can be very overwhelming, and it may also be helpful to lean on your network to see if you can find any reliable referrals.

Case Studies of Successful Software Outsourcing

Software outsourcing has historically not been limited to smaller companies that are doing so to cut costs. Many larger companies still rely on outsourcing as well. Most importantly, many larger names in the market were able to achieve their rapid growth by relying on outsourcing during the early stages.

You may be surprised to learn about some of the big names in the market that relied on outsourcing to launch their visionary companies. Companies like Citi, WhatsApp, Slack, Skype, and GitHub have all relied on software outsourcing.

WhatsApp, one of the world’s largest messaging systems, originally started by raising $250,000 and using software developers in Eastern Europe to cut its costs.⁸

During its early stages, Slack decided to use9 a Canadian company called Metalab to help them build their beta version of Slack. The combined cost savings and insights gained from Metalab were instrumental in helping Slack reach its current success.

Lessons Learned

There are many lessons one can learn from studying all of these decisions made by companies over the past few decades.

• Software outsourcing can be great for start-ups in the early stages, as they can both cut costs and gain insights from partners.
• Large companies in a variety of industries, such as major banks, can rely on software outsourcing to save costs.
• The global talent pool for software development is vast, and companies shouldn’t limit themselves to one country.

These IT outsourcing benefits make it a must for most companies to consider outsourcing at least some aspects of their software development.

How Do I Manage an Outsourced Software Development Team?

Bringing in an outsourced software development team can be very beneficial, but also produce unique challenges for your existing team.

Set Clear Objectives: Management should have a clear objective as to what the outsourced team should achieve, and clearly communicate this to the entire company.

Separate Operations: The outsourced software team shouldn’t be involved in all of the company’s operations. Companies should also plan what work the core team should perform and determine ways to ensure that sensitive data is kept secure.

Manage Time Zones: In some cases, time zones can be a catalyst for improved productivity. Companies should use project management and communication tools to ensure that work is continuously flowing and that teams in different time zones can effectively communicate.

Measure Progress: Once a goal is set, companies should set milestones and analyze these every week. Consistent project tracking can help ensure that the project stays on budget. It is also very important to document the process so that you can track your progress and ensure you finish on time. You can also use various project management tools, some of which are even free. SaaS List notes that 47%⁷ of companies that use free project management software say that it has a positive impact on their project cost estimates.

Use Communication and Collaboration Tools: There are plenty of tools available that can help you boost communication between team members. You can also use these tools to accurately document the process. Tools like Slack and Monday.com are great for facilitating communication between team members and contracted software developers.

What are the Best Countries for Outsourcing Software Development?

There are many countries to consider for outsourcing software development. Some options that have gained popularity due to a combination of quality, cost, and scale include Poland, Ukraine, and India. Many companies also outsource software development to Latin America due to the talent and attractive wages.

Wise can be a great tool to help your business if you hire software developers in these countries and need to frequently send payments. Check out Wise Business to learn how you can set up an account for free in the US and begin sending payments at the mid-market rate.

Recommendations for Businesses Considering Outsourcing

There are many software outsourcing advantages for companies to consider. Considering the cost savings is one of the first and most logical steps for companies. However, companies should not limit themselves to this approach. They should consider how a software outsourcing company can help boost their innovation and meet their financial goals.

At the same time, companies should consider the common pitfalls that small businesses have faced when outsourcing their software development. Doing all of your research before can increase your odds of finding the right partner and completing your projects on time.

Discover Wise: The Smart International Payment Solution

If you plan to outsource software development or other crucial processes, Wise can help you easily make payments to companies in other countries. All payments are made at the mid-market rate, ensuring you don’t lose money on poor conversion rates.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. You can also send money to 140+ countries.

Open a Wise Business account online

Sources:
1.Software Development Outsourcing Statistics: What You Need to Know
2.A Complete Guide to Outsourcing Software Development in 2024 | Toptal®
3.15 Countries that Produce the Best Software Engineers
4. Haystack Introduces Solution to End Chronic Software Delays Worrying 89% of US Business Leaders
5. https://blackbear.global/blog/9-advantages-of-software-outsourcing
6.The Pros And Cons Of Software Development Outsourcing During A Digital Transformation
7. The State of Project Management in 2023, 42 Statistics | SaasList
8. 6 IT Outsourcing Case Studies Every Startup Can Learn From | Uptech
9.11 Successful Outsourcing Case Studies From Tech Giants | by NeoITO