Although the concept of outsourcing appeared around the mid-20th century, it’s only since the 1980s that it was viewed as an actual business strategy. Companies started to understand that by delegating some of their tasks to third-parties providers, they were able to focus on core competency, thus gaining efficiency and efficacy.
Since then, the process has become a staple in most industries, no matter the area of business or the company type. Projections indicate that by 2023, outsourcing global spending could exceed $730 billion.
Among the most common outsourced services, we have accounting, customer service, digital marketing, and, the subject of today’s article: software development. Even though bigger companies typically outsource most of their IT processes (92% of G2000 companies use IT outsourcing), outsourcing software development makes sense for companies of all sizes. So why not yours?
Why do companies outsource software development?
For the past few decades, companies of all sizes have been leveraging third-party vendors to deliver essential solutions as a way to mitigate some of the pressure put on in-house developers. More often than not, companies choose to outsource software development to:
- Save time and money: Outsourcing software development reduces labor costs significantly as seeking a service provider’s help is usually less expensive than hiring in-house. This also allows companies to cut hiring and training expenses, freeing up a lot of time and resources. The saved capital can then be reinvested in other areas of business.
- Focus on core business activities: By delegating software development to an external team, you can concentrate all your resources on more profitable areas of business. This time can help you focus on the present (processes and tasks) as well as the future (strategy and R&D).
- Benefit from the expertise and tools of professionals: When you seek out the help of an outside development team, you’re collaborating with specialized workers that have the skills, experience, and technology your company is lacking. Because of this, the final product is likely to be better and released sooner than if you’d done it in-house.
- Obtain different perspectives and insights: By bringing in an independent development team, you’re going to gain a valuable outside perspective on the project and situation. Because of their expertise and the many software across various industries they’ve developed in the past, outsourced developers are likely to bring new ideas to the table and unique perspectives you might never have thought about.
However, outsourcing software development shouldn’t be taken lightly as it comes with its fair share of challenges. Selecting the right partner is essential to avoid delays as well as mitigate the risks of ending up with a subpar product, paying unexpected charges, or exposing your company to data breaches. Hence, it’s imperative to choose a proper outsourcing model and draw a bulletproof contract to mitigate those dangers.
The impact of outsourcing software development on business value
One of the main ways to maximize business value is to streamline business operations. As we’ve seen above, by outsourcing software development, you optimize and organize systems to make processes more efficient and effective.
Some business owners still believe that outsourcing means giving up some control which, in turn, equates to admitting weakness. In reality, it’s quite the opposite. Contrary to popular belief, outsourcing doesn’t mean offloading problems. Companies that choose to outsource know the ins and outs of the tasks at hand. They’re choosing to seek out external help because it’s simply more efficient economically. They still own the process and can bring software development in-house at any moment if they deem it necessary.
But more often than not, outsourcing software development is simply too cost-efficient of an opportunity to pass out. Outsourcing itself gives companies a greater competitive advantage. By leveraging external knowledge and skills in addition to their core business activities, companies can be competitive on multiple fronts and offer the best products to their clients without suffering from some of the downsides of diversification.
Furthermore, this process allows companies to boost business branding and overall market share, which ultimately, helps maximize the value of the business. On top of this, it gives companies the opportunity to expand into new markets while minimizing the risks and costs inherent to the process.
Finally, outsourcing software development can help businesses be more flexible and agile. They’re in a position where they can adapt quickly to market changes, switch the structure of the company and offload resources more easily in times of crisis.
As we’ve seen throughout this article, outsourcing software development can be a great way to maximize business value. You can achieve this not only through capital savings and the efficiency increase in both the short and long term but also through the valuable business relationships that are necessary to build to make it worthwhile.
