All you need to know about types of Software Outsourcing

With the increasing demand for software development, outsourcing has also become a popular concept in the IT world. Recent research by Statista shows that the IT outsourcing industry has a global market of 92.5 billion USD. It includes the development of various services for businesses, infrastructures, and more.

Nowadays, even if someone owns an IT firm, they prefer to outsource software developers because of many reasons like flexibility, cost reduction, and less risk factor. In this blog, we will learn more about it and also go through the top 4 software outsourcing types.

What is Software Outsourcing?

Software development outsourcing is a concept where companies who want to have software for the business hire a third-party for it. Outsourcing is something that has many advantages like security, cost reduction, efficiency, and lighten risk.

Basically, software outsourcing is an agreement where an organization chooses an outsourcing software development company to create a perfect solution.

Why is Software Outsourcing the Best Solution?

In software outsourcing, the software development company handles the certain business process of an organization and creates software as per the requirements. This concept has become very popular in the last decade. The main reason behind it is that Outsourcing reduces the cost of development. According to Technavio, the IT outsourcing market can rise between 2020–2024 by 90 billion USD.

Besides this, some of the important reasons behind people going for software outsourcing are -

1.Smarter use of Resources

When a company hires a full-time in-house employee for their firm to create a business software solution, a lot of time and expenses goes behind it. Therefore, the majority of organizations are now choosing outsourcing as an option. Outsourcing a software development company is like hiring contract-based employees. They can fill the gap of the experts, help meet the requirements, and handle the entire project.

2.Cost Reduction

One of the main reasons for hiring a software outsourcing company is cost saving. When an organization outsources an employee, they don’t need to invest expertise and skills that can help the employee create a software solution. In outsourcing, one can easily provide the project details & company details to the IT expert and wait for the result.

3.Skilled Resources

Having expert staff members in your firm for every different type of work is not feasible. Therefore, people mostly prefer to outsource employees that have a talent for their business activities. Besides this, software outsourcing is an option that offers workstations that can help in finding experts who know of various technologies.

4.Flexibility

With outsourcing, one doesn’t need to pay a salary to the software developers who don’t have regular projects in hand. Here, you only hire and pay for the current project requirements and then stop working with them. So, it is clear that software outsourcing is way more flexible than having full-time employees.

5.Low-Risk Factor

As we know that multitasking is never easy. So, if you hire full-time employees who are working on every task of the project, they won’t be able to deliver great results. Therefore, outsourcing software developers as per the task requirements are way better in terms of the success of the project.

Mistakes to Avoid While Hiring Software Outsourcing Company

By hiring the right software outsourcing vendor, one can reduce the development cost and in-house employee workload. But sometimes there are some mistakes that businesses make while outsourcing. Here we will discuss some of them.

1.Lack of Tech Expertise

As we know that every Onshore outsourcing company or Offshore outsourcing company will have expert developers for every technology. But this doesn’t mean that you presuppose that those experts will be able to provide the software you require. Therefore, interviewing the developer you hire and testing his skills is a must. Besides this, after hiring the developer, regularly monitoring is something that everyone should follow.

2.Uncertainty in Requirements and Miscommunication

Sometimes it happens that business outsources software development companies without a proper understanding of their needs. With a vague idea about the project, they try to explain their requirements. This can create issues in getting a product that they desire and when the product modules are not as per requirement differences occur between two parties. Therefore to avoid this miscommunication one must have proper knowledge of their project requirements.

3.Absence of Comprehensive Research

Choosing an outsourcing software development company without proper research is a mistake a lot of people do. One must gather all the information about the company or software developers they are going to hire. They must know the company’s expertise, reviews, and market value before hiring.

Now, after learning about all the basic information software outsourcing, we will go through the various types of software outsourcing.

Top 4 Types of Software Outsourcing

1. Location-Based Software Outsourcing

When we talk about various types of software outsourcing the first one that comes to mind is location-based software outsourcing. It means hiring an outsourcing company as per the geographical location you want. There are different types of location-based outsourcing which we will go through -

• Onshore Outsourcing

Onshore outsourcing is basically domestic software outsourcing. It means that the software development outsourcing company you want to hire is in the same place as you are. Here, your organization can work with a team of onshore outsourcing companies near your location and have easy communication with them without any language differences.

• Offshore Outsourcing

Offshore outsourcing is a type of location-based software outsourcing where the service giving company is not in the same country as yours. Hiring an offshore outsourcing company is profitable but there are some complexities that both parties will have to face.

• Nearshore Outsourcing

Nearshore outsourcing is a concept in which organizations hire a development company from nearby countries or places but not from the same locations as theirs. For instance, the United States will outsource to places like Mexico and Canada. This option is for the businesses that don’t want to hire developers from major time zone differences.

• Multisource Outsourcing

Multisource outsourcing means using developers from various location-based development companies at the same time. This concept helps in getting experts from different locations to create one product for you.

2.Relation-Based Software Outsourcing

In relation-based outsourcing, there is a perfect balance of responsibility and ownership between both outsourcer and the client. Here there are three different types of relationship-based software outsourcing. Let us explore it -

• Project-Based Model

The project-based model of software outsourcing is something where outsourcing providers have major responsibilities. They have to complete the project as per the requirements from the start to finish.

• Managed-Team Model

By managed team models we mean that the software sourcing companies and clients will have to share all the responsibilities and ownership of the software development project. They have to agree on the responsibilities they need to share.

• Staff Augmentation Model

In the staff augmentation model, the business organization that is going to hire an outsourcer has to take almost all the responsibilities of the project. Here, the outsourcers are on lease and they will assist in the software development process. Basically, there is high client involvement.

3.Time & Material-Based Software Outsourcing

Time and material-based software outsourcing model is a type of contract where the business organization has to pay the outsourcers as per the working hours and the use of materials. The payment is on an hourly basis and material here means software licenses or subscriptions.

This type of software outsourcing model is an ideal choice for business owners who have a clear objective for their project. Besides, the T&M model is more preferable for short-term projects. Here the business owners have to control the working hours and the budget of the project.

4.Fixed-Price Software Outsourcing

Fixed-price software outsourcing is again a type of contract. Here the client hires outsourcers only after agreeing to a fixed price for the project. After giving a specific amount according to the project scope, working hours, number of developers, and time limit, the development process starts.

Here the clients don’t have to divide the budget for specific features. Basically, they don’t decide on how the amount needs to be spent, they just provide the fixed number. Besides this, this is an ideal model to get the desired functionalities and features of the software in limited expenditure.

To Wrap Up With

After learning about software outsourcing and its types, it is clear that it is the best software development model. It has many benefits like cost reduction, time-saving, flexibility, and the chance to have a variety of resources. But whom to outsource and which type of software outsourcing model to use is completely on the requirements of the project.

If you want to have business software for your organization but don’t want to invest your in-house resources behind it, then outsource them. There are many software outsourcing consultants available in the market who can suggest the software outsourcing type and the company according to your project requirements. So go for it and save your time and money.