How to Use Outsourcing to Increase Efficiency and Reduce Costs

In today’s digitally-connected, globalised society, many software development businesses have begun outsourcing part of their operations. Software development outsourcing helps businesses to improve their productivity and efficiency while also reducing costs. Let’s examine outsourcing in more detail and why it offers such benefits.

What is Software Development Outsourcing?

You may be familiar with outsourcing, which refers to the practice of delegating business functions to an external third party. Software development outsourcing refers to a similar arrangement in which an external software development agency is hired to effectively perform software development project tasks. 

Often these software development tasks could be completed in-house. However, a dedicated software development company can make operations more efficient and cost-effective through outsourcing.

The rest of the article is available under the form. Read more!

Types of Software Development Outsourcing

Software development outsourcing can be classified on the basis of where the third party is located. This includes:

Onshore Outsourcing

This is when the third outsourcing partner is located in the same country. Such outsourcing offers a greater degree of control and responsiveness.

Nearshore Outsourcing

This is when the outsourced development partner is located in a neighbouring country or in the same time zone. Such outsourcing can be more cost-effective due to lower labour costs in neighbouring countries.

Offshore Outsourcing

This is when the software development partner is located in a more-distant country, offering access to a global talent pool and lower labour costs. However, it often comes at the expense of responsiveness and issues arising from cultural differences.

Each of these outsourcing types is suited to different purposes. You can learn how to choose the right type of outsourcing partnership in our previous article.

General Benefits of Software Development Outsourcing

Many software development companies have begun outsourcing part of their operations for the cost benefits this arrangement provides. A recent analysis of 210 studies from the past two decades revealed that 85 cited cost savings as the primary benefit of outsourcing. 

Some of the other benefits of software development outsourcing include:

• Increased efficiency
• Increased flexibility
• Increased software quality
• Better access to skills and resources
• Faster time to market
• Improved access to innovation and intellectual property
• Lower operation costs

How Does Software Development Outsourcing Improve Efficiency?

You may be wondering how exactly outsourcing increases efficiency for software development operations. After all, many businesses that outsource their software development operations are located in developed countries with high productivity rates.

Some of the ways software development outsourcing improves efficiency include:

No Recruitment and Onboarding

Hiring specialists for your software development operations can take weeks, if not months. Onboarding these new employees and bringing them up to speed can also take up additional time, which may increase your time-to-market.

Outsourcing your operations to a third party saves time as they can assign their own specialists for software development duties. This helps you bypass the recruitment and onboarding process while still benefiting from the increased productivity of an experienced specialist.

How Does Software Development Outsourcing Increase Quality?

Outsourcing also increases the quality of your software development operations. It does this in the following ways:

Better Techniques and Problem Solving Methods

 The third party can utilise up-to-date technologies,techniques and innovative problem-solving methods in their operations. 

Access to a Greater Pool of Experts

Some of these quality improvements can be especially significant if the third party has access to a wide pool of software development experts that the contracting company does not.

Maximising Resources

With certain duties out of the way, the contracting company can focus on the tasks they are best at. This can improve operational quality in multiple areas.

How Does Software Development Outsourcing Lower Costs?

Software development outsourcing also helps lower costs in various ways. This includes:

Reduced Hiring and Training Costs

If your company needs to hire additional software development staff to carry out operations, you can save costs by outsourcing these roles. This is because the hiring process itself can be costly for businesses – before considering salaries and benefits for the new employees.

Surveys have found that the average cost-per-hire is approximately £3000. This is due to the high cost of using recruiters and the time spent during the hiring process. In addition to this, your company will need to spend money training new employees and preparing them for their roles in the software development department.

By outsourcing your operations, you won’t need to worry about finding the right software development specialists for certain duties. The third-party provider will take care of sourcing suitable candidates for you by assigning it to the specialists at their organisation. These are specialists that have already been onboarded and brought up-to-speed regarding your requirements.

Fewer Technological Investments

Hiring staff at your company often involves investing in additional technology or infrastructure. This could include desks, chairs, computers or additional software licenses and subscriptions. By outsourcing your operation, you won’t need to worry about spending funds on these items. 

Lower Labour Costs 

One of the primary reasons why software development companies outsource operations to other countries is to save on labour costs. It’s no secret that developed countries have higher labour costs than developing ones. However, these wage differences do not necessarily translate to differences in productivity. 

This means you may be able to achieve the same productivity by outsourcing software development operations to a country with lower labour costs. 

How to Outsource Your Software Development Operations Effectively

If you intend to outsource your software development operations to boost efficiency and reduce costs, it may help to use the following approach.

Define Your Goals

The first step in the outsourcing process is to define your goals. Your project managers should speak with software development staff and determine which tasks must be completed in-house and which ones can be outsourced to a third party. Once these goals have been defined clearly, you can start seeking suitable outsourcing companies.

Research the Right Places for Outsourcing

As mentioned earlier, there are many different types of outsourcing depending on where the third party is located. If you do not wish to outsource your operations abroad, you may be able to find third party providers within your own country.

It is possible to save on labour costs by seeking out a third party in another country. However, you should be aware of cultural and time zone differences and how they may impact your operations. This is especially vital for companies that wish to outsource their SaaS operations. 

Research the Best Companies for Your Needs

The next step is to research the best companies to outsource your operations to. Look for different companies that have experience with software development and learn what their past clients have to say about them. This research phase is vital, as you do not want to leave your company’s operations in the hands of an unreliable third-party.

Final Thoughts

Choosing an experienced and reliable software development partner is vital, as they can help you build a good reputation with your clients. The key to outsourcing successfully starts with the right partnership. Please get in touch with us and schedule a free discovery call to learn more about smarter outsourcing.