Outsourcing Software Development: Models, & Top Locations
Google, Ashton Kutcher, and Boeing all outsource. Only some of them succeed in doing so.
So, why do some fail when others glow with regard to how to outsource successfully? Find answers to these and other questions in this ultimate guide.
The State of Software Outsourcing in 2019
The reasons for outsourcing are varied. Intel, Orange, and Reuters see no point in hiring an in-house team permanently.
Cost savings are also attractive. OnContracting reports that tech companies may save an average of $100,000 per year per job thanks to outsourcing.
Some CEOs trust in the professionalism of software outsourcing firms. Thus, the benefits of hiring a professional have even united outsourcing and Hollywood. Celebrities like Britney Spears and 50 Cent delegate their social media projects and websites to contractors.
The Risks & Rewards of Outsourcing Software
Ironically, the advantages and disadvantages of outsourcing project development are often the same side of one coin.
Better flexibility is a pro, but it takes time to be flexible. Expertise is a benefit, but what about hidden costs?
Top 5 Mistakes You are Likely to Make When Outsource
Two of the biggest outsourcing disadvantages are financial losses and security breaches.
You might be able to bypass these risks if you stay away from the following:
1. Choosing a team based on price comparison
Solution: learn the prices of software development companies around the world.
2. Overrating expertise
Solution: when beginning to outsourcing projects, make references. Ask a question in a community. Feel free to contact us for a free consultation and receive expert advice on how to outsource your project properly.
3. Sharing access to sensitive data
Solution: keep the tasks you would only trust your team with, way from strangers, and stick to an NDA.
4. Incorrect expectations
Solution: it is necessary to prepare specification documentation. A good company usually offers this service as well.
5. Communication issues
Solution: set up a communication procedure with the project manager.
The Benefits of Outsourcing Development
Companies looking to outsource software development usually abide by the goals below:
- Cost-saving- there are three factors why outsourcing saves costs. Lower prices, tax rates, and savings on in-house labor laws.
- Access to a larger talent pool- attracting top talent is easier if you go global. Using temps and vendors is more convenient, as you can hire the specific expertise as needed.
- Time savings- with wider resources, you are in a position to better manage deadlines. It’s not only about bigger teams — better task distribution matters as well.
- Streamlining the business process- outsourcing streamlines business processes, which leaves space for concentration on core values. Additionally, you enjoy better risk management and accommodation of peak loads.
- Security- this is the domain that requires the highest expertise and most up-to-date skills. A well-trained contractor team can provide these exact things.
3 Models of Outsourcing Software
Now, your next step is learning about software development models during outsourcing.
We recommend focusing on the three most frequently used:
- The fixed price model
The fixed price model assumes that you agree on the final result and price at the start. This model needs a lot of preparation and paperwork. Both sides agree on requirements and further changes are not allowed. However, if they are introduced, it means additional costs and potentially prolonged deadlines
- The time and material model
You calculate the cost of the time and material project in hours per team member. This value depends on the salary of outsourcing developers engaged in the project. The process involves setting final goals and assigning milestones.
- The dedicated team
The dedicated software development team is a flexible and convenient way to go about outsourcing. The team may augment your internal IT department or even become your remote IT department. They can add new levels of expertise as well.
Complete control over all processes arms you with the ability to leverage costs. Additionally, you enjoy full visibility with regard to the progress, not to mention communication — which is much better.
The following table compares the above-listed models on all the steps of development.
Top 5 Destinations for Outsourcing
Due to geographical proximity, some countries have built rock-solid partnerships with wealthier neighbors and show no signs of splitting. China is an ally of Japan. And, Mexico has deep ties with the US.
The best countries to outsource software development are in Eastern Europe and Asia. South America and Africa follow.
1. Eastern Europe
Although the price factor is important, the main pro is the level of experience and expertise. Eastern European countries can boast a good education and a long history of outsourcing software operations.
Cost. The average price of a software developer in Eastern Europe ranges between $30–50 per hour.
Region’s best option. Ukraine. Due to taxation benefits, this country has the best price-to-quality ratio. The average price of a developer here is $40 per hour.
The dragons in this region are India, China, Vietnam, Malaysia, the Philippines, and Indonesia.
Cost. Asia is the cheapest region in the world. The highest price required in the region is in China ($50-$100/hour) and the average cost is $18-$40/hour.
Region’s best option. The golden combo of skill, experience, and price is still India.
3. South America
South America is a traditional outsourcing pool for the United States.
Cost. The average cost of hiring a developer in South America is $30-$50/hour.
Region’s best option. Brazil. This country offers the best price-to-quality ratio with an average rate of $30-$50 per hour.
African countries make a big promise on the outsourcing market. Their strong sides are governmental support, incredible foreign investment, and great infrastructure.
Cost. The average developer rate is $20-$40 per hour.
Region’s best option. Egypt, South Africa. These countries offer the best price-to-quality ratio.
5. Optimal zone for outsourcing
Eastern Europe is the top location for this goal. Although not the cheapest, the region offers a unique level of expertise. Ukraine and Poland rank first as countries with the most developed software skillset (Acct. to TopCoder and Hackerrank.).
If you are still looking for cheaper destinations, make sure to mitigate the risks. Over-saving may have fatal results. The sad Boeing story is an example.
How to Start with Outsourcing Successfully
Here is the 6-step program for creating a successful strategy when outsourcing:
1. Avoid cost comparisons — starting with price comparison is the least effective strategy. A better option is centering attention on expertise, flexibility, and communication skills.
2. Set clear specifications — avoid any sort of guessing games. Proper preparation may save up to 50% of expenses.
3. Due diligence — literacy in prices is where successful projects start.
4. Portfolio first, reference next — a portfolio is a great indicator of your team’s professionalism. The same applies to referrals.
5. Communication. It matters — moreover, the rules should be set in the beginning.
6. Be a feedback geek — transparency at every step of software development is very important.
This is a summary of an article. Check out more details and recommendations for outsourcing software development in the complete article on our blog.