Set the goal and vision of the project:
- What is the outsourcing project about?
- What kind of software do you want to make?
- What do you want to get out of the outsourcing project?
- Are you trying to cut costs or save time?
- By how much?
Software outsourcing gives you access to a well-qualified IT talent pool, 24/7 services while reducing costs. Accelerate your business with the ultimate guide.
Outsourcing or Software Outsourcing has been one of the most talked-about business strategies as technology is advancing at a fantastic speed, and businesses are more competitive than ever.
If you are new to software outsourcing services, however, we understand your troubles. Therefore, through this ultimate guide, we wish to explain in depth what software outsourcing is about and why it is an excellent strategy for your business regarding time, costs, quality, and competitiveness.
In the simplest definition, software outsourcing is to bring a project or tasks from inside the company to outside of the company and be delivered by a third party which is usually called an IT partner. In other terms, this means that a business is hiring one or multiple external software outsourcing companies, or agencies, to carry out software development projects.
In 2019, the global outsourcing market was worth $92.5 billion, with software outsourcing as one of the most popular outsourcing industries. The global IT outsourcing market is expected to grow by $98 billion by 2024, which is a vast number, as cloud technology has become mainstream and accessible for every business.
You may want to check out In-house vs Offshore Development Center: Pros and Cons to understand the differences between having an in-house team and an outsourcing team.
If you are looking for a one-word answer to your business challenges, then outsourcing is the word. Outsourcing software development has proven to be a great success for many companies worldwide. It reduces your internal costs while allowing your company to focus on its core competencies. In a competitive world where technology and demands are constantly changing, outsourcing is a make-or-break solution for your businesses’ success.
Sometimes it’s not about the costs. Sometimes you just cannot find the right team, the right people for our project. Software outsourcing services give you a chance to explore the world and meet new talent who are trained to do exactly what you need them to do. This does not only save costs, but it also saves time, resources, and reduces time-to-market, which is vital for your business’ survivability.
Another benefit of bringing your business overseas is the possibility of 24-hour services. This can be done even if you only have one outsourcing partner or multiple and is vital especially for services that need real-time communication 24/7 such as customer support.
One of the most significant benefits of outsourcing is probably costs. This does not mean you are underpaying people or rushing work. The difference in salaries across the globe is the sole reason why software outsourcing can save you millions or billions of dollars. Instead of paying someone $50 per hour in the U.S, another person can do the same amount of work, with the same quality, and given the same amount of time, for $20. This is not unethical in any way as different countries have different costs of living, and you are paying your outsourced employees their regular pay, if not higher.
When you outsource software development, you do not have to spend time recruiting, training, and housing your employees for projects. You also don’t have to worry about scaling your employees in case your labor size changes project-to-project. One of the best things about outsourcing your software is to find talent that fits perfectly for the position, but without investing in a permanent position.
Outsourcing your IT projects can reduce your time to market significantly. This can be done even faster if you are multi-sourcing, where you split your project into separate processes and use multiple third parties to oversee specialized tasks. Your outsourcing partners can also work together with you around the clock to make sure that all your products are up-to-speed and can be delivered with the least amount of time.
As a company, you might not be specialized in a certain aspect, such as IoT, Machine Learning, or web app development. However, outsourcing your software project makes sure that your software is in good hands. Software outsourcing companies are specialized in a certain area, and they make sure that the results are up to good quality since their reputation relies on the success of their projects. Software outsourcing developers also have more experience with dealing with various projects, which leads to flexibility in their knowledge, and they can adapt to different tasks easier.
The larger the scale of your business, the more responsibilities you have to take care of. Sometimes, it can be very overwhelming, especially to monitor tasks that are not in your expertise. Outsourcing your software can make sure that your project is in good hands. Most IT outsourcing companies have years of experience working on different IT projects, and they are committed to providing the best IT solutions for businesses of all scales. This can take some weight off your chest knowing that someone capable is handling your problems.
By outsourcing your software development, you gain access to international talents without the legal compliance that most companies must undergo from hiring employees. Your outsourcing company can take care of all the legal paperwork and customs so you can focus on other things that matter.
Since the end of the 20th century and early of the 21st century, software development outsourcing has been known to strategize costs and time-to-market efficiently, especially software outsourcing, since technology is advancing at a fantastic speed. However, not every business decision-maker knows the full potential of outsourcing and the difference between outsourcing cheap and outsourcing smart.
To do outsourcing right, it is vital to understand outsourcing not just as a tool but as a global strategy to stay competitive and relevant in the current market. So, what you need to do is to establish a clear software outsourcing strategy following these steps:
Set the goal and vision of the project:
Identify potential Outsourcing areas
Identify potential Outsourcing models:
This is usually based on the project’s scale and size.
Set up realistic and expected KPIs.
Even though it is good to dream big, it is also good to have a realistic goal, so there are no false promises.
Once the Outsourcing Strategy is established, the next step is to bring strategy into execution.
Suppose you are expecting to pay someone $1000 to make the following best social media. Well, that’s not going to happen. Some people will promise you what you want, but trust me, it won’t be what you want. Another thing is, outsourcing employees might be more expensive than hiring your employees. However, you are free from permanent position investments such as benefits, bonuses, training, taxes, etc. It is vital to hire an outsourcing partner due to their experience and competence, not their prices (even though it is a bonus).
To ensure that your outsourcing project can be carried out flawlessly and with the least possible miscommunication, it is vital to work in person sometimes. This also makes sure that you and your partner can understand each other’s company’s culture and vision, to make this work better. You can also see how your team works during regular working hours and what can be improved immediately. Talking and demonstrating are always preferred over hundreds of direct emails.
It is always best to work with a partner who has worked successfully with someone you know personally when possible. If not, you should always do proper research on your potential partners. The best way to increase your project quality with a partner is to increase your relationship with your partner. When someone likes you, they will always ensure you get the best quality out of their services.
Make sure you have clear expectations and deadlines for your outsourcing partner. Know what you want and when and how. This helps you both in estimating your budget and managing your project. With a roadmap, your outsourcing partner can also ensure that they know the deadlines and what exactly you expect to deliver your project on time and fulfill the proper requirements.
You need to know and control your resources. Make sure you have all the proper contracts ready and have backup options if anything unexpected happens. Having an in-house legal team is a bonus, but a reputable legal firm can handle your problems right away if you are prepared ahead of time. Always read the contracts before signing them and ensure that there is insurance even in case of failure from your outsourcing company.
Southeast Asia holds a large pool of IT experts – more than 10 million developers. Of all the regions, South East Asia has the lowest labor costs for software outsourcing. Vietnam especially has a young population – 70% of the population is under 35 years of age, and a concentration in IT, focusing on Machine Learning, Artificial Intelligence, and Mobile Applications. Vietnam is also a middle-income country and one of the most dynamic emerging countries in the East Asia region, which means the cost of labor will be affordable, and the education level is growing rapidly.
According to the global real estate adviser Cushman & Wakefield (C&W), Vietnam topped the Global Ranking for top software development outsourcing locations in 2015. Vietnam is also considered the top IT outsourcing country for Japanese businesses, along with many global partners, including Apple, IBM, Intel, Microsoft, Bosch, etc. The market size is predicted to reach US$300 billion in 2025, making it the fastest-growing location for IT outsourcing.
Despite being a late player as Vietnam has a relatively short history of IT outsourcing, Vietnam’s success is because it has over 400,000 IT engineers, with over 50,000 IT students graduating annually from 153 IT institutions.
Proper evaluation and selection of offshore vendors are vital for your business’s success in overseas software outsourcing. When you outsource important business functions, you will inevitably lose some control over the project, including its quality standards, budget, and timeline. That’s why it is so important to select the right offshore partner who will complete the work to your standards and have a compatible working culture and high ethics.
A good way to find out whether a vendor is a good fit is to start by researching and listing all potential partners that can provide the required services and send out the RPP (Request for Proposal). By sending out the RFP, you can check and ensure that the vendor can fulfill your requirements and expectations. Here are a few qualities that you should look for in software outsourcing companies that can usually be found through bidding:
Look through their past case studies and achievements to determine whether they are experienced in similar projects or are experts in certain technologies you need for your project. You should also look closely for their service hours and whether they can be reached out of office hours for constant communication. Are they going to be available for 24/7 support? Can they meet your request ASAP or only at certain times of the day? Make it clear in your proposal that you are looking for a 24/7 vendor or a normal 9-5 one.
The ISO 27001 for Information Security Standard and ISO 9001 for Quality Management are good indicators of quality to start with. Then, depending on what type of project you are looking for, you can look for other certifications, such as PCI DSS or SOC 2. If a vendor possesses reliable certifications, there is a higher chance that your project will come out successful.
As outsourcing software development is a great way to cut costs, it is reasonable to look at the value the vendor can provide you compared to the price. However, cheaper labor doesn’t necessarily mean more inexpensive costs. For example, if a company is charging you $10 an hour but takes 100 hours to complete a project, it is much more expensive than a company charging you $75 an hour but only takes 10 hours to complete a project.
A big risk for software outsourcing is that the project might not come to fruition due to external issues, such as pandemics, natural disasters, or simply, the third-party going bankrupt. Ensure that your potential partner has reliable, professional liability insurance or other ways to make sure that nothing can stop them from finishing your project or minimizing the potential impact.
Are you ready to outsource yet? Hit your potential partners with a welcoming email, open yourself to a new partnership opportunity, and watch your business transform over the next few years!
Do not hesitate to ask for an expert’s opinion. All software outsourcing companies will give you inputs on your projects. Take this as an advantage to further understand what technology is needed and which type of process is the most fitted for your project.
And above all, always have a backup plan. You cannot foresee all the risks. Be ready for the unexpected, and you can overcome all challenges.
Located in Ho Chi Minh City, Vietnam, with over 16 years of experience in the software outsourcing market, Orient Software can be your trusted partner when it comes to IT solutions for your business. With over 500 experts in various technology fields and over 200 successful global projects, from AI to IoT, from web app to mobile app development, you can be assured that Orient Software can provide you the best, affordable, and outstanding results for your projects, without compromises.