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If you are required to develop software to run your daily business operations, you are probably left with three major choices – 1) develop your software in-house by hiring a team of software engineers, 2) adopt an off-the-shelf software solution, and 3) outsource software development to a third-party.
Of all the three options, software development outsourcing offers a highly cost-effective, flexible, and valuable way to access the best of technology, skills, expertise, and development speed. Outsourcing software development allows your organization to decrease operating costs, increase speed-to-market, enhance core competencies, and get access to technology experts from any part of the world at half the cost of in-house development. New research reveals that outsourcing for software development is projected to increase by 70% between 2022 and 2023, as companies want to avoid development delays, reduce staffing costs, and scale quickly with new and improved business applications.
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- Predicted growth of IT outsourcing market size during 2020-2024
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- Projected CAGR of IT outsourcing market by 2024
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- YoY growth of IT outsourcing market during 2020-2024
(Source: Technavio)
As software outsourcing becomes one of the most-discussed business strategies today, it’s important to understand why software development outsourcing is relevant for your business, what kind of software development services you can outsource, different outsourcing models, and practical tips to efficiently outsource your software needs. This article presents an ultimate guide to outsourcing software development in 2022. Let’s dive in.
What is Software Development Outsourcing?
Software development outsourcing refers to an arrangement or a contract, in which an organization decides to engage a third-party software development company to effectively handle their software development project instead of utilizing their in-house team and resources. Organizations usually outsource some or all of their software development needs to a third-party with relevant knowledge and experience.
Top Technology Outsourcing Trends in 2022
- Cloud Data Storage
- AI, IoT, and RPA
- Blockchain Services
- AR and VR
- Cyber Security and GDPR Compliance
What Kind of Software Development Services Can You Outsource?
Here are some of the key software development services which you can outsource:
Full Software Development
Legacy application support and upgrade
Platform Migration
Software Testing and Bug Fixing
Software Architecture
UI and UX Design
Full Software Development
The entire process of software development, right from the concept creation to technology selection, to implementation, to release, and to maintenance and post-implementation support can be outsourced.
Legacy application support and upgrade
Protect your software application from getting outdated, until the technology beneath your application is supported and maintained by its creator or user community.
Platform Migration
If your mobile application currently supports only Android users, your outsourcing partner can help migrate your application to a different platform, say iOS. Based on your application’s user requirements, the outsourcing partner can opt native, hybrid, or cross-platform development.
Software Testing and Bug Fixing
Improve your application’s overall user experience, speed, reliability, and efficiency by getting rid of the vulnerabilities caused by bugs or other quality assurance issues.
Software Architecture
Design your software product quickly and efficiently by developing its software architecture (front-end and back-end designs and workflows), including the identification and implementation of the right tech stack.
UI and UX Design
User Interface and User Experience design services comprising usability consulting and front-end design for various devices across all industries. Outsourcing UI and UX design services will improve your application’s look and feel, ease of use, and overall experience.
Why Software Outsourcing is Good For Your Business?
Working with an outsourcing company will help you mitigate the risks of running a project internally. Outsourcing compensates for the lack of in-house skills and ensures that your product is delivered on time. Here’s how outsourcing makes your business more efficient and smarter.
Focused Business Development Strategy
To win the technological race, you need to have a focused strategy. Every business needs to align its operational strategy with the changing people, process, and technology. When your software is developed by an outsourcing company, your business processes will be highly streamlined and optimized, allowing you to focus on the core activities that will take your business to the next level.
Business Continuity Planning
Outsourcing your IT necessities can be a boon in times of financial and natural adversities such as the COVID-19 crisis because outsourcing companies like Fingent implement business continuity planning and disaster recovery measures to fulfill obligations and deliver services without interruption.
Manage Risks and Compliance Effectively
Partnering with a software outsourcing company like Fingent enables you to mitigate the risks associated with handling your project. We follow a high-quality project management system that has been tried, tested and proven across our past as well as ongoing projects. We take care of all the legal compliance-related matters that have to be fulfilled while onboarding offshore resources as well as setting up contracts with our clients. This lets you focus on the things that matter.
Gain An Edge Over Competitors
Outsourcing software development services accelerate your time-to-market. With people working around the clock, your competitiveness improves greatly and gives you an edge over your competitors. Outsourcing software development companies do not necessarily demand you to make any upfront investments. The cost advantages make your development project more attractive and reduce your overall workload. With outsourcing, you will gain access to new and innovative perspectives and an opportunity to utilize strong and diverse technology expertise.
Why Do Businesses Outsource Software Development?
Software application development remains the most frequently outsourced function among all the different segments of IT. Statistics indicate that software outsourcing is expected to be on a 10-year growth roll through 2025. If 56% of companies outsourced at least part of their application development in 2020, the figure rose to 60% in 2021.
Outsourcing Benefits Achieved by Businesses in 2021
- 88% Cost Reduction
- 78% Standardization and Process Efficiency
- 63% Improved Business Value
- 67% Developed New Capabilities
- 54% Accelerated Digital Goals
Here are some of the key benefits of outsourcing software development:
Save Costs
Outsourcing is the most viable option to reduce your overheads and increase profit margins. Offloading your software project to an offshore development partner allows you to get the same amount of work done, with the same quality at a much lesser cost. For instance, the average offshore software development rate in India is $30 per hour, whereas in the USA, the hourly developer rate will cost around $100. Software development outsourcing saves you from investing heavily in infrastructure, licensing and subscription charges, and other training costs. It’s more feasible than keeping full-time employees on your payroll.
Gain More Flexibility
When you outsource, you only pay for the skills and expertise required to execute your project. Software outsourcing gives you the flexibility to scale up or down the size of your team based on your requirements. Outsourcing empowers your business to address the changing market needs easily and stop worrying about the rising cost of hiring and other technology investments. It improves your team’s focus on the mission-critical activities essential to run your business successfully.
Access to World-Class Technology
When you team up with a strategic and trusted offshore software developer possessing a proven track record, you will gain an upper hand in technology. Access to cutting-edge technology without any hefty investment gives you a competitive advantage over your peers. Software development outsourcing ensures innovation and sustainability by helping your business stay ahead with technology.
Reduce Time-To-Market
Outsourcing software development relieves you from the mammoth task of searching for new developers and preparing them to work on your project. When you have a dedicated offshore team working on your product in different time zones, you are all set to make progress 24/7. A competent software outsourcing partner understands your project’s ideas precisely and helps reduce your time to market significantly. Outsourcing allows you to minimize the risks associated with software development as you work with a team that uses high-quality project management systems and established workflows.
Reach a Wider Audience
Software outsourcing companies come with diversified experience of tailoring their services to businesses across multiple verticals and geographies. They follow the latest industry standards and software development best practices to build high-performing modern apps that meet your customers’ expectations and expand your market reach.
Five Major Software Outsourcing Models
Companies choose a feasible outsourcing model based on the outsourcing partner’s location, relationship level, and terms of agreement. All these factors should align with your business objectives.
Here are the top five software outsourcing models:
In onshore outsourcing, an organization outsources their development project to a third-party software vendor located within the same country. Though onshore outsourcing is costlier than offshore and nearshore models, it offers the advantage of geographical proximity to your business location and eliminates cultural and linguistic barriers.
Example: A business located in Chicago outsourcing their project to a third-party software vendor in Missouri.
In offshore outsourcing, an organization outsources their development project to an external software development company located in another continent with a different time zone. Offshore outsourcing helps optimize your overall budget by letting you hire from a global pool of talented resources with hourly or monthly rates.
Example: An American company outsourcing software development to an offshore development agency in India.
Read more: Offshoring Software Development
Nearshore outsourcing refers to the practice of hiring a software outsourcing company that is located in a neighboring country of the same time zone. This outsourcing model saves your travel time and eliminates the linguistic and cultural barriers that affect communication.
Example: A New York-based company outsourcing their development needs to a software services provider in Georgia.
Team augmentation model implies the process of hiring external workforce on a temporary basis to quickly respond to urgent business requirements. Through staff augmentation, you can scale your internal development team in minimal time. This outsourcing model is highly effective for businesses facing a tight project deadline and skill shortage.
Managed IT services is an outsourcing model in which the IT services provider is responsible for ensuring the stable work of your IT environment by maintaining and anticipating your software and IT infrastructure requirements. It frees your internal team to do work that’s specific to your business.
Fingent’s Software Outsourcing Success Stories
At Fingent, we specialize as an offshore software development company. Our custom software solutions are game-changers and life-savers for many of our clients, including the ones below:
1. Custom Property Management Software
SimpleRent, the custom SaaS-based property management software developed by Fingent is helping its owner Ben Sealey and many other realtors to overcome day-to-day complexities in managing properties, tenants, payments, maintenance, and complaints.
Challenges faced by property managers
- Complicated rent collection and distribution involving multiple tenants and owners
- Managing maintenance requests from every nook and cranny
Solutions delivered by Fingent
- Automated the rent collection and distribution process
- Eased the handling of maintenance requests and complaints
- Simplified the software for property managers and tenants
Benefits gained
- 60% time savings through automation
- 3-4% reduction in rent collection service charges
2. Customizable Course Mapping & Pivoting Application
Educational establishments face challenges related to managing credit hours in a time-efficient way. We helped our client develop a pioneering approach for addressing compliance related to educational programs and also helped them render learning requirements in a simple and comprehensive manner.
Challenges faced by educational institutions
- Complex course accreditation process
- Aligning courses to compliance regulations
- Inability to manage credit hours in real-time
Solutions delivered by Fingent
- Customized application for tracking credit hours and managing courses
- High scalability and integration capabilities leveraging web, cloud, and mobile
- Helped establish a pioneering approach to address compliance in education
- Anytime, anywhere access to data through secured user profiles
Benefits gained
- 508 compliance - Accessible to people with disabilities
- LTI integration - Interoperability with other education platforms
- 60% reduction in cost and effort spent on course management
3. AI Application to Manage Workers’ Compensation Claims
Sapra & Navarra, a leading Californian attorney, wanted to develop a software that will help reduce the average case settlement time and cost taken to process employee compensation claims. Fingent helped them enhance and accelerate the activities involved in processing workers’ compensation claims.
Challenges faced by the legal attorney
- Balancing the time, cost, and cases in hand was hard for insurance carriers
- Painful, manual methods for document segregation and analysis
- Personnel training stress diminished workforce efficiency
Solutions delivered by Fingent
- AI-based application that combines client’s pioneering litigation strategy
- Employed OCR and AI for smart data extraction
- Intuitive dashboards to derive basic case information at a glance
- Contextual analysis to extract meaningful insights from larger datasets
Benefits gained
- 50% decline in claim cycle time and associated personnel costs
- 57% cost-drop for the insurers, carriers, and claim admins
- Average case settlement time reduced to 1-2 days
Does Your Business Require Software Outsourcing?
Hiring a software development outsourcing partner takes the load off your shoulders. Here are a few scenarios where software outsourcing can help your business:
- If you are hard-pressed to launch your product or service in the market in minimal time, without heavily increasing your existing overheads
- If your product or service is already a hit in the market and you want to reach out to all your customers and provide a better, efficient, and faster service
- If you require custom software development, process automation, updates, and upgrades on your existing business application
- If you want your software to be developed by a domain expert, specialized in developing software for your industry
- If your business has to undergo digital transformation while saving costs on resources and infrastructure
- If you are unable to juggle new business and software requirements as well as current internal workloads
- If your core business area is not related to software, but you need a mobile app or a cloud-based software to run your daily operations
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“By the end of 2023, the global value of the IT outsourcing market is expected to exceed $1.3 trillion as companies increase their search for digital transformation experts.”
Source: Findstack
Best Practices to Follow While Outsourcing Software Development
Here are a few points to consider while outsourcing your software development project:
- Find out if the offshore service provider’s experience is sufficient to handle your project requirements.
- Get introduced to the team of software developers, architects, business analysts, and other key people who are supposed to work on your project.
- Ensure to have a full-time onshore lead and an offshore lead to help establish the coding standards, solve technical issues, and mentor the offshore team.
- Use video conferencing to arrange regular meetings to handle any roadblocks, discuss queries, and resolve issues in a timely and efficient manner.
- Use a collaborative project management tool to plan tasks efficiently, prioritize tasks, and track the project’s progress.
Are you planning to build a mobile app for your business? Explore our template and share your requirements with us. We will get back to you with a ballpark estimate.
Outsource Your Software Requirements to Fingent
Since 2003, Fingent has been a reliable and capable offshore software development partner for leading global brands, including several Fortune 500 companies. With an impeccable track record as an offshore development team, Fingent has helped improve cash flow and increase business efficiency for many clients. We help your organization to scale up its size without the need to hire or fire any team member.
Our diverse offshore talent pool includes experienced developers and tech professionals who leverage the latest software development trends, such as automation, data analytics and visualization, cloud computing, Artificial Intelligence (AI), Internet of Things (IoT), Augmented Reality (AR), Virtual Reality (VR), 3D Web Configurator, Robotic Process Automation (RPA), mobile application development (hybrid and native), Microsoft, SAP, and Odoo solutions, and digital experience platforms among others.
Want to know how software outsourcing can add value to your business and improve your customer experience? Contact us to get an extended consultation.
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