To outsource or not to outsource? This question is being asked by many C-level professionals, especially now, in the times of an uncertain economic situation. You’ve heard that both small companies and big players do it, but you’re still not sure if you should take the leap. Would you land in a better financial spot if you opened your company to the possibilities of contracting out some of its development work? Read our list of pros and cons of outsourcing IT and check where the gains and risks are, so you can make a better decision.
Outsourcing is… wait, are we talking about the same thing?
The word “outsourcing” may mean different things to different people. Usually, it’s one of two things:
- classic outsourcing, that is entrusting entire projects or parts of them to an external company. This is usually a long-term cooperation.
- team extension, which means strengthening your existing development team by adding external specialists who work directly under your management. This is most often a short-term or medium-term cooperation.
In both cases, we deal with the use of competencies of developers who are employees of another company. Except for very rare situations, external specialists almost always work outside the premises of the commissioning company (they can work entirely remotely, or from the office of the employing company).
IT outsourcing benefits
Money
You make bigger profits because outsourcing can significantly reduce costs, eliminating the need to purchase and maintain your own infrastructure and employ a full IT team. This means:
- no need for an office to accommodate new developers or costs connected to purchasing the necessary equipment
- depending on the contract type, you typically pay only for the hours worked and reported by the subcontractor’s developers, so you don’t need to cover their days off or sick-leaves. These are the responsibilities of the company employing them directly.
- lower rates due to lower labor costs, depending on the country of residence of specialists
Let’s compare the rates for the same level of developer competencies in the USA and Poland. The latter are about twice as low as the rates in the USA ($60-120 vs. $35-75). The rates are greatly affected by seniority, technology and company.
Access to unique competences
By opening up to the possibility of outsourcing your development work, you gain access to highly qualified experts in various technological fields, often very niche, which cannot be found in the local market or the chance of employing them is very low.
An example from real life: we were approached by a startup that needed help with implementing Android Auto and Apple CarPlay functionalities into their application which was built using Flutter. Since we had competences in creating radio apps with the same functionalities (and also in Flutter), we could help. We outstaffed two developers who worked alongside the startup’s own team for the period of time needed to implement the new scope.
This takes us to the next point.
You won’t lose a client
They say “You miss 100% of the shots you don’t take”, and it’s true in the case of software development as well. Whether it’s a trusted client who comes back to you with another opportunity (“Can you also make a mobile app in Flutter?”) or a new one, ready to explore a long-term collaboration, you don’t want to turn them down because your tech stack doesn’t align with their requirements.
An outsourcing company has got your back. If you’ve established a team extension partnership in advance, you’re ready for such opportunities and won’t have to say ‘I’m sorry, but that’s not our field of expertise”. If you do, your prospective client will go to your competition… who is probably already taking advantage of outsourcing.
Time (flexibility) is money, too
Outsourcing gives you the ability to adjust the size of the IT team depending on the current needs of the project and allows for greater flexibility and cost control. This is because you don’t need to start a recruitment process to hire new staff when you will need their support only for a few months. In such cases, team augmentation is a blessing, offering you flexible possibilities. Your off-shore IT partner may have specialists available “asap” and for a short period. It’s advisable to have a pool of trusted outsourcing subcontractors, instead of just one. Thanks to this, you’re not dependent on just one partner.
Business security
Outsourcing or staff extension is a much safer choice than collaborating with freelancers. There are a few reasons for this.
First of all, IT outstaffing companies have already conducted a recruitment process, choosing developers who can create code of good standards. You’re one step ahead of the game.
Secondly, their developers very often work together in-house, making knowledge transfer much quicker. Unlike freelancers, they are not left alone, while facing a programming challenge or a problem (these will inevitably happen).
Thirdly, even if a developer decides to part ways with you, you’ll be protected by a notice period included in the subcontracting contract. If you’re afraid of a remote freelancer disappearing, this won’t be the case with a developer employed by an established IT outsourcing company. Your tech partner will be responsible for finding a suitable replacement.
IT outsourcing risks
Losing control over the project
Outsourcing cooperation should be transparent, otherwise your company may lose some control over the project. This can affect the quality and timeliness of implementation, not to mention your customer’s satisfaction. It’s especially true if you’re planning to find a partner that will take over the whole development process, and not just team augmentation. Keep tabs on the progress by meeting regularly with the team during the development process. Also, don’t forget that it’s industry standard to meet with the developers before even starting cooperation.
Additionally, prior to contacting a potential subcontractor, do some research. Check their reviews on clutch.co. A list by Hacker Rank can give you a general direction of where you can find the best developers. Here are some of the highest scoring countries, which are also most popular outsourcing directions: Poland (98/100), Hungary (93.9/100), Czech Republic (90.7/100), Ukraine (88.7/100), and Bulgaria (87.2/100)
Communication difficulties
IT is a fast-paced environment, where effective communication plays a key role. What exactly and how something should be done are questions that get asked a lot. You need developers who can concisely explain complex ideas. Cultural and linguistic differences can lead to difficulties in communication between teams.
Getting one’s message across can be a challenge even within your own in-house employees. The challenge is even bigger with external teams. Thankfully, most software development companies across the world are accustomed to using typical Agile project management methodologies and use English to communicate.
Check on the map below what linguistic levels you can expect in the countries that are considered typical outsourcing directions:
Anxiety within the existing team
Existing employees might perceive the outsourced team or individuals as a threat to their job security, especially if the latter are perceived as having more expertise. This perception can lead to anxiety among the staff.
To mitigate these risks, clearly communicate the reasons for deciding on outsourcing, and emphasize its advantages: more stable financial position as a company, giving the company a competitive edge, a chance for your in-house team to learn from the outsourced team or individuals. Showing outsourcing in a good light will improve your team’s attitude towards it. As a result, it will strengthen both your team and your company.
The takeaway
Outsourcing and team extension are popular collaboration models between IT companies. When done right, it can leverage your potential, both financial and in terms of competences and technological possibilities. If you’ve never had an off-shore contractor, a good place to start is by opening up to team extension, which is a low-risk high-gain option.
Choosing an outsourcing partner can be a daunting experience, since there are thousands of software agencies that offer it worldwide. Narrow your search based on their technologies, reviews and rates and you’re good to go.
