54% of companies use third-party support teams to connect with their customers. And interestingly, more than a third of small-sized businesses, outsource a process to an offshore software development company. Spending on outsourcing security was about $75.2 billion in 2019. While this may seem to be high, 59 per cent of organizations feel that the biggest benefit of outsourced product development is a reduction in costs.
- Why Should a Company Outsource Software Development?
- What is the Difference between Offshoring and Nearshoring?
- Tips to Find the Right Outsourcing Partner
- Tips for Working with Offshore Software Development Teams
Why Should a Company Outsource Software Development?
For businesses that are still sitting on the fence about outsourcing, or want to expand their current outsourcing teams, the primary question is why?
You need to reduce business costs
Running any business is expensive and the bottom line is always to lower costs. Outsourcing helps you achieve this. Take for example backend workflow systems such as accounting – both payables and receivables, paperwork related to budgeting, billing, and inventory, and overall administrative work. All of these are important tasks for a business but, can be repetitive and tedious. They are also a drain on resources. An offshore development team can take care of this efficiently, at lowered costs, allowing for a business to reallocate budgets to where it may be most needed at the moment – sales and marketing, or strategizing. Outsourcing then becomes the simplest and most effective business move.
You need to focus on critical aspects of business
Most businesses have a core competency around which it is built. Most of the time, hiring and running the non-strategic departments can be a drain on time and take professionals away from their core competencies. Working with an offshore software development company makes it simpler for a business to focus on its core specialties. You will be able to hire the right professionals and concentrate on their training rather than get sucked into the daily rigors of administrative work.
You are Expanding Fast
Expanding your business means you have to ramp up production, and balance cost, quality and customer preferences. Gaining quick access to larger teams who can work on your processes enables fast, yet reliable expansion. Another reason to outsource is when you are looking at scaling up in terms of a quality talent pool to hire from. Outsourcing tasks like hiring a multi-skilled team to build up a business can help you reach your end goals sooner than anticipated.
What is the Difference between Offshoring and Nearshoring?
As a business, you can offshore or nearshore your company’s work.
Nearshore outsourcing is when a business outsources its software development tasks to a team located in a country close by, usually within the same or a similar time zone. An example would be parts of America nearshoring to Canada or Mexico, depending on time zones. Offshore outsourcing, on the other hand, refers to companies that work with teams that are located in a completely different part of the world. An example would be America offshoring to India.
Put simply, nearshore outsourcing is similar to offshoring, except in terms of physical distance from the team you are outsourcing to. There are benefits to both kinds of outsourcing, but in most cases, nearshoring often cannot match the competitive rates that offshoring can provide. The upside to nearshoring is that site visits are easier to plan and execute.
Here’s a look at the benefits that offshoring and nearshoring offer to get a better understanding of the differences between the two options and what it means for your business. There are some benefits that both nearshoring and offshore software development provide:
Lowered costs: The principle here being that the further away you outsource, the lower the costs are going to be. But, both offshoring and nearshoring can offer you a lowered pricing. Which one you opt to go with depends on the kind of work being outsourced and other factors such as how close geographically do you require the team to be for functionality; how often do you require site visits; how often do you need to collaborate with the team in person, etc. Qualified professionals, latest infrastructure: When you are outsourcing, offshore, or nearshore, you will have access to the most qualified professionals. You will be able to choose team members based on the requirements of your client, project, or the vertical of your business that you plan to scale. Team members can be added or removed as per the requirements of the projects. The size of the team can also be scaled up based on your needs. All this, without affecting the functioning of your core competencies.
Quality of service: The quality of work from in-house teams can suffer for various reasons. This can affect output until the problem is resolved. When outsourcing, you can be sure that the quality of work you get will not dip – irrespective of them being offshore or nearshore. It’s the business of such teams to make your business their priority. Additionally, they come with the experience of having worked on multiple outsourcing projects and therefore bring varied experience to the table. Additionally, with a dedicated team, you can be sure of the focus, innovation, and creativity that the team you outsource to, offers you.
There are other specific benefits that nearshoring and offshoring can provide your business. Your choice of outsourcing partner can depend on how each of these works for your business.
Time zone: Nearshoring means that you work with teams in your time zone, or with minor differences. This allows for better interaction during the workday. It also makes it easier to organize site visits or team meetings across departments. Being in the same time zones ensures that any crisis can be handled immediately. These advantages cannot be had with offshore development teams that usually work in different time zones.
The benefit of different time zones however is that you have a company/team that is functional round-the-clock. Any issues that arise during the workday in your time zone, can be addressed by the team in the other time zone ensuring things remain on track at all times.
The cultural angle: Nearshoring ensures that work and social cultures are similar making working together easier for any organization that is outsourcing. Communication is clearer, local lingo is easily understood, culturally similar work styles are easier to understand and decision-making is quicker.
While this may not be the case with offshoring, there is a cultural advantage in working with a team that is different from yours. This can help introduce newer working styles and work cultures. It helps makes team interaction more interesting and can also result in a greater exchange of ideas.
Tips to Find the Right Outsourcing Partner
If you are in the market to find an offshore software development partner, it can seem like a daunting task, considering the many factors involved in narrowing down on one. Whether you are looking to expand your presence, add to your core competencies, take on a new project, or simply make the best use of your resources – outsourcing can be the right solution for you, if done right.
Asia and India, in particular, are key outsourcing hubs for offshore development. This region offers reliable outsourcing that is cost-effective and allows your business to reach the market with newer products and services faster.
There are quite a few factors you have to take into consideration before you sign the dotted line with an outsourcing partner. A wrong choice can result in delays, failures, and a rise in costs. The process of choosing an offshore or a nearshore team is quite similar. Your decision, however, is based on the specific requirements of your business.
While the process of choosing the right outsourcing partner, whether from India or any other country, is almost always the same, here are some best practices that you can follow:
Set out a clear scope of work: Even before you start scouting for the right outsourcing partner, be sure to have a clear scope of work set out. As a business head, it is your responsibility to put down your company’s business goals, specify what its needs are, and list out all the possible solutions that will help your company achieve its goals. If you are a start-up, or a relatively new business or simply find it hard to come up with a scope of work, these are the questions that need to be answered:
- What does your company need to outsource right now?
- What are the solutions you are looking for?
- What is your competition doing well that you would like to adopt?
These questions will help you figure out the problem you are trying to address and will set a clear path that you need to follow to solve the problem and identify what your business goals are. This will help make the most of the collaboration. For the best results with outsourced product development, you will need to be very specific with your scope of work.
Look for the right expertise: When you are hiring an outsourcing company, what you are looking for is the right expertise. Narrow down on possible vendors based on your requirements and then evaluate each one on:
- Industry or domain knowledge they offer
- The varied skillsets their teams have to offer
- Their experience in solving similar challenges
- The immediate technical expertise and problem-solving they can bring, and how quickly they can scale it
What is the outsourcer’s market reputation: As a business, you cannot compromise on quality. This means you cannot work with anyone who does so. Missing deadlines, lack of a work ethic, inadequate project and communication management are not acceptable in an outsourcer. You need to assess the market reputation of potential outsourcers before you sign them on.
A background check is not hard to do in today’s connected world. There are several forums and platforms where you can check the credibility of the organization that you are planning to work with. Asking for references is also perfectly acceptable.
Be transparent in your financial dealings: Every business, yours or the outsourcer, is in it for the monetary benefits. Lay down all the facts when it comes to financials. What you are paying for, how much, timelines, milestones, and even penalties where necessary. Remember that quality services cost money. However, this does not immediately exclude newer players in the business. Check their market reputation and work out a good deal if you are satisfied with what you see.
Ensure your data and intellectual property are protected: While there are several benefits to going digital, there are numerous dangers too. Digital security and intellectual property protection are key to a good working relationship with an outsourcer. Since you are sharing sensitive business information with an outsourcer, you have to ensure that it is well protected. Water-tight non-disclosure agreements are essential to the smooth functioning of your relationship with the outsourcer. Also, ensure that regular audits and network security checks are conducted to ensure the constant safety of your data.
Aim for Agile methodologies for your developmental processes: Customer demands are constantly changing and as a business, you have to keep up with it. To be able to accommodate these ever-evolving needs, ensure that your outsourcer works with Agile technologies and offers you a collaborative environment that assures you quick results.
Find and work with a flexible partner: When you work with an outsourcing partner, you need to work with a flexible business. It should be able to scale up when you need it to or scale down if necessary, without losing steam. It should be able to handle a crisis or an unexpected issue that arises. This flexibility is especially necessary when you are working with an outsourcer in a different time zone. Such flexibility should be part of the agreement that you sign off on.
Tips for Working with Offshore Software Development Teams
Once you have settled on the team that you are going to work with, you need to develop a working rapport with them. It may take a short while to get into a smooth flow with the team. Here are 5 ways in which you can ensure the maximum benefits of working with an offshore software development company.
Set Information Milestones: Especially when you are working with a team for the first time, it is important to set up information milestones. You will be working with an Agile team and they will have regular updates to share at various stages in the development process for any software. Ensure that you are regularly updated on the progress of the software. Such periodic interaction ensures that the final software delivered matches your exact requirements, is within the budget agreed upon, and is delivered within the timeline set.
Make small beginnings: The temptation to go big will be strong, especially if you are in expansion mode. However, it is best to start small and work your way up to a larger team gradually. Start with a small project, particularly one that does not play a major role in the day-to-day functioning of your organization. That way if something were to go wrong, your production or current client list is not affected. With a small project and a team of programmers, you will be able to better assess your outsourcer, while on the job. It will also help get you a buy-in with those at your company who may still be resistant to the idea of outsourcing.
Ensure the basics for the work process: When you begin your outsourced product development, certain basics need to be in place. These are:
Infrastructure: One of the biggest issues that onsite teams face when trying to communicate with their offshore developers is the lack of a communication system. It could be administrative issues like not having a conference room when needed or weak conferencing equipment. These issues should be sorted out before a project goes live.
- Mode of communication: Before the actual work starts, test all means of online communication and the software necessary to facilitate it. Also, test security such as VPNs, etc. that you will be using to share sensitive company data. Fix regular time slots between your offshore and onsite teams for communication.
- Hire a qualified project manager: Every outsourcing project requires a dedicated manager to serve as a go-between the business and their offshore/nearshore software development team. Find a project manager who understands the company’s vision for the project and who can communicate this well to the outsourcer team. This has to be done in a manner that gives both teams the necessary space and freedom to work while ensuring that the project remains on track with the company’s end goals. The manager should be able to communicate with the top brass of the company as well as with the programmers at the outsourcing end. If you have many outsourced projects on the floors, you may also require a delivery head to supervise all project managers and ensure output is delivered at the right times.
- Freely share information: It cannot be reiterated enough, communication is central to all offshore development. Always have a free sharing of information model with the outsourcer company to ensure that they have all that they need to do their best on your project. Share all details about the client for whom it is being developed, the company’s vision for the project, what the competitors may be doing. Some level of onsite training is also a good idea so that the offshore/nearshore team has a better understanding of your company’s and the client’s vision. It also helps build a good rapport between teams.
- Treat the outsourcer team as one of your employees: Besides having a water-tight contract and clear communication strategies, you can get the best out of your offshore/nearshore software development team if you consider them as part of your team. Regularly discuss the impact of their work on customers, on the enhancement of employee productivity, and how it reduces operational costs. Recognize major milestones and acknowledge the work done. Sending congratulatory notes, and going into specifics of what you liked best can be especially motivating for teams. Work on building up a great working relationship with the senior management of the offshore/nearshore team.
Hiring an offshore software development company comes with several benefits. It helps you onboard quality expertise at lowered costs and expand the scope of your business.