What Is Software Outsourcing and Top 5 Benefits That It Brings
Table of contents
- Software outsourcing definition
- Reasons to work with an outsourcing partner
- Types of software outsourcing
- Outsourcing software development can bring key advantages to your business and work output
- Reasons to work with an offshore partner include better scaling, time and cost optimization
Software outsourcing is a business practice that allows a company to hand over its software development to an external provider. By doing this, you could reap multiple benefits as a development center handles a flurry of operations.
Outsourcing software development projects has become even more popular since the coronavirus pandemic swept across the world. Businesses quickly became limited in their daily operations and needed to find an effective and timely solution.
In that context, a spate of companies is embracing the “new normal” which suggests remote work, even from different continents. US companies, for example, are drawn to the advantages offered by an offshore software partner. Further, multifaceted development centers in Eastern Europe present attractive incentives for both overseas businesses and European companies.
It is important to note that software outsourcing is suitable for large and small businesses alike. As a matter of fact, no matter how large your business is, you are likely to find a number of reasons that could compel you to look for an outsourcing partner.
Software outsourcing is quickly gaining traction as a powerful tool to enhance productivity and accelerate growth. To illustrate, statistics collected by Deloitte show businesses look to outsource for five key reasons:
Scaling faster, Cost optimization, Better speed to market, Enhanced user experience, Competitive advantageScaling faster, Cost optimization, Better speed to market, Enhanced user experience, Competitive advantage
In order to better understand how your business could elevate performance, let’s dive into the details.
1. Scaling faster
The ability to scale up or down is crucial for any operation that might require flexibility. Creating capacity by scaling is an opportunity to build better services and products and form stronger relationships with your clients.
In addition, scaling allows for more flexible work arrangements. In other words, your offshore service provider takes care of any workload you could outsource.
On this note, the same Deloitte research states that 57% of the organizations polled believe outsourcing enables them to stay focused on their core business activities.
57% of organizations believe outsourcing enables them to stay focused on their core business Source: Deloitte Global Outsourcing Survey 202057% of organizations believe outsourcing enables them to stay focused on their core business Source: Deloitte Global Outsourcing Survey 2020.
2. Cost optimization
During the pandemic, cost optimization has been increasingly sought after from small and large businesses alike. The coronavirus-induced economic meltdown, especially in 2020, prompted organizations to give priority to cost reduction.
For its part, software outsourcing helps you stay ahead in a world where it could be increasingly difficult to stay on the payroll and keep all your expenses in check. In that context, skyrocketing inflation around the world is already undermining supply-chain processes, as prices for virtually everything are going up.
With this in mind, running a technical team is a lot more affordable in places like Eastern Europe than it is in the US or Western Europe. Our extensive remote delivery experience at Scalefocus shows that a business could externalise and reduce operational costs by up to 50%.
Businesses could reduce operational costs by up to 50% Source: Scalefocus DataBusinesses could reduce operational costs by up to 50% Source: Scalefocus Data.
3. Better speed to market
Another factor at play when looking at software outsourcing is the better speed to market. With the growing attention to digitalization, businesses have been rotating to providers who enable them to leverage the latest technologies and accelerate their product release cycles
This is intended to help them improve their overall time to market, and speed up their product release cycles. With the Scalefocus remote delivery center, businesses receive a detailed ramp-up strategy for the first 12 months which is tightly aligned with their long-term objectives. Moreover, we provide customers with adjustable team composition to match varying project needs.
Have your project up and running in just 12 months with the right partnerHave your project up and running in just 12 months with the right partner.
4. Enhanced user experience
User experience is key if you’re aiming to maintain a strong presence as a leader in your industry. Not only do you need to continuously find ways to satisfy your clients, but you also need the right architecture to build out new solutions to achieve it.
To this end, a proper IT outsourcing center could do all that heavy lifting for you. You can either hire in-house staff, spend time on training, and have them sit idle once the project is finished. Or you can hire a software development team readily available to meet all you might require for any specific project – long-term or short-term.
More than 50% of enterprises have implemented or are planning to implement customer experience and user-centric design. Source: 2021 Deloitte Global Shared Services and Outsourcing SurveyMore than 50% of enterprises have implemented or are planning to implement customer experience and user-centric design. Source: 2021 Deloitte Global Shared Services and Outsourcing Survey.
5. Competitive advantage
A major benefit to consider when going to a software development center is whether it could give you a competitive advantage. Forward-thinking organizations are likely to plan ahead for any new developments that could come upon the market.
Therefore, it’s crucial for a company to always be looking for ways to grow and expand. In this light, the watchful eye of a strategic outsourcing partner will make sure there will be no surprises out there and you won’t lag behind your competitors.
Accelerating digital is on the agenda of 61% of organizations Source: 2021 Deloitte Global Shared Services and Outsourcing SurveyAccelerating digital is on the agenda of 61% of organizations Source: 2021 Deloitte Global Shared Services and Outsourcing Survey.
Outsourcing in 2022 can take many shapes and forms. The most common ones, however, are just a few:
Offshore, Nearshore, Onshore, Multi-sourcingOffshore, Nearshore, Onshore, Multi-sourcing
Offshore development centers are located in distant regions. If your company is based out of the US, offshore outsourcing for you would mean Europe, India, or Ukraine. Benefits of offshore IT centers include cost reduction, extended technical and customer support through time zone differences, and a richer and accessible talent pool.
Nearshore IT centers will have their physical location near your business. In other words, this would be usually in the same, or similar, time zone, and will most likely have the same work culture. Additionally, nearshoring generally gives you smoother communication.
Onshoring, also known as homeshoring, is practically the handling of your operations by a company located within your own country. This is usually accompanied by relatively high costs, and potentially workforce shortages. Similar to the nearshoring, onshoring allows for simpler communication and sharing the same work culture.
Multisourcing is a combination of the above in a way that allows you to diversify by working with several vendors from various locations. For example, you may want your technical team to be outsourced in an offshore location, while you keep your management onshore near you.
Software development, particularly IT outsourcing, is an attractive opportunity for a growing number of businesses looking to expand above and beyond.
With over 250 people dedicated to remote delivery centers across the globe and an average Net Promoter Score of 9.3 (out of 10) among all of those engagements, Scalefocus is a trusted remote delivery partner who helps businesses innovate, operate and scale effectively in a truly digital world.
To learn more about Scalefocus, simply head over to our company page or directly send us a message.