Saigon Technology, as a top IT outsourcing company in Vietnam, we share our knowledge in this in-depth research which is helpful for you, outsourcing buyer before outsource your IT software project.
With the way the economy is driving towards globalization, a lot of enterprises and startups are hard bound to gain a competitive advantage by minimizing costs, enhancing customer service and maximizing efficiency.
But how do you go about implementing these goals when working on a limited budget? If you’re looking for a solution to this problem then the answer might be in software outsourcing.
And we must understand about outsourcing software development deeply to be able to work with it effectively.
This article walks you through every aspect of software development outsourcing!
Table of Content:
What is Software Outsourcing?
Or Software Outsourcing Definition!
Software development outsourcing essentially describes a situation in which an organization chooses to hire a third-party programmer to offer services related to software development. By handing out essential business processes over to a specialized third-party, companies are then able to manage even the most complex tasks. According to current statistics, at least 60% of the total outsourcing market is comprised of IT/software workers. It makes sense to hire developers for a number of reasons:
- It’s hard to find a business that doesn’t need software service
- Software projects are constantly increasing
- Companies can reduce costs significantly by outsourcing software development services
Why Is Outsourcing A Viable Business Model?
Cost reduction is mainly the first reason why companies choose to outsource software development. The cost of hiring a software developer in North American is far higher than outsourcing abroad – which is why many local developers send their projects over to Vietnam, India and China. The current business environment requires high-efficiency in order for a business to stay competitive. As a way to stay ahead of the competition, managers today must use multiple strategies to increase productivity, and this can mean implementing things like automation, standardization, and business process re-engineering.
In addition, they restructure entire organizations with the goal of making them lean and flexible to allow quick response to customer needs and changes in the business environment. Outsourcing is one of the strategies that managers use to meet these goals.
Software Outsourcing Pros and Cons
A. PROS OF SOFTWARE OUTSOURCING
1. Reduced operating expenses
Perhaps the most obvious benefit of outsourcing development is cost reduction. For a business, minimizing expenses is one of the surest ways of enhancing growth. Keep in mind that hiring the cheapest software developer doesn’t always translate to enhanced services, and for this reason, one has to find a balance between quality and affordability.
The fact that you don’t have to buy equipment and other supplies means that the overall cost is drastically reduced. It is the goal of offshore software developers to offer these services to companies at a reasonable price.
Business owners can appreciate the opportunity to hire an outsourcing company only when needed (this reduces the pressure of having to sustain long-term employment). This is ideal in situations where your business hits a low season or when you are running specific projects on a limited budget. It is far cheaper than paying a full-time in-house programmer or having to hire and fire software developers all year round. For the sake of maintaining a friendly business image, consider outsourcing to an expert third-party for the duration of each project.
3. Exposure to new talent
By outsourcing part of the business to software professionals, the business owner gets access to new talents. When you have access to skilled software developers from all around the world, you can streamline the entire process and have an easier time designing, integrating and implementing new projects.
4. Focusing on core business processes
In a situation where your staff is overloaded with work, software outsourcing can help to manage software development so that your staff can then focus on key business functions. Since your offshore contractor will be handling all the hard work, your staff will have more time to work on tasks like marketing, content management, customer service, and other essential services. As a business manager you will have more time to focus on the implementation of essential tasks.
5. Downsize the business by using outsourcing services
With software outsourcing you can expand, downsize and re-prioritize certain elements of your business easily without affecting core functions. But make sure to consider the existing business laws, security policy and potential employee lawsuits.
6. Managing resources
Since your in-house team has a wealth of resources to perform specific tasks, you may find it necessary to monitor the usage of resources and any arising challenges from outside the business. By hiring a software developer, you can examine core aspects of the business from an unbiased source.
Outsourcing offers lots of potentials particularly when working within a tight deadline. Do you need more hands working on the project? One way to speed up the process is to hire specialized people who can work within your timeframe. As a way to stay competitive, today’s business owners must strive to keep their staff up-to-date with the latest software innovations, and leaving this issue of technical ability to the software outsourcing company is a sure way to enhance productivity without compromising quality.
B. THE DRAWBACKS OF SOFTWARE OUTSOURCING
Keep in mind that if you want to outsource a project outside of the company, several potential issues are bound to arise. There is always a possibility of lowering standards and performance; however when you understand the challenges and how to avoid them, you can outsource only the most relevant parts of the project and reduce negative exposure. Here are a number of things to consider:
1. Lowered Quality of Service
There is the possibility of experiencing a low performance from the developer, particularly when they are charging far lower than existing market prices. The good news is there are ways to avoid this. Liaise with software developers on staff to get a reliable agency, and if that’s not possible then ask for references and contact other clients serviced by the outsourcing company to get a clear picture of their skill. It may also help to conduct some sort of test or assign a small project to the company to measure their skills before making a decision.
When hiring a company from abroad, there is a difference in language, culture, and time, and this can create challenges for both parties. If not properly handled, the resulting misunderstanding can lead to frustration and lowered performance. To minimize these challenges, you can schedule regular meetings and try to familiarize yourself with the other culture. If possible you can work with an individual who understands the culture and language to handle potential misunderstandings.
When working with a software developer there are always risks involved. In the case of software development, you expose confidential company information to a third-party and trust them to use it appropriately. But in the event that the software company itself suffers a leak in their database, then your information would be in jeopardy.
But even with these apparent risks, your business won’t gain anything from playing it safe. If you want to grow the business and bring in new ideas, some of these risks will have to be managed in order to attain a higher goal.
How To Outsource Software Project Effectively?
Assuming that your company has decided to outsource its software development, you might ask yourself how outsourcing will affect quality. Generally speaking, the quality of software depends on the provider you choose to work with. If you choose a good provider, then many of the arising challenges will be mitigated.
In an ideal situation, the developer you hire will bring vast experience from having worked on software for a variety of companies and industries. You can expect your outsourcing partner to leverage their collective experience to help overcome some of the more difficult challenges
and to set up a platform that allows for a seamless integration of services. We’ve found out the most common mistakes that companies make when outsourcing software development, and how to avoid them. Follow this guide to learn how to do software outsourcing safely and effectively.
1. Make a list of your candidates
To make sure that you only work with the best, make a list of at least five candidates, and then begin the process of vetting each one of them. Start by asking people who work in IT or have good knowledge of software development and find out if they can recommend a particular company. It is possible that one of your own people has had outsourcing experience with one of the companies on your list, or they know someone who has. This way, it will be possible to get a recommendation from a trustworthy source.
If this isn’t possible, don’t worry. You can always conduct an organic search online and look for outsourcing partners. Paid advertisements don’t always give you quality service providers, but they may still point you in the right direction. Look for reputable companies online and consider checking out startups if you have a good recommendation.
Depending on the nature of your project and its complexity, we recommend that you start with 5-10 companies and then structure them in a spreadsheet with columns. Here’s what the columns should cover:
- Name of company
- The price that each company offers
- The solution to your problem and other details of their proposal
- Your initial evaluation of each agency based on information you gather from your own sources
When you organize this information in one document, you will have an easier time evaluating each agency without being bogged down by the details.
2. Check the agency’s reputation
Once you have your list ready, it will be crucial to know as much as you can about each company before you go forward. Start by conducting a Google search to see what people are saying about the agency. The good thing about the internet is that information added there constantly, and so it’s quite easy to gauge how popular a company is by monitoring discussions on different platforms.
To make sure you don’t use manufactured reviews as references, try to get closer to what the average person has to say about the agency. To do this you have to conduct your search away from the agency website and all affiliated programs. Go for neutral websites and chat forums that involve programmers from different parts of the country and beyond.
You can search for more information on blogs and review portals but remember to not disqualify an agency after reading one bad review online. When there’s competition between companies that offer the same service, you may come across one or more bad reviews written by business rivals to trash their competition. Also, not all customers are satisfied and so a few negative reviews are left on these platforms.
Once you go through all the reviews, take it a step further and search through social media profiles of your potential partners. You will learn a lot about what other clients think about these websites because people tend to leave rather detailed evaluations on Facebook and other social media profiles after paying for professional services. Remember some people unintentionally give 1 star to rate a company because they think this is the highest score, and others do it for malice.
3. Check whether your potential partner is financially stable
The last thing you want is to work with a company that cannot sustain itself financially. In any case, it says a lot if the agency has financial troubles. It could be an indication of mismanagement or just a lack of clients. We all like to work with people that we trust and one of the things that we look for in companies as well as people as an indicator of competence and proficiency is financial stability.
Marketing campaigns cost a lot of money and a lack of any distinctive marketing effort can be a sign that the agency doesn’t bring in much revenue. Check for companies that run affiliate programs or sponsored programs to promote their services, and focus on social media to see how they operate.
If you’ve followed our instructions, right now you have a lot of information garnered from reviews, social media profiles and other sources. Check how often each agency posts on their social media and see if they have a significant number of followers. If you find that they have good engagement with their followers, and that most of the feedback is positive, then there’s a good chance that it’s a competent company with good values.
It takes a considerable effort to set up a strong presence on social media and to engage positively with customers, so if an agency shows competence on this part then it’s a good indicator of proficiency.
4. Learn the cultural basics
It’s always a good idea to investigate the clichés that tend to circle around different industries. The cost of some services tends to increase when you hire people from certain countries, and the opposite is also true. One of the things that affect the price of these services is the general educational level of the people in that particular country. For this reason, you should only outsource complex software-related tasks to countries with excellent programming talents.
Issues such as social background can also affect how you interact with the agency, so pay close attention to the nature of your project and find out whether your chosen agency is capable of providing the service and meeting international standards.
Working traditions tend to differ from one country to another, and this may affect your schedule if you choose to hire a company from abroad. For this reason you might need to keep in mind the deadline of your project and find out if they have any relevant holidays coming up that
might affect your schedule. It should be noted that some companies choose to adjust their schedule to fit with most of their clients, but this only happens in cases where most of their clients are from abroad.
5. Ask to see the products they’ve developed in the past
It’s easy to fall for vague declarations because companies tend to exaggerate their accomplishments and will go a long way to draw links between them and large projects and companies when possible. Your approach should be to check for real accomplishments and not some mention of potential associations.
If you are considering hiring an agency for the purposes of software development, then it is absolutely important to visit some of the websites that they’ve developed to see their work first hand. Remember their work is a mirror of their skills, quality, and imagination. Check for speed, robustness, user experience, media integration, functionality, etc.
But don’t make any conclusions after only one inspection. Take your time and evaluate more of their work to get a better understanding of their skills and philosophy.
Another thing worth mentioning is that agencies are sometimes creatively limited by their own clients’ demands. If you see one project that doesn’t impress, or websites that have strange fonts and images, it could be that the client insisted on building it that way, and so it wouldn’t always be a reflection of their ability.
Going through just five websites that they’ve developed will give you a pretty good idea of what they can do for you. Check whether the pages navigate easily, if they load quickly, and more importantly, whether they are optimized for mobile devices.
6. Meet with agency representatives in person
Communication is enhanced a great deal when you can converse face-to-face. If your project is rather complex and requires a lot of resources to complete, it would be ideal to meet with the manager or CEO of the firm. The reason for this is that sometimes large projects require a readjustment of the entire working program of the company, and it would be in their best interest to meet with you in person in order to get more details and to be made aware of your needs.
As a new client, the firm will most likely involve their best people and approve the changes quickly. Take this time to share all your ideas and ask as many questions as you need to. If you find that the people you are talking to do not have a firm understanding of your needs or the technology involved in the process, you should probably move on to another agency altogether, instead of taking that risk.
Another good reason for meeting with your potential outsourcing partner is that you get to see firsthand all their technology and infrastructure, and you also get to meet their workers. You should expect to see them working with the latest hardware and software, as this will tell you whether they have the right tools to handle your project.
Software Outsourcing Models
Software development outsourcing is not a new thing but still, it’s worth starting with the basics – the service models. You can use different models to outsource the development, maintenance, and testing of software, but these models are based on three primary approaches, project-based outsourcing, dedicated teams, and staff augmentation.
1. Staff Augmentation
This is the simplest form of software outsourcing and it involves relegating the job of building the software development team and their place of work to the outsourcing provider. Other aspects such as defining and controlling the process, managing the projects, are left on the client’s side. The software developer ensures that the team reports working on time and that their vacations and PTO are paid as agreed, but the rest of the responsibilities (hiring and firing, team building, motivation, and distribution of responsibilities) are all left with the client.
2. Dedicated team
In this model, the provider is responsible for people management, low-level tasks, and process quality. This essentially means that you get a team of experts working on a number of projects or providing a set of services.
3. Project-based model
This is perhaps the best-understood model of outsourcing because in this case the client doesn’t worry too much about the team that builds the software or the methodology. Instead, they are more concerned about the end-result, and this gives the software developer more flexibility to plan and execute the project.
To be effective when doing software outsourcing, please: Set your goals clearly.
When evaluating your list of potential partners, ask yourself whether you’d want to work long-term with any of them. This will tell you a lot about how you measure their potential, and whether they are a good fit for your company. It might take a while to get a good match right away, but finding the perfect software developer means that your business can grow and expand in ways that you haven’t thought of yet. The impact that this arrangement has on your business is rather profound, and as such, proper measures should be used to get it right.
Do you need to hire a developer for a new project?
Consider all these factors carefully when choosing your outsourcing partner, and remember the more time you spend examining their work, the better chance you have of choosing a developer that suits you. Once you decide on a particular agency, read the contract carefully and politely ask to add, remove or change anything that you don’t like.
By using this information as a guide, you can learn a lot about software outsourcing and what it takes to get a good developer on your team.
Over 10 years doing software development outsourcing for clients worldwide, hope Saigon Technology‘s knowledge sharing is valuable for you, the software outsourcing buyers.
About Saigon Technology, a top software outsourcing company in Vietnam:
Founded in 2012 in Ho Chi Minh City, Vietnam, we serve clients worldwide in outsourcing software development using cutting-edges technologies and matured Agile process with the power of 100 software engineers. Our software outsourcing services: web and app development, custom software development. Engagement models: fixed price, time and material, offshore dedicated team.