The technology industry has witnessed a revolutionary change with the advent of disruptive outsourcing. This kind of outsourcing involves technological advancements like automation, cloud computing etc.
According to the 2018 Deloitte survey, 500 executives from leading organizations have stated that disruptive outsourcing has helped them increase their productivity and competitiveness in the market.
Emerging trends and solutions in cloud and automation have enabled various tech industries to scale faster and reach the global market. Outsourcing is a valuable strategic tool, especially for the tech industry.
For example, outsourcing an activity like software development, Software maintenance to a vendor helps to cut down operation cost and also helps to focus the resources on the business logic. Moreover, technology is rapidly changing and it is difficult for your in-house team of developers to be good at everything.
Outsourcing of services opens up the immense possibility of working with expertise that is not available to individual companies. Your workforce instead can focus on the core competencies of the company while IT services are handled offshore.
According to the surveys of Deloitte, 31% of all IT-related services were outsourced and the global outsourcing industry produced a whopping 88.9 billion U.S dollars in revenue, last year alone.
Outsourcing software development helps companies to reduce the costs that they incur and also helps them focus solely on business goals. It is not just beneficial for saving money but it is a great means of innovation.
Why Do Companies Outsource?
“As with many initiatives, organizations are finding that delivering competitive advantage through disruptive outsourcing solutions is anything but simple; effort and expertise are needed to address potential data security and cyber risks, changing regulations, organizational resistance, skill gaps, and to help flatten fragmented processes. In this new world, place your bets on the brave and the good, and against the fearful and complacent.”
Doug Plotkin, managing director, Deloitte Consulting LLP
1. Time to Market
Time to market is basically the duration between the creation of a product idea to launching it in the market. If you have the development process streamlined and effectively planned out then it becomes easier to predict the time you will take for your launch. It is also extremely important to decrease this time gap.
Delaying your launch will allow your competitors to get ahead of you. The ephemeral nature of technology can also you’re your product idea redundant and useless.
Hiring an outsourcing company helps you to make your delivery to the market much quicker, thereby reducing a considerable amount of time. This improves your competitiveness in the market and also gives you a head start among your contemporaries.
2. Access to Expertise
There might arise a situation where your company might lack people who are qualified enough for a big project. However, with hiring a dedicated team, you have access to the most qualified and experienced professionals. The hired outsourcing company will be the expert in the field and hence can make your projects professional.
Outsourcing of services can enable somebody who specializes in the field to apply their specific technical expertise to make your product better.
You get access to expert specialists like business analysts, project managers, fullstack software developers etc who can guarantee you a high-end product .
3. Domain Awareness
You might have a project that involves a complex technology. For this, you might require a team that has specific and deep domain expertise for that particular activity. It is not financially practical to recruit an in-house team merely for such a skill-specific project.
This is where outsourcing helps you. For example, if you want a team of developers for custom software development you can look for vendors that are proficient in custom software development.
Offshore outsourcing reduces the overall business operating cost. It eliminates the need to hire permanent employees who have to be paid even after the completion of a project. This, in turn, reduces the cost of training and recruiting.
In most developed countries, companies have the added burden of paying the employees insurance, tax, security benefits and other collateral dues.
Outsourcing benefits in flexibility when it comes to termination of services. It eliminates the need to pay government-mandated compensation while terminating an employee.
With an independent outsourcing contract, they can simply change the service provider if not satisfied with the service.
Outsourcing software development are on a steady rise. More companies are now outsourcing both their major as well as minor projects.
Why do software outsourcings fail?
Even though the trend of outsourcing has grown, it also had high failure rates.
According to the data collected by Dun & Bradstreet’s Barometer of Global, 25% of outsourcing project fails within two years and 50 % of them fail within the first five years.
5 reasons why outsourcing relationships fail
1. Unclear Expectations and Objectives
Client companies often fail to communicate the goal they are trying to achieve and what they are expecting to get out of the outsourcing company. This will drastically affect the outsourcing company’s perspective of the work they have to do.
Without a detailed understanding, orders might have to be changed. This can, in turn, lead to delays and cost overruns. There has to be a clear understanding of what the project entails and preferences. Clients have to be transparent about their goals and keep them realistic. Then you have to make sure that the outsourcing company is on the same page as you.
2. Lack of Clarity
Lack of overall clarity of the business can lead to poor planning. It can lead to a waste of your budget. You must succinctly pinpoint all the essential details about the project. The implications of the project must be communicated properly to the outsourcing vendor and other important stakeholders. A detailed portfolio of your expectations and goals and the entire plan and methodology of the project will help.
3. Insufficient Technical Experience
Most often, companies outsource software development to keep the cost low and also to not hire employees permanently.
The outsourcing company might not have the technical expertise or know-how, it can lead to severe problems, especially in project estimation.
The whole purpose of outsourcing services is to get the work done by somebody that is more equipped at it than your company. Therefore, if the company is not better than your own in-house team or lacks sufficient knowledge, the whole exercise becomes fruitless. You also outsource services expecting better quality than what you can achieve.
Quality that does not meet your market standards also lead to failed projects.
4. Communication Barriers
Clients sometimes do not share information thinking it is apparent.
However, if the outsourcing company is not aware of what they are expected to do, the project will not be finished as is expected.
What might seem apparent might not be apparent to the outsourcing company.
Therefore, all details have to be shared even if it might seem redundant. Ideally, there should not be a communication gap.
It is imperative to hold regular meetings and video conferences as well as exchange feedback.
28% of respondents indicated poor communication as the most important cause of outsourcing projects failure.
According to the white paper released by SourcingFocus.com
Sometimes the reluctance to share information might be due to confidential information which has the risk of being stolen.
To solve this, a confidentiality agreement or a non-disclosure agreement can be signed. This will delineate the security responsibility each party holds. Once this agreement is signed the outsourcing company will be bound not to disclose any information covered in the ambit of the contract.
5. Failure to Fine Tune Contract
Signing a contract with the outsourcing company does end the job of the clients.
The project needs to be managed and under supervision throughout the process.
The main priorities that the clients have should be set out and the project must be planned to the very details before a release date is announced. These details must also be informed to the outsourcing company.
Failure to have a consistent method and planning for the project can lead to a loss. Not every single thing can be planned but the tasks to the nearest milestone must be planned and specific.
These are some of the most common reasons why outsourcing relations and projects fail at a high rate. This can easily be avoided if the clients do their due diligence during the pre-deployment phase of a project.
Choosing the Right Development Partner
The planning that goes into the pre-deployment phase is what ensures a smooth launch post-deployment.
Choosing the right development offshore partner and building a good team can prevent your outsourced projects from failing.
Following are some of the guidelines while choosing your offshore team.
1. Team Skill Set and Expertise
It is extremely important to study and know everything about the team you intend to work with.
You have to collect information about the company, what their skill set is, the expertise of their team, how adept they are with the latest technology, exposure to the latest technology, their portfolio, how effective are they with meeting deadlines, experience in handling different kinds of projects communication etc.
You must look for an offshore outsourcing partner that can give you the appropriate person to handle your account. It is advisable to keep in touch with a developer who is working on your project.
Going for a team that works with hybrid models or agile models will be beneficial for your project. It has to be made sure that they understand what exactly it is that you want and also that they are serious about achieving your project milestones.
2. Market Reputation
Working with the best company can yield you the best results. Therefore, it is important to check up on the market reputation of your prospective partner.
This can be done by taking a look at their client base and completed project history.
You can also look for reviews and feedback from their previous clients, from their website and other social media platforms.
You have to ensure that their services are customer-centric, that is services centered around the needs of the customers. All of these have to be considered before you decide to hire a particular vendor.
3. The Trust and Security Factors
Trust is a very important factor for such a project to succeed.
During the course of the project, you might have to share a lot of information. Sensitive information stands at the risk of being misused.
One of the major security concerns is the intellectual property of the client and the sensitive data.
Before hiring an outsourcing company, you can make sure that they will respect your privacy. The vendor must be somebody who has regular security and network audits.
You have to make sure that they have sufficient infrastructure to protect your data.
4. Scalability and Flexibility
Scalability and flexibility are important elements that you need to consider when you choose the company for your software outsourcing project. You have to check how much scalable their services are and how much customization they can provide. This is an important factor when your business is expanding. The software has to be scalable as per the growth of the business. Your offshore business partner must be able to handle your growing needs.
5. Project Management
There has to be a clear idea as to how the project will be managed. Signing the contract and handing over the project does not end your responsibility.
There has to be constant management throughout the whole process.
All the decision making and planning must go smoothly so that the project does not have any delay. The supervisory role of your client and the management of the project must be decided along with the key terms of the work contract. There must be several channels of communication between your in-house team and the offshore team so that your team can manage and supervise the project.
6. Post Deployment Support
Technical assistance is not only needed during the project put also post-deployment.
A small bug or technical glitch can cause a huge loss to your business. You have to inquire how your offshore partner is going to handle technical issues and updates. There has to be consistent post-deployment support to maintain your product.
Team Set-Up Process and Guidelines
Software that you build or a product that you make is a long-term investment. So is the outsourcing partner you choose. It has to be an addition that will always be valuable to your business. Therefore, it is important to have a great team of developers.
Guidelines to follow while setting up a team.
1. Legal Aspects of Hiring a Dedicated Team
The legal aspects of building a team mainly include three important agreements: Non-Disclosure Agreement or NDA, statement of work or SOW and Master Services Agreement or MSA.
• Non-Disclosure Agreement (NDA)
If your project involves sensitive information that you might have to share with your partner, then it is important to sign an NDA. The agreement must contain what the information entails, and that the information can only be disclosed for project-related purposes. This agreement will legally bind the partner from not disclosing the information. The agreement can also indicate the penalty in the event of a breach.
• Statement of Work (SOW)
The statement of work agreement includes the scope of work, the product that has to be delivered, criteria for acceptance, the time period, the standards, deadline and any other terms and conditions or special requirements.
• Master Services Agreement (MSA)
This agreement is what defines the cooperation with the offshore partner. You have to specify the payment, terms of paying, intellectual property rights, dispute resolution mechanism. The agreement must explicitly indicate that your company will own the copyright to the work that has been done by the team but they will have the rights to it.
2. Set Up Communication Channels
It is important to set effective channels of communication. Most of the communication can be done via online means like video conferencing. But a real-life communication bond has to be made so as to understand the team properly. An in-person conversation will be more effective and supportive.
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3. Establish Procedure
It is important to establish procedures for the work. You have to foresee the questions and problems that the members might have. They should be aware of the work procedure and it has to be ensured that it is followed. There has to be a strict guideline as to who is responsible for what, whom to contact in case of issues etc.
4. Provide Constant Feedback
You have to be responsible in order to manage a team successfully. All the answers and questions of your software engineers have to be answered to make sure you get what you expect. You have to be equipped with the answers. Feedback is what will guide the team as to how their product development is going. There might be a situation where your feedback would dictate the next steps of the team. Therefore, it is important to provide constant feedback.
Examples of Successful Companies that Leverage Dedicated Teams
Apiax is a fintech startup that has proved that outsourcing can be successful business cooperation with the right partner and the right team.
They outsourced their Minimum Viable Product to an efficient Portuguese agency. They provide regulation services to financial service companies. They started off in 2018. However, by the end of the year, they have some of the most sought after clients in the banking industry. Moreover, they were also awarded the Early Stage Startup of the Year at the 2019 Swiss Fintech Awards.
GitHub is another company that went on to immensely succeeds due to their great outsourcing partnership yet again. They were helped by the offshore partner Scott Chacon.
Slack the company that collaborated with MetaLab was valued at $7,1 billion but this year, Slack is getting closer to revenue of $10 billion due to their outsourcing partnership.
WhatsApp has Igor Solomennikov who started as a contractor and later joined the team in California on a full-time basis. Thus, these companies go on to prove that successful outsourcing can revolutionize business.
As an entrepreneur in the technology industry, it is always in your business’s best interest to find innovative ways to bring your product into the market. They have to be faster yet cost-effective.
Fortunately, the technology has advanced so much so that the core competencies of your business can now be taken care of by experts offshore in any part of the world.
Outsourcing has proved to be the most lucrative in the software industry.
It reduced the overall business cost including, compensation, tax, wages etc.
Although there are instances where an outsourcing partnership might fail due to factors such as lack of experience, a poorly drafted contract, communication barriers, unclear objectives etc., it can improve your outcome and make business more financially sustainable for your business.
It is also very easy to mitigate these risks by following a strict guideline while choosing your offshore development partner and also while setting up a team.
With the help of the right software development partner like aTeamIndia, we ensure that your idea gets translated into a market redefining product. Talk to our expert today!
In this day and age, it is difficult to run a startup business. There are very few that manage to succeed. Even though your startup might be small, it brings with it a lot of complex activities that have to be managed rightly. On top of this, software development might be a huge task to manage. However, it is also an integral part of the business that cannot be compromised. In such a situation, hiring an in-house team of your own can cost a hefty sum and also take up a lot of time. Instead, outsourcing website and software development to another company will help get your perfect software and is also convenient and less expensive.
Startups often go for an in-house team thinking it is the safer way to handle their information. They are often under the misconception that an offshore team might leak their client information and other such sensitive data. This is not true. This is a challenge that is there in both offshore and in-house firms which can be resolved with a Non-Disclosure Agreement.
Outsourcing Development is Beneficial for Startups
Outsourcing software development is more economical and helps the tech startup to focus on their key components without spending an awful lot of money and time.
According to the studies conducted by Information Services Group, the annual global revenue generated from software development outsourcing amounted to 60-70 % billion US dollars.
Following are some of the reasons why startups stand to benefit from an outsourcing strategy:
#1. Cost Saving
For a company that is starting out, the operational costs of running an in-house team of employees can lead to a financial crunch. Therefore, it is important to distinguish between tasks that can be outsourced and the ones that need an in-house team. Many have agreed that outsourcing services have helped them stay within their startup funding.
Maintaining an in-house team can cause you to run out of money. This is the case with 45% of startups. Some run out of funds initially itself when creating their own startup websites.
27% of them have been able to cut startup cost with the help of outsourcing. Around 60% of the operational cost can be saved with the outsourcing of services.
One of the outsourcing benefits is that it eliminates the need to keep a set of employees on payroll and paying them regularly even when there is no work. Outsourcing staff also helps you find better talent internationally at the best price than what might be available locally. This is because the international market offers a better talent pool at a competitive rate.
#2. Loose Focus
When you lead a successful business there might occur situations that are not expected. You have to be prepared for these. These new changes can either help your business or cause a loss. The key to a successful startup is to be prepared for both the contingencies by focusing attention on what is needed the most.
A startup company can’t handle every area of their business. Those who try to handle everything because they are reluctant to let an outsider deal with certain aspects of their business often end up ill-equipped to deal with an unexpected event. Therefore, startups have to be realistic as to what tasks they can handle and what they should not be wasting time on. Such tasks can be handed out to a professional through outsourcing human resources. This can increase the productivity and competitiveness a 100-fold.
#3. Scale Up & Down
Outsourcing offers scalability. It is the most efficient way to scale up or down. This is why it is an attractive option. There are thousands of new startups entering the market and there is a lot of pressure and competition. Therefore, they will lose out on a lot of things if they stick to an in-house team of developers.
Startups are also restrained by a small budget with which they might not be able to hire skilled developers. Top developers will most certainly demand a higher wage. On the other hand, outsourced talent can be hired at half the cost. This process is also very quick. They need not be included in the payroll and do not even need to come in every day. All they need to do is one job that is given to them. This speed can be tremendously useful. Scaling down is also quick. It is just as easy to remove them. This way you can apply your time and money on a difficult project and then go to the next one efficiently while on a small budget.
One of the best outsourcing examples is that if your outsourcing partner does a good job, they can be hired again for another project. Otherwise, you can look for a better person for the next project which is difficult to do with your own staff.
Sometimes you might be 100% sure that your product or idea will be a success right off the bat. However, the reality might be quite different and disappointing. When you are employing the services of an in-house team that comprise full-time labor, your product might take longer than expected. In this circumstance, you risk the jobs of people and the capital you invested.
For startups, it is a wiser decision to hire a software developer offshore who is qualified, especially for creating an MVP or minimum viable product. Minimum Viable Product is an essential part of a startup business plan in the sense that it can make or break your business. Outsourcing MVP development helps you to reduce the risks such as equity dilution, investments and will make you more trustworthy to your stakeholders.
In the case of MVP, outsourcing this process will bring a lot of new idea and innovation to the table. They will have global exposure and are more aware of what ideas are more validated in the market. They bring in new ideas for the entire development cycle.
7 Reasons why Should You Outsource MVP Development
#1. Access to a Cross-Functional Team
One of the main benefits of outsourcing MVP for startups is that you get a cross-functional team. You already get a team that has developers having experience in different areas instead of hiring different developers for each different element. Thus, hiring an offshore team is much less expensive than hiring different developers for one project.
#2. Technical Support and Consultation
If the outsourcing vendor is an established company of developers, they will have a team of experienced developers. They will be partners with great knowledge of the field and can, therefore, understand your vision perfectly. They can then help you to make your idea into reality. Because of their years of experience, they will be aware of the practical problems that arise while running a startup.
An efficient team can provide you with high-quality technical support. They bring a different perspective to your MVP startup business idea and will provide their support to constant consultation.
#3. Get Started Sooner
Outsourcing web development or an MVP project will reduce the duration taken to bring your product to the market. It is much easier to get started than it is with an in-house team of developers. You will not have to waste time finding developers, interviewing them, recruiting them, providing them with adequate training etc. This, in turn, ensures that you can market your product much faster and will get a head start when compared to your competitors.
#4. Short-term Commitment
One of the most overlooked benefits of an offshore term is its short-term nature of the commitment. You get to bring experts to work with you on a short-term basis. This means that you will not have to pay them a monthly salary or incur any long-term expenses that are involved while hiring an in-house team.
You also do not have to worry about laying off employees if you need to scale down or worry about losing employees if you take on a different project. You have the freedom to hire experts only when you need them.
5. Structured Process: Project Management Made Easy
If you are working with an experienced company, they can provide you with a structured process for your MVP development. From the initial meeting to the delivery, they will have a planned method which ensures a smooth uninterrupted workflow. A good MVP development company will give importance to communication in such projects. They will be in constant touch with your business during each and every stage of the MVP development process. This gives you clarity as to where the project is standing and how long it will take.
Along with this, without having to dedicate any resource for recruitment and training, the project becomes much easier to manage. It requires less manpower as well. With your idea, the vendor will bring their expertise to it. Combining these two elements, you get a fair idea of how feasible the product is, the duration for it to reach the market etc. This helps you to plan ahead and allocate resources when they become necessary and gives a smooth flow for not just the MVP but also the development cycle. You can also plan your launch dates, strategy to promote, advertising etc.
#6. Development of Strong Code Base
You often seek experienced developers for outsourcing MVP work. They will know what platform to be used, the best languages for coding, UI frameworks, testing mechanisms and other good development practices. With this knowledge, they can build a strong and robust base for your MVP. The entire infrastructure of the code will be understandable easily so that your future developing team can manage the application.
A great advantage of an MVP development partner is that even after the initial stage of development, you can continue working with them. They will work until the details are sorted out rightly. They can also work along with your in-house team of developers as the business expands. They can share their knowledge and expertise with your team.
In short, outsourcing software development needs has helped many big startups to be successful from their initial stage of MVP. This is mainly because a third party will handle technology, coding, testing etc. because of their expertise, they will know which technology will be appropriate for you and what development practices fit you the most. While your technology partner focuses on these challenges, you can focus on marketing strategies, finding investors, new and innovative ideas etc. You can finally put in the time and effort that is required to grow your business. You no longer have to worry about things that are not related to the key elements of your business.
Another important expense is that of hiring an IT department which outsourcing lets you avoid. The outsourcing team comes with their own experts. Technologies and solutions that were previously only accessible to big corporations can now be used by startups, thanks to outsourcing.
MVP development outsourcing can be a very wise decision for your startup. Often, you might have a great idea but lack the time or skill for developing and building it. This is very common. Outsourcing companies will have the resources and expertise required to convert your idea into a product. This will help you to quickly deliver to the market. If it is a company that has previously done many successful MVP projects, it’s all the better for you. Once your idea is approved, you can right away build a team and start outsourcing work.
Outsourcing reduces the risk while also providing you access to clients. There are chances that the MVP might change in its version upon receiving feedback. This will help you to directly reach customers and understand their reaction before bringing changes to the product. In the case of MVP, the product version changes under the feedback received from early adopters. Outsourcing vendors thus give great exposure to your MVP. Outsourcing also provides you with better access to stake holders who guarantee easy access to potential customers and developers. Your outsourcing partner will help you create the final product accurately based on the initial reaction thereby mitigating the risks
A reliable software development outsourcing company can help you save time and money while providing you with top services. Carefully analyzing and studying your prospective partner will guarantee a successful outsourcing partnership. This can also avoid common outsourcing disadvantages. Outsourcing MVP development also ensures better success rates for the finished goods. Finding the right outsourcing company is the most profitable alternative to wasting time on technology, software etc. which can be efficiently looked after by a team of experts.
With the help of the right software development partner like aTeamTexas, we ensure that your idea gets translated into a market redefining product. Talk to our expert today! To know more about aTeam-India offerings, drop a mail to email@example.com