Why More Startups are Considering Outsourcing Software Development

Launching a product startup and keeping it afloat demands a substantial investment. And when it comes to managing resources, they are scarce for most startups. Not only for human resources but financially as well. Less than 1% of startups are backed by solid investments.

Building an in-house development team costs far more than outsourcing software development services to a third-party service provider.

Why Are Startups and Small Businesses Opting for Outsourcing?

There are far more reasons why startups opt for outsourcing rather than assembling an in-house software development team, including:

  • Access to rare skills, experience, and knowledge

Hiring in-house software engineers can take many months, with the global shortage of developers reaching $8.5 trillion.

Large corporations still have some engineering positions unfilled for months, especially regarding rarer programming languages or specific niche experience.

There has been quite an array of tech layoffs in the current economic situation. The shortage of developers still exists, but the overall situation in the job market has eased.

  • Flexibility and scalability

When outsourcing, you can scale your software development team up or down at any time to reach the desired outcomes.

Depending on your project needs, you can select a fixed price, time and material, or a dedicated team engagement model to save a pretty penny compared to in-house expenses.

While outsourcing, you don’t need to spend days and weeks assembling a software development team from scratch. Since time is money, you are protecting your financial resources by saving time.

But don’t get trapped by choosing the cheapest outsourcing vendor. Instead, check the vendor’s competence and qualifications before pulling the trigger on software development.

All startups differ in product, tools, and time of development. Therefore, before starting the search for your outsourcing vendor, analyze the requirements to find the best vendor for your project.

Top challenges and risks of software development outsourcing and how to mitigate them

In the debate about the pros and cons of outsourcing, the advantages definitely outweigh the cons. However, advantages come with certain risks attached:

  • Improper vendor evaluation

When choosing a software development vendor, you need to analyze their previous projects, ensure they work with the tech stack your project requires, and so on. An assessment based solely on rates and ratings isn’t enough to build a successful project.

Time zone differences, poor language skills, and cultural differences can negatively impact the communication between a client and vendor. Still, all these factors can be mitigated if:

– The vendor and the client have some overlapping working hours

– All the review sessions and calls are scheduled beforehand

– There is a dedicated project manager that acts as a bridge between the client and the development team

  • Intellectual property concerns

Intellectual property safety is one of the biggest concerns for tech entrepreneurs. While choosing your outsourcing partner, don’t forget to check their security policies, data loss prevention systems, and data processing methods. Moreover, signing an NDA with your vendor can also help protect your intellectual property.

Overhead costs may take a big bite out of your project budget. This can happen because of a faulty cooperation model. Fixed price is an excellent fit for a project with clearly defined requirements. The dedicated team engagement model works well when you need to focus on your core business and vital processes. Finally, the time & material model comes in handy when there could be multiple iterations.

Choosing the right engagement model will help you optimize your budget and minimize the likelihood of surcharges. So when drafting a contract, ask your vendor to specify the hourly rate and fees for every service they provide.

To simplify code maintenance and make it easier for a team to fix bugs, your code needs to be uniform. Otherwise, you might need to rehire the former contractor for further maintenance and support.

Developing a software solution in a single language and with a similar architecture structure makes all the integrations and maintenance easier. This type of approach can save you tons of money in the long run.

Get the most out of software development outsourcing

Startups and well-established companies choose software development outsourcing over assembling in-house teams to save time and funds, access a larger pool of software development talents, and get a rate-expertise balance.

But only with an experienced, diligent vendor can you easily reap all the benefits of software development outsourcing. So always search, talk, check, think, and analyze. Doing so will help ensure you choose the right software development partner and build a product that will be used and loved by millions.

Featured Image Credit: Photo by Christina Morillo; Pexels; Thank you!

Andrei Kasyanau

Senior Executive and Advisor with more than 20 years of success in the Software, Technology, Healthcare, and Real Estate industries. My areas of expertise include leadership, team building, coaching & mentoring, software development, business strategy, business analysis, and growth. I started Glorium Technologies in 2010 and have built the company from the ground up over the last 11 years.

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