According to Statista, IT Outsourcing market revenue is projected to reach US$541.10bn in 2024. It is expected to grow to US$812.70bn by 2029. Several businesses worldwide depend on software outsourcing development companies to access talented software engineers and programmers with diverse technical skills.
It is a game-changer for fast-growing small and mid-sized businesses. Fast-growing small and medium-sized firms can benefit greatly from outsourcing software development services.
It can provide a 50% – 80% deduction in overall costs compared to traditional methods.
However, if you’ve never worked with a software development company before, it might seem a little intimidating. Therefore, before you get started, you should have a perfect understanding of outsourcing software development.
In this blog, we gather everything you need to know about outsourcing software development from its benefits to its challenges.
Let’s get started!
What is Outsourced Software Development?
Software development outsourcing is a method of delegating your business operations to a third-party service provider on a contract basis. It involves analyzing your business processes to determine which element of software development needs to be handled by experts.
Companies of all sizes can benefit from outsourcing.
The main purpose of software development outsourcing is to:
- Help businesses maximize productivity in a cost-effective manner
- Save time on hiring specialists
- Increase the flexibility of scaling your project
- Allow you to focus on your core business operations
- Increase your business efficiency
Companies like Data Mark report 31% savings in a single year through outsourcing
Moreover, Deloitte found that 78% of companies have a positive experience of outsourcing and they achieve standardization and process efficiency. It is the best way to grow your business by accomplishing more in less time.
Benefits of Outsourcing Software Development
Software development outsourcing provides several benefits to companies, which include:
Access to Skilled Resources
By outsourcing software development, companies can tap into a global pool of skilled developers, designers, and engineers. This allows them to find the right talent for their specific project needs, regardless of geographical location.
Software development outsourcing will surely grow to 70% in 2024.
Outsourcing providers often have teams with specialized skills and experience in specific technologies, frameworks, or industry domains. This can be beneficial for companies looking for experts in their niche. Another advantage is their flexible model, making it easier to start the project immediately.
Cost Savings
One of the primary benefits of outsourcing software development is cost savings. Outsourcing development work to regions with lower labor costs can result in significant cost savings compared to hiring an in-house team. This can help companies reduce their overall software development expenses.
Increased Efficiency
Outsourcing companies often have well-established processes and tools to improve software development projects’ efficiency and speed. This can lead to faster turnaround times and quicker time-to-market. In addition, it allows companies to stay competitive in the tech industry.
Focus on Core Competencies
By outsourcing non-core software development tasks, companies can free up internal resources to focus on their main business activities and strategic priorities. When companies outsource tasks like application maintenance, infrastructure management, or even new feature development, it allows their in-house teams to concentrate on the core competencies that are central to the business.
For example, if a company’s main focus is on developing innovative financial services products, outsourcing allows the internal team to dedicate more time and resources towards activities like product design, user experience, and developing differentiated financial models. This ensures the company’s best talent and efforts are directed towards the activities that are most critical to its success.
Flexibility and Scalability
Outsourcing allows companies to scale their development team up or down as needed, adapting to changing project requirements or market conditions. You can make quick adjustments to team size without long-term commitments.
Reduced Risk
Addressing the risks associated with software development, such as budget overruns, missed deadlines, or lack of technical expertise within the in-house team can be overcome with outsourcing.
Reputable outsourcing partners have well-defined processes and cost controls in place to ensure projects stay within the agreed budget. Their economies of scale and specialized expertise can help minimize unexpected costs.
Improved Quality
Reputable outsourcing providers often have stringent quality assurance processes and employ best practices in software development, which can lead to higher-quality deliverables.
Further, hiring reputed software outsourcing companies will allow you to hire skilled developers who deliver the project on time.
Disadvantages of Outsourcing Software Development
Software development outsourcing also comes with some disadvantages, such as:
Security Risks
One of the main disadvantages when outsourcing projects is a significant security breach. The security risk is high for your business when outsourcing projects that require your personal information. There are possibilities that your information gets misused and passed to any person who has disastrous effects on your clients and company.
Time Zone Differences
Outsourcing has benefits and drawbacks, including being stuck in different time zones. Time zone variations may offer clients round-the-clock help, but coordinating schedules to stay informed at all times can be challenging. If something urgently needs to be done or a query is addressed, the third-party provider might not be approachable.
Lack of Focus
Another main problem with outsourcing software development is lack of focus. Outsourcing IT development companies and vendors have more than one client at a time. When they have multiple clients, your project might face the risk of not receiving the proper attention.
Your business may suffer as a result of this lack of concentration and attention to detail. For this reason, you should choose wisely and look for a trustworthy company that assigns a dedicated team to every client.
Language Barrier
It is another main challenge that businesses face when they opt for outsourcing. For creating the right project, strong communication is crucial. Without proper communication, you cannot deliver your requirements and end up with a poor product.
You can overcome the language barrier in outsourcing tasks by communicating and regular updates. Also, you can use visual images such as diagrams or charts, which can further enhance understanding.
Hidden Costs
Outsourcing is a cost-effective solution but sometimes it involves unexpected expenses. Hidden costs can make outsourcing more costly than initially projected.
Therefore, you must discuss everything with the software development outsourcing firm from the beginning that helps to mitigate the disadvantage of hidden costs.
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Less Control
It is one of the main risks of outsourcing software development. When working with an outsourcing provider, you have little or no control over work processes. This loss of control potentially impacts the quality, timing, or manner in which the tasks are completed. Also, there is a risk of compromised quality, and the company may result in receiving low-quality deliverables that affect the overall business reputation.
Outsourcing Software Development Cost
Outsourcing in software development can provide significant cost savings compared to building an in-house development team. However, the specific cost savings will vary depending on the project, location, and provider.
The below table shows the figures that reflect the average hourly rates of software developers.
| Role | North America | Eastern Europe | Asia | Latin America |
| Business Analyst | $100-$120 | $40-$50 | $30-$35 | $35-$45 |
| Architect | $180-$265 | $40-$50 | $40-$50 | $40-$50 |
| Project Manager | $130-$210 | $35-$45 | $35-$40 | $40-$50 |
| Jr.Developer | $95-$101 | $25-$35 | $20-$30 | $25-$35 |
| Mid-Level Developer | $120-$127 | $30-$40 | $25-$35 | $35-$45 |
| Lead Developer | $160-$170 | $40-$50 | $30-$40 | $35-$50 |
| Graphic Designer | $72-$148 | $30-$40 | $30-$40 | $30-$40 |
| Jr QA | $70-$74 | $25-$35 | $20-$30 | $20-$30 |
| Mid-Level QA | $90-$95 | $30-$40 | $25-$35 | $30-$40 |
| Sr QA | $130-$154 | $35-$45 | $30-$40 | $35-$45 |
Here are some of the key ways it can reduce costs:
Lower Labor Costs
Developers and engineers in many outsourcing destinations, such as India, Eastern Europe, or Latin America, often have significantly lower hourly or monthly rates compared to their counterparts in Western Europe or North America.
This differential in labor costs can translate to huge savings, especially for larger or long-term software projects.
Reduced Overhead Expenses
When outsourcing, the client company avoids the overhead costs associated with maintaining an in-house development team, such as office space, equipment, HR, and administration.
The outsourcing provider handles these operational expenses, allowing the client to focus on the core software development work.
Access to Cost-Effective Expertise
Outsourcing providers often have access to specialized skills and expertise that may be difficult or expensive to build and maintain in-house.
By tapping into this existing talent pool, companies can get high-quality work done at a lower cost compared to hiring individual experts.
Increased Efficiency and Productivity
Experienced outsourcing providers typically have well-established processes, tools, and methodologies that can improve the efficiency and speed of software development projects.
This can lead to faster turnaround times and quicker time-to-market, ultimately reducing overall development costs.
Flexible Resourcing
Outsourcing allows companies to scale their development team up or down as needed, without the fixed overhead costs associated with maintaining a large in-house team. This flexibility can help optimize resource utilization and avoid unnecessary expenses.
Reduced Risk of Budget Overruns
Reputable outsourcing providers often have robust cost control mechanisms and project management practices in place to help ensure projects stay within the agreed budget. This helps mitigate the risk of budget overruns that can occur with in-house software development.
Software Development Outsourcing Companies
Here is a list of the best software development outsourcing companies that help you find the best company for your business.
1. Ninjas Code
Ninjas Code is a leading MVP development company. The company specializes in building MVP projects for startups and existing companies at budget-friendly rates. They have experience in providing web, mobile, and desktop solutions.
Therefore, if you have an idea for the project and don’t have the expertise, contact them to help you make an MVP according to your requirements.
Why Ninjas Code?
- Expert team
- Use latest technologies
- 50+ happy clients
- Deliver project on time
- No hidden fees
- Complete process transparency
Rating on Clutch: 4.8
2. Innowise
Innowise is a software development company that has expertise in custom software solutions. The company was founded in 2007 and serves several IT and non-IT organizations to achieve their goals and objectives. They have experience working with various industries and deliver the best work on time.
In addition, the Innowise team has expertise in the following domains:
- Blockchain
- Big Data
- Data Engineering
- Machine learning
- Artificial and virtual reality (AR/VR)
- Cloud & DevOps
- Machine learning
- Artificial arteligence
Why Innowise?
- 17+ years of experience
- 1100+ projects deliver
- 200+ clients worldwide
- 1600+ IT professionals
Rating on Clutch: 4.8
3. Clarion Technologies
Clarion Technologies is a leading solution provider of web, mobile, and technology services. With over two decades of experience, they have worked across 30+ diverse industries and provided end-to-end support to 1500+ customers.
The developers of Clarion have vast expertise in a range of frameworks and applications, from designing software to building robust e-commerce platforms.
Why Clarion Technologies?
- More than 20+ years of experience
- 400+ top developers
- 1000+ clients of all sizes across the world
Rating on Clutch: 4.7
4. VironIT
VironIT provides custom software development and IT outsourcing services. They develop IT products for individuals, startups, and small businesses. The company specializes in providing end-to-end web development services.
They use Agile, SCRUM, and Kanban in their software development process, enabling them to provide various IT solutions on schedule while still satisfying customer demands.
Why VironIT?
- 500+ completed projects
- According to Designrush, top outsourcing software development companies
Rating on Clutch: 5.0
5. SumatoSoft
SumatoSoft is a custom software development company that helps its clients digitize their business. They have a deep understanding of modern technologies and strong expertise in business domains to deliver high-end web, mobile, and IoT solutions.
The company worked with well-known players in the market like the World Bank, Widgety, Cornerstone OnDemand, Dexai Robotics, Beiersdorf, and TLNika Group.
Why SumatoSoft?
- 200+ developed custom software products
- 10+ years on the market
- 98% satisfaction rate
- Reasonable pricing
- Full transparency
- 70% senior engineers
- 100+ successful projects
Rating on Clutch: 4.8
Outsourcing Software Development Trends
Here are some key trends in outsourcing software development.
Agile and DevOps Adoption: Outsourcing providers are adapting their processes to align with Agile and DevOps methodologies, enabling faster software delivery and better collaboration with clients.
Focus on Data Privacy and Security: With growing data privacy regulations, outsourcing clients are emphasizing security, compliance, and data protection capabilities when selecting providers.
Hybrid and Distributed Teams: The shift to remote and hybrid work models is leading to more distributed software teams, with clients and outsourcing partners collaborating across multiple locations.
Increased Adoption of Low-Code/No-Code: Businesses are exploring low-code and no-code platforms to speed up application development, which is also impacting the outsourcing landscape.
Conclusion
Outsourcing software development will continue to be on-demand worldwide. It is increasingly popular among companies of all sizes and this trend shows no signs of slowing down in 2024. Businesses gain a competitive edge in the tech industry by outsourcing.
So, if you are looking for the best outsourcing software development company for your business, schedule a meeting with us. We have experts who have experience in helping businesses in various domains.
