IT Outsourcing: A Complete Guide To Outsourcing Software Engineers

Companies choose to do IT outsourcing for a number of reasons.

Sometimes it’s to reduce costs. Other times it’s to access skills and expertise that are not available through your in-house team. 

A crucial part of software engineering outsourcing is trusting the team you’ve chosen. You will need to trust their expertise, their abilities, and their interest and involvement in the project. 

Working with an outsourced software engineering team is associated with a number of risks that can negatively affect the delivery of your project.

And when you’re not familiar with the ins and out of outsourcing, you won’t make the best decisions for your business.

But once you learn how to mitigate or avoid these risks as well as become well-acquainted with outsourcing in general, you can benefit from productive collaboration with a remote team.

If this is your goal, keep reading. 

What Is IT Outsourcing?

Outsourcing occurs when a business uses an outside supplier to obtain goods or resources, rather than relying on internal support. 

While many branches of outsourcing – like call centers – focus on reducing costs for big businesses, small and medium-sized companies in the tech industry often outsource software engineers to gain an extra set of skills. 

IT outsourcing is a flexible and cost-efficient way for your business to meet its technological needs without investing too much time and resources into hiring an in-house team.

This can also be a convenience for your internal employees whose time might be better spent on tasks unrelated to IT or software. 

Related read: Everything about Software Outsourcing in Latin America

How To Outsource Software Engineers?

There are a multitude of paths you can take for outsourcing IT talent.

Understanding these paths in-depth will prove to be beneficial if you choose to outsource software engineers.

Let’s take a deeper look at a few of your options. You’ll have the chance to identify the pros and cons of each option and decide what feels like the best fit for your business.. 

Freelancer Platforms

Freelancer platforms can be a practical solution if you’re on a tight budget and looking to get something done in a short time-frame. 

The gig economy is thriving at the moment with websites like Upwork and Fiverr giving businesses the opportunity to hire freelance software engineers with ease.

The quality of talent on these websites varies greatly, as do the tools provided to you for managing your temporary hires. 

Many websites offer integrated tools for operations such as payment processing and hours tracking. These features make freelancer platforms a viable solution for handling small technical undertakings. 

On the other hand, these platforms have a reputation for delivering mixed results.

And if you have a large project, you should consider other options. 

Project Outsourcing

Sometimes it makes sense to hand over an entire project to an outside firm.

This could be because your team lacks the skills required as a whole, or maybe you don’t have a team of software engineers ready-to-go and you want to build something in a timely manner. 

Project outsourcing is a fairly hands-off approach, which can be good or bad depending on your needs as a company.

Taking this less-involved approach to software development reduces massive amounts of training and realignment internally, effectively saving time for you to focus on other matters. 

You can think of this approach as the “plug-and-play” method of getting a project done because it removes a lot of the overhead costs and administration that comes with integrating a new staff member to your team. 

Payments, relations with individual contractors, and training are the concerns of the hired firm, not you.

This option is accessible and removes a lot of management from projects

But the lack of oversight and management with entire outsourced teams can be a negative for those who like a lot of control over their projects.

And you’ll still take on the responsibility of making sure the firm you hire delivers quality results.

Staff Augmentation

This is a trend in software development that has become more prevalent in recent years.

Staff augmentation means to add one or more staff members to your team on a contractual basis. 

The difference between this method and outsourcing your entire project is that with staff augmentation you can integrate the outsourced talent into your company and manage them directly. 

Related read: 7 Ways to Improve Communication With Remote Teams

One reason staff augmentation has become quite popular recently is that it is a flexible way to add and reduce staff as needed.

Some projects require a different amount of human resources at different points of time.

Staff augmentation allows you to meet these demands in a way that is much more reasonable than hiring and firing in-house staff on a per-project basis. 

A lot of companies find staff augmentation easier than outsourcing entire projects because of the control they have over the process.

It’s a familiar procedure for anybody who is already used to hiring in-house staff, except outsourced staff is only temporary. 

There are firms that exist to provide staff augmentation services, offering developers for your project on a contractual basis. Imagine IT outsourcing as a library of software resources for you to use as needed. 

A notable advantage of staff augmentation is the level of control you’ll be able to have regarding your own project and the people working on it.

The principal disadvantage of staff augmentation is the ongoing need to on-board contracted staff when you’d much rather put that time towards development. 

Of course, as staff augmentation becomes more widespread the industry will implement streamlined ways of prioritizing the technological needs of businesses like yours.

The Geography of IT Outsourcing

Geography influences the service price and talent of a given outsourcing provider.

The customary market positions are shifting, revealing the new competitive countries in the sight. 

You can decide whether to outsource engineers onshore, nearshore, or offshore.

These locational categories will also determine how exactly you go about managing your project.

Because of the high costs of domestic developers, companies often search for technical help in foreign countries offshore.

Asian countries like China and Indian are especially popular in the outsourcing world and after so many years leading the market, the talent in this region is considered to be particularly reliable and high-grade. 

New markets are also emerging in Western countries like Hungary, Bulgaria, and even in Latin American countries like Brazil and Costa Rica.

For the latter, the term nearshore comes in handy. 

Nearshore locations are within two to four time zones of the central location of your business.

This closeness in distance can alleviate communication and collaboration concerns but you’ll still be saving money in the end. 

Of course, you can always hire onshore developers in your own country, but this will likely lead to higher costs.

The benefits would be low communication barriers, a predictable level of service, and perhaps even a location that would allow for in-person meetings. 

When deciding where to find your IT outsourcing provider, it’s important to know the exact requirements of your project, allocated budget, and the time frame allotted for completion.

Don’t hesitate to look into countries that are less popular. You might find hidden talents at an attractive price. 

6 Software Engineering Outsourcing Risks and How To Avoid Them

Knowing the risks of outsourcing software engineers can better help you understand what your needs are at what fits best for your particular business.

Much of the time these risks align with what you would experience with an in-house team.

Here are some common problems that arise when outsourcing developers.

1. Unrealistic Expectations

Unrealistic expectations happen all the time.

You expect the project to be delivered yesterday or the engineering team expects to have more time for development.

Setting clear expectations for the project and communicating progress is the best way to avoid misunderstandings. 

Conducting meetings in-person or over video chat can really help everyone on the team communicate and deliver the project according to the client’s expectations. 

2. Poor Communication

On more or less the same note, communications still remains one of the biggest problems when outsourcing.

Not only is it important that team has a means of communication, but they should know how to communicate effectively as well.. 

Every project requires clear guidelines.

This is even more vital for remote teams because you won’t be able to communicate your needs on-site in a face-to-face discussion.

3. Hidden Costs

There are many ways in which you can overpay for a project.

Ironically, this can sometimes be due to striving for the lowest price possible. 

Some examples of the problems you can face if you do not pay close attention to a company’s estimates are:

  • Low quality service
  • Issues over source code ownership
  • Poor documentation
  • Lack of transparency during development, and
  • How your budget is distributed in the terms and conditions of your business relationship.

4. Inadequate Technical Skills

The team can consist of skilled experts, but if the technical architecture and the framework of your project do not match, you won’t be able to make that collaboration work.

Proof of previous work skills and experiences in similar projects can ensure that the team that you are hiring is a good match for your project.

References can also help you identify if potential hires are a good fit for your project. 

5. Poor Project Management

Project management is key to carrying out development projects.

Good project management entails that business needs are addressed on schedule and within budget. 

Providing the team with clear instructions and guidelines, offering regular feedback, and ensuring that tasks and resources are distributed correctly are only a few of the responsibilities of a project manager. 

Poor leadership can result in the failure of the project, so it is crucial to ensure that the person in charge is capable of taking responsibility for a complex software engineering project. 

6. Intellectual Property

Even if your idea is not unique or innovative, you should protect it.

Using safe data processing methods and having engineers sign a non-disclosure agreement (NDA) or confidentiality agreement (CA) is the first step in protecting your intellectual property.

But every situation requires a different approach and solution. 

Finding a reliable software development partner will help you to eliminate most of the risks related to intellectual property matters.

You should also avoid doing anything that can result in legal consequences.

Remember that the development project is a collaborative process and as such both parties need to be involved and responsible for the outcome. 

The Current State of IT Outsourcing

IT outsourcing as an industry is experiencing healthy growth and is predicted to grow by 4.42% between 2018 and 2022.

Economic instability due to changes in the global political sphere such as Brexit and the Trump administration likely affected these numbers have dropped these numbers lower than usual.

Regardless, the global software outsourcing market is still on the rise.

There is still a certain stigma associated with the idea of outsourcing. Even though the majority of the companies use outsourcing services, they prefer not to mention it.

But with the growing need for transformation and innovation, businesses need to have reliable partners to fuel their growth. 

The nature of IT outsourcing is changing:

  • Where once price was the deciding factor, value has come to the forefront.
  • Companies are seeking proactive partnerships in turn for detached third-party service providers.
  • Strategic partnerships now matter more than ever.

Successful collaborations are based on supplier and client relationships and partnerships.

Customer-oriented outsourcing suppliers with tech-savvy specialists that know how to provide value to their clients will thrive the most in this climate. 

India and China are still leading the market for business outsourcing. China alone has 1.3 billion consumers utilizing their talent.

And needless to say, flexibility and low costs continue to be important factors for many companies. 

As far as what IT outsourcing needs are the most represented, you’ll find that software development outsourcing is the most popular type of IT outsourcing, followed by website/e-commerce and hosted applications.

The Future of IT Outsourcing 

Just like any other industry, IT outsourcing will look differently over time and you can be sure that some traits of its distinguishing traits will change or completely disappear in the next decade. 

The following trends dictate the direction IT outsourcing is heading for the future.

What can you expect to see in the years to come? 

Partnerships

A transition from a third-party provider to a partner and collaborator is not a distinctively new development for the IT outsourcing industry but it is certainly driving change in the industry. 

Companies are looking for reliable and engaged IT partners that can give new perspectives and share expertise where in-house teams are lacking. 

An involvement that goes beyond simply following the instructions and offers informed opinions, active participation, and mutual ownership in projects provides value beyond just the service.

This is the collaborative model taking over the IT outsourcing industry.  

For this reason, features other than low costs are becoming the deciding factors in how businesses choose to outsource their IT needs. 

Team Modelling

A dedicated team model is a relatively new, but popular, outsourcing practice.

There, the outsourcing service provider and the client agree on the workload and timeframe of the project and the provided professionals solely focus on one project.

A more focused and dedicated approach allows team members to deliver projects in a shorter time period and with fewer errors.

These models eliminate the need for mult-tasking and a team works on one project at a time. 

Trio, for instance, offers Engineering Team Allocation (ETA), supplying client needs in the form of software development talent.

Whether it’s only one developer or a team of software engineers, Trio knows how to seamlessly incorporate developers into your project without interrupting your regular business processes. 

This project-based approach can tune businesses in to many advantages including flexibility, team scalability, and cost-efficiency. 

Technological Optimization

In the past outsourcing wasn’t a synonym of innovation. On the contrary, it was a way to reduce costs by delegating repetitive, time-consuming business processes.

Now emerging technologies like artificial intelligence, intelligent automation, and machine learning can do that and so much more.

While you might not live long enough to see the machines having feelings and emotions, you’ve already witnessed them becoming a part of your daily life. 

Due that, businesses must re-evaluate their processes and figure out how to upgrade their operations to become more effective and efficient. 

Outsourcing Smaller Projects

Small and medium-sized businesses (SMBs) will play a bigger role in IT outsourcing.

Before outsourcing was a privilege reserved for big companies. Now it’s the common tongue.

Niche providers are looking to establish long-term relationships with clients while offering specific services that perfectly fit the demand of small and medium-sized enterprises.

IT service providers take on a large number of smaller projects in order to be more competitive and generate revenue.

While the bigger contracts take much more time to be set up and are much harder to find, smaller projects provide flexibility and can often lead to larger jobs afterward. 

For small companies, outsourcing is a competitive advantage, granting them access to more expensive and advanced technological solutions.

With a low barrier for implementation and maintenance, SMBs can compete with larger and more established companies with little of the startup costs.

In other words, outsourcing is essential for SMBs to realize their potential for growth sooner rather than later.

New Market Growth

As mentioned, countries in South America and Eastern Europe have begun to enter the international outsourcing arena with strong intentions to knock India and China off the pedestal. 

Geographical proximity, high English fluency, and outstanding technical knowledge makedevelopers from these countries appealing candidates for software development projects in international companies. 

Economic conditions are something to consider as well.

Global businesses seek out stable economies that are actively supporting technological development. 

Does IT outsourcing sound like something that could work for your business?

If so, consider Trio as your partner for on-demand software development. 

Trio onboards remote teams of engineering experts onto your projects without disrupting normal business procedures.

We stress the importance of customer satisfaction, delivering your projects efficiently and with high quality no matter the complexity. 

Discover our teams and contact us to talk more about your project.

 

 

 

Daniel Alcanja

CTO

About

Co-Founder & CTO of Trio. With more than 17 years of programming experience

Frequently Asked Questions

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Outsourcing occurs when a business uses an outside supplier to obtain goods or resources, rather than relying on internal support.

1. Freelancer Platforms 2. Project Outsourcing 3. Staff Augmentation