Not so long ago the only matter for software development outsourcing was a price. In the late 90s outsourcing to countries like India was a common practice. Software development there was a few times cheaper and the quality was only a little bit worse than in the rest of the world. Is this still valid? A lot of companies are outsourcing software development but not to India or other “cheapest” regions anymore. For example in Poland, software development outsourcing is cheaper than in US or UK but not as cheap as in India, China, Ukraine or Belarus.
In general, nowadays software outsourcing is more popular than it was back then in the late 90s. So what are the other reasons for software development outsourcing if it’s not the money?
High demand and low supply of software developers globally
Demand for software developers is around 40% higher than the number of software developers in the world. This trend is growing extremely fast so even the best modern educational systems are unable to assure enough software development work power.
This demand is obviously bigger in highly developed countries. But supply is pretty the same in developing countries. Besides the migration of highly talented people (unfortunately, it’s still difficult in the US, for example), offshoring is a natural way of balancing this high demand.
The organisational culture that is unable to create innovations
There are two main factors standing behind the long-term success of the organization. The first one is efficiency. For most organizations, it is achievable through proper methods used as well as hiring good managers. The second one is the ability to create innovations. Short-term efficiency can guarantee success, but from a long-term perspective, competitors will sooner or later come up with new innovative solutions so that even the most efficient company may quickly go bankrupt.
The main factor that makes one organization more innovative than others ones is the company culture. It is extremely hard to grow this kind of innovation supporting culture in big organizations. As especially that this kind of company has to be efficient firstly because of its scale.
In this case, Software development outsourcing might be one of the options on how to possess innovation.
Decreasing the risk
Hiring people is costly but also risky. By outsourcing software development companies, you are also outsourcing risks. In most countries, it is easier to terminate one contract with an outsourcing provider instead of a hundred employment agreements. Especially for small and new companies, the risk of hiring their own IT department is huge. In the beginning, as a startup, you do not even know if your product hypothesis will be positively confirmed. You do not know if you will survive till the end of the next month. So hiring an employee with a 3 months notice period agreement is a risk that the majority of startups can not handle?
Access to the knowledge and experience
If you decide to build your own in-house IT department in a startup, you may hire a good CTO who will have an experience with 3-5 startups. Quite nice. But if you decide to hire a software house specialized in working with startups – that number will grow massively. You will immediately gain access to the experience of hundreds of startups. Besides good practices implementation and experience in startups, software management Software Houses also experience knowledge sharing among their employees.
Money is only one of the reasons behind software development outsourcing nowadays.
Next time when choosing between having your in-house IT department or outsourcing software development take the factors above into consideration. The in-house software development department obviously has a lot of advantages, but software outsourcing is not about money only. From our experience, one of the best results could be achieved by mixing in-house software development and outsourcing those services.