Advantages and Disadvantages of Outsourcing Software Development
There’s no shortage of praise for the impact that outsourcing software development has had on the global market, certainly none from us here at iTexico. The concept itself is as much a monument to the interconnectivity we can all enjoy now, from easily sending a package overseas from the comfort of your own home or calling up a friend who lives across the country. The entire population of Earth is at our fingertips, a fact that’s often taken for granted.
The world gyre is picking up speed as we find new ways to make ourselves better, more effective, and more integrated into the planet’s workflow. The rise in outsourcing is only one example of our accelerated forward progression. It’s not limited just to corporate monoliths anymore either; business both large and small are taking advantage of outsourcing’s capabilities. In many ways, it’s a good time to be alive.
But we should deflate the beach ball just a little bit. Outsourcing has numerous benefits that it offers, but it’s not a perfect system either. Like anything built by human hands, there are both advantages and disadvantages to outsourcing. These are based on a couple factors, such as what outsourcing company you’re partnering with, the type of project you're undertaking, and, most importantly, which country you’ll be outsourcing to.
We may tout the best aspects that outsourcing has to offer, but being ignorant of its drawbacks will likely come back to bite you if you’re not careful. But that’s what we’re here to do: to give you best perspective regarding both the advantages and disadvantages of outsourcing software development.
Advantages to Outsourcing Software Development
The challenge for pitching outsourcing to an outside audience is overcoming their preconceived notions. Admit it, the term “outsourcing” has developed a fair bit of flak for itself for years. That’s the issue with having such a broad umbrella term for a nuanced practice: one painting to fit every image.
Software development outsourcing isn’t a crooked dark mark, it’s an outlet for better commerce and customer satisfaction. The ethical questions applied to mechanical outsourcing - the kind that results in sweatshops and the like - don’t apply to this field by virtue of requirement. Everyone involved in software development must be educated, skilled, and valued for their work.
The biggest advantage originating from the introduction of outsourcing tactics derives from having more available options to work with in development. You are, after all, essentially hiring an entire team of developers for a fraction of the cost it would normally take you in-house. The opportunities generated via new routes made possible through outsourcing result in more benefits, such as greater cost-efficiency, the ability to fill in team gaps, and saving more time overall.
Dropping in a penny and earning two pennies isn’t exactly the best method for building a strong foundation. Dropping a penny in and earning a dime, however, is. Making the greatest profit with the least expense is one of the most powerful driving forces behind every decision and assessment made in regards to the function of the company. This is the kind of mindset that directs everything, no matter how small.
The practice of outsourcing is predicated on its ability to be the cost efficient solution. The nature of its cost efficiency is defined by a handful of distinct factors informing its capability to deliver on high-quality products while lowering overall expense.
- Competitive rates
If you hire someone to work for your company, you’re keeping them for the long haul. Employees are as much an investment as they are an expenditure, making them a resource you don’t want to lose. However, you may find yourself with projects that you need to complete in an allotted amount of time, but you find yourself lacking the manpower to follow through. You don’t want to hire more people. Investments are valuable, but they’re expensive.
Outsourcing provides the solution by allowing you to contract people for any amount of time you need them for. Contract work means you’ll only be required to pay as long as you want to, not a penny more or less. Those projects that your corporate structure might not have otherwise been flexible enough to handle? Grit, resourcefulness, and a little bit of business know-how can point you where you need to go.
There’s a good reason why hiring through an outsourcing company usually means drastically lower rates than what you’d find back home in states: strength of currency. The American dollar, compared to a majority of other countries you’ll find around the world, is relatively stronger in the market than other currencies. Through strength of currency alone, American companies have a distinct advantage in securing competitive rates.
As a result, we’re afforded access to a wide range of people and companies to choose from to hire. A dollar travels much farther in a foreign country than it does on our home turf, and with more buying power, the greater variety there’ll be in business partners.
The USMCA is a unique factor in determining the cost efficient value of an outsourcing partner. The cost imparted from outsourcing will always be dependent on who and where you outsource to, and until recently the scales were on equal footing vis-a-vis rules and regulations. The USMCA has the potential to overhaul that system a bit.
No matter where they were, every country had some level of tariffs and taxes to pay in order to do business with the U.S. The USMCA, which has yet to be ratified fully, is a trade agreement between Canada, America, and Mexico regarding digital property. Nearshore outsourcing was already comparatively better for several reasons in comparison to offshore outsourcing, but now nearshore partners will not be required to deal with tariffs and trade barriers.
The absence of these regulations spells a lot of opportunities for future work between nearshore companies. How can you argue with not having to pay to outsource your work?
Rounding Out Your Team
There’s not nearly as much incentive to browse through the national labor pool as there used to be. America is currently in a software engineer labor pool recession. There’s a shortage of qualified, affordable, skilled engineers available to work, and it’s impacting how businesses are pursuing their hiring programs. The pool is too shallow, with a growing disparity between graduates of IT programs and available open jobs making it difficult to find the quality of workers you need for your teams.
Limited supply means growing demand, and as such the cost of hiring a new software engineer with adequate experience continues to rise. The high cost for developers can make filling roles difficult, weakening the productivity of your team. Outsourcing, in this case, is an excellent option for rounding out your teams to compensate for a lack of options stateside.
Countries like Mexico and India are renowned for their healthy software engineer labor pools, making them prime targets for outsourcing software development work. Not only will you have access to a myriad of talent, you’ll have them at a better rate than you’d find locally. This method allows you to add highly qualified individuals to your team, allowing you to fill roles faster with less training than hiring someone new.
Balancing the line between quick turnaround and thorough work is often like tightrope walking. Lean too far to one side, you’ve delivered a product on a tight schedule except it’s full of bugs. Lean too far to the other, you’ve got a fully realized creation but you missed your deadline. Neither option is ideal, but working with an outsourcing company gives you the best shot at threading that needle.
Not only will you be saving money, hiring an outside team simply takes less time than it would to create your own team. Cobbling together new hires takes time, patience, and training to ensure they’ll be able to handle the work. With an outsourced team, you’re contracting an intact, experienced team ready for whatever’s coming their way.
Being able to shave off the training time necessary to get new individual members up to speed saves you a significant amount of time. Not only that, but not having to worry about training time means you can resort back to outsourcing more manpower in case you need it, accelerating your turnaround pace on projects at a whim.
Disadvantages to Outsourcing Software Development
Now, we have to deliver on what we promised: an unbiased examination of outsourcing IT development advantages and disadvantages. We still believe that the pros are a valid, steady argument for investing in outsourcing, but it’s not for everyone. It might work wonders for your neighbor, but it might put a nail in your coffin.
There are really only two things that bear consideration when dissecting what makes outsourcing risky. You’ll be getting a good price, that’s not up for debate, but the end result is dependent on two things: communication and quality. The only way that outsourcing works is by sacrificing a certain level of control to an outside organization, and that lack of control can break either good or bad.
We’re able to communicate with literally any country in the world at the press of a button. It should then logically make sense that communication would be the least of your worries, right? If only. You may be able to reach anywhere in the world, but the Earth is a big rock. Not everyone’s going to be available at the drop of the hat, and even if they are, they might not appreciate being bothered during non-work hours.
Time zones are the issue. If you’re in the U.S. and you want to contact your team in Europe, Chine, or India, you need to plan ahead to make sure you’re catching them at a decent time. The farther east you go, the more hours there are between you two. China is 11 hours ahead. American and Chinese working hours simply don’t overlap. That’s your first challenge.
When work hours don’t overlap, communication is slowed to a crawl. You may be forced to send off a message one day, wait for them to receive it the next, and then you’d be able to see their response the day after that. With multiple days required to send even the most basic of messages, you’ll be hard pressed to keep up with the project and maintain updates on its progress.
The next hurdle is cultural barriers. Diversity is a great thing in concept, but whether we like it or not, the differences between people in work settings can make cooperation a challenge. Different countries are not guaranteed to hold the same standards to work ethic or habits, and maintaining adequate communication can prove to be difficult in cases where work expectations are not fully understood.
Finally, basic distance is a problem. Having an onsite meeting is important, but getting there is another thing entirely. You need to make arrangements, book flights, get a hotel, shell out money for food, and take an appropriate amount of time off for the trip. It’s expensive, long-winded, and exhausting. In person meetings are important, but they’re a drain that’s hard to avoid.
Issues with Quality
The distance naturally extant in an outsourced project means you’re running the risk of the final product not meeting your expectations. Ensuring creative control is challenging when communication is so slow, meaning you can’t be expected to sufficiently catch every problem and report back on it. As a result, quality assurance tends to have holes, leading to an overall buggy finished project.
You also need to be careful that you’re actually hiring the high-quality workers that you’re expecting. Keeping costs down is good, but maybe there’s a reason why the prices for some of these outsourcing companies are so stellar. If you get too cheap with outsourcing, you may end up hiring low-quality professionals to do your work, directly affecting the quality of the final work.
Software development outsourcing is great. Really, it is. The problem with being blinded by how great something appears to be is that you might miss the weak links in the chain. Ever heard of the phrase “too good to be true?” Staying vigilant while searching for a new partnership with an outsourcing company is the only way you’ll be able to avoid the money pitfalls that might otherwise stand in your way.
The advantages for outsourcing software development speak for themselves, really. It’s an extraordinarily cost-effective practice, nailing high quality with low cost. It also provides an avenue for building and rounding out effective, experienced teams while saving the time otherwise necessary to develop them. The catch is that communication tends to suffer due to time zones and differing cultures, and you might just wind up with a product that doesn’t fit what you paid for.
What’s important is that you’re aware. Advantages, disadvantages, as long as you know what’s coming your way, you should be ready for it. Taking a few risks every now and then is simply a part of business. If we’re talking about worthwhile risks, then outsourcing your work is one of the best you can make.