Best Practice Software Development Outsourcing Model: The Intrinsic Value of a Dedicated Virtual Offshore Team versus Project Work

Business leaders today often struggle with exactly how best to leverage the offshore outsourcing model. When seeking to improve their internal software development process, executives recognize the obvious benefits of cost savings, access to new talent pools and labor risk mitigation; but sometimes are not sure whether to build a dedicated full-time team or farm-out projects to different teams, sometimes within different outsourcing companies and even different geographies in multiple time zones. And as you might suspect, the answer to these questions is…‘It depends’.

Very simply, if your development needs are not consistent throughout the year… if you do not require a continuous need for software development month after month…and if your requirements will never change, then you already know your answer…project work is an ideal solution for your organization. On the other hand, if you require consistent development throughout the year…if you would like work to be ongoing 24/7…if you need to significantly reduce costs… if you want access to a larger pool of senior talent…and if you would like the developers to be professionally managed, then the following will be helpful.

The key to the dedicated virtual team model is the value derived from building and working with a team. The intrinsic benefits of a dedicated team of software developers, as opposed to a shorter-term project include the following:

1)   Your team of software engineers is always and 100% working on your software tasks…new code, updates, bug fixes etc. They will never be redirected for an ‘urgent’ issue from some other client. This level of availability is a very strategic advantage in contrast to shorter term projects, in the same way you derive more value from your full-time employees who are always committed to you and your company.

2)   Similar to full-time internal employees, the software engineers on your offshore development team continually develop a deeper understanding of your company’s culture and its internal processes. And this natural development of native knowledge allows the work they perform to be done better and faster; similar to the way a 5-year tenured employee is more value than an employee who has worked for your company for only 3 months.

3)   Cost reduction will also be a very material consideration between these two offshore models. When evaluating the list of decision factors to outsource, cost reduction is always at the top. And while you will save money outsourcing project work to geographies in Asia and Eastern Europe, being able to commit to a team over the long-term allows an offshore outsourcing company to better forecast labor. At our company, project-based clients will reduce their spend on software projects by 50% or more. But our customers who build dedicated virtual teams of software engineers commonly experience savings of 70% or more. This can be a very significant number depending on the size of the team. And a ‘team’ may simply be a single developer or it could include a group of twenty or more developers.

4)   I have worked with outsourced teams of software developers in many geographies over the past twenty years, and I am always impressed at the role ‘camaraderie’ plays in the ongoing and critical communication process. Over time, and through proper integration of your internal software employees with your offshore team; you may be surprised at the significant increases in productivity when compared to a shorter-term project. There is very real value and strength in human camaraderie.

Some business leaders are reticent to build a dedicated software offshore outsourcing team. And the reasons can usually be reduced to a single yet critical issue…trust. This is a very valid concern. The best way to develop the level of trust you require to take advantage of the offshore outsourcing team model is to simply do your homework and start small. Find a single activity. The activity you identify should be low risk. Suggest a pilot period of 90 or 120 days. This will allow both you and your outsourcing partner to have the opportunity to work together. Through this process trust will inevitably grow and at that time you can then scale your offshore team to the size you require in order to reap the maximum value for your company. Early in my career, at Accenture, I once heard a senior strategy consulting partner advise a group of CEOs to ‘think big…start small…scale fast’. The software development offshore outsourcing dedicated team model is a very good example where this axiom applies perfectly.

If you have any question or comments, please feel free to contact Phil at [email protected]

 Phil Bartos has worked extensively in the management consulting and IT/BPO outsourcing industries for Fortune 500 companies including: Accenture, Computer Sciences Corporation, TELUS and Siemens Corporation.  Phil’s experience in the offshore outsourcing industry has included operations in the Philippines, India, Thailand, Russia, Mexico and Mercosur.  Phil was an early adopter and pioneer entering the Philippine market in 2003; when it was still a small yet burgeoning offshore geography.  In 2009, he launched NarraSoft and today serves as its President and CEO.  Phil serves on the board of directors of the NC Museum of Life and Science, a globally renowned institution.  He is also an executive advisor to Bright Knight Ventures (brightknightventures.com).  Bright Knight Ventures is an innovative shared-risk VC catering to small independent companies and entrepreneurs.  He graduated from Baylor University’s Hankamer School of Business with a Bachelor of Business Administration in Management and Marketing.