Software Outsourcing Pros and Cons: Do the Benefits Outweigh the Risks?

Software outsourcing has become a key strategy in the information technology sector to boost efficiency and improve output quality. As information technology continues to drive enterprise growth, the demand for skilled IT professionals is surging.

However, many countries need more talent, making it challenging to meet both the quantity and quality of workforce demand locally. Consequently, the need for software engineering outsourcing is on the rise. Hiring local software outsourcing firms in regions like the USA, Japan, the EU, or Singapore is unaffforable for many IT companies. To manage expenses, they increasingly look to countries such as Vietnam, India, the Philippines, and China for offshore software development services, where they can access skilled talent at a lower cost.

Before deciding on outsourcing, it’s essential to weigh both the benefits and potential risks. This article highlights key considerations to help guide informed outsourcing decisions.

What is Software Outsourcing?

Outsourcing is hiring third parties to perform tasks, handle operations, or provide services for the company. Outsourcing a software project involves using a person or a team to complete some or all of an IT Service. It includes software development, graphic design, infrastructure maintenance, and even quality assurance outsourcing. In other words, software outsourcing is handing over the responsibility for developing a part or the whole software to a third party. This helps to overcome their lack of internal expertise and resources.

Why is Software Outsourcing Beneficial?

With quick IT development, software outsourcing is crucial to keep pace with market demands. Many companies decide to outsource development because of its significant benefits:

1. Access to worldwide IT talents and experts

In a fast-changing industry, owning an in-house development team excelling in every technological section is impossible. But if you use software outsourcing services, you access innovative IT solutions and great technological talents. These experts will use their knowledge and years of experience to meet your requirements most professionally. Such cooperation also enhances your in-house capacity to meet further needs.

2. Faster delivery with the latest technologies

Outsourcing is an approach to filling the IT skill gaps and adapting to new trends. In a world where new competition is born every second, outsourcing is outshining to keep you on track. Collaborating with an outsourcing company in a different time zone allows your business to optimize your time budget, as your external team handles tasks while your in-house team is off and vice versa. This continuous workflow speeds up the time-to-market and empowers your business to adapt quickly to market demands and technological trends in the fast-paced development cycle. Regular meetings and collaboration are essential in outsourcing software development projects to ensure performance, speed up production, and reduce time to market.

3. Better focus on core competencies

Outsourcing lets you tap into both your strengths and those of specialized partners so you can keep your focus on your competencies. You do branding, research, and new initiatives to meet customers and leave problems to domain experts. Like puzzles, you put in-house and outsourcing teams in the right place where they do their best. By leveraging external expertise, companies can streamline processes, optimize resources, and ensure products hit the market precisely when needed.?

4. Cost-benefits

Hiring in-house employees involves a range of expenses, including salaries, equipment, software, training, office space, and additional overhead. Each new hire requires an investment in recruitment and onboarding and ongoing costs associated with training, development, and retention. On the other hand, outsourcing can significantly reduce these costs by eliminating the need for workspace, equipment, and extensive training programs. By partnering with an outsourcing provider, businesses can quickly build specialized teams with the necessary skills and expertise tailored precisely to project demands while avoiding infrastructure investments and time-consuming processes.

We have numbers to prove the same:

- An Australian survey of 7500 public organizations shows outsourcing saved around 46% of costs over in-house.

- An analysis of 210 studies in the past two decades reveals a whopping 85 of them talking about outsourcing as an effective way of reducing cost.

- A McKinsey Global Institute study states outsourcing IT services reduces costs by 60% in the US.

5. Enhanced Flexibility and Scalability

As outsourcing brings flexibility, it adds agility to your values. Securing high availability, an outsourcing partner can become a competitive advantage for enterprises. Business needs fluctuate, and so should your development team. Outsourcing allows you to scale your team up or down based on project demands. Whether you need to quickly expand your resources for a significant initiative or reduce your workforce during slower periods, outsourcing offers the agility to make these adjustments without the long-term commitments of full-time hires. This dynamic capability enables businesses to respond swiftly to market changes and optimize their resources effectively.

What are the potential risks of software outsourcing?

There have always been two sides to everything, and outsourcing is no different. IT outsourcing has many advantages, yet there remain some risks that need consideration.

1. Information leaking & security issues

Since outsourced staff is not a part of the organization, they may divulge sensitive information. They might even be workers of competitors. So, signing a confidentiality agreement with outsourcing employees is necessary to uphold security, limit information leaking, and get protection from the laws.

2. Loss of control

Quality depends on the team you hire to outsource. It will be challenging to guarantee that the work is proceeding effectively or that the outcome is accurate. Since outsourced personnel need a thorough understanding of the business at the beginning of the collaboration, it will be challenging to suggest strategic directions and avoid making costly errors.

3. Unforeseen and hidden costs

In general, outsourcing assists businesses in making short-term cost savings, but only sometimes. Suppose enterprises do not have a tight agreement and reasonable allocation of work. In that case, software outsourcing is costly because of unforeseen and hidden costs such as hardware or software upgrades, relocation or redeployment, after-hours services, and troubleshooting.?

4. Communication barriers

The communication barriers depend on geographic distance. It is more difficult to communicate over phones and video calls than in person, especially if we share a different language and time zone. Although technologies improve remote communication, this barrier is still a noticeable disadvantage. Misunderstanding and late responses are potential risks leading to unsuccessful software outsourcing projects.

NAPA Global – Vietnam’s Trusted Software Outsourcing Partner?

In today’s digital world, having high-quality, efficient software solutions is essential for businesses to stay competitive. At NAPA, we specialize in providing top-tier software outsourcing services designed to transform your ideas into impactful software that drives results and accelerates your time to market.

With a dedicated team of skilled developers and industry experts, we offer a wide range of services to meet diverse business needs:

- Software Outsourcing & Development: Being an extension of your team to reduce time-to-market and launch your products on schedule.

- Blockchain & AI Solutions: Harnessing the power of cutting-edge technologies for implementing profitable projects like chatbot development, crypto marketplace, e-wallets, dApps development, etc.

- Web & Mobile App Development: Building fast, reliable, and responsive apps tailored to your needs across industries.?

- Embedded Systems: We assist you at every stage, from prototype to production design and on-demand, from firmware to user interfaces.

- Quality Control & Testing: Ensuring your app is bug-free and performs well to meet your expectations and delight your end-users.?

Partnering with NAPA means accessing a team dedicated to innovation and success, ensuring your projects meet the quality, security, and performance standards.

The bottom line

Outsourcing has enormous advantages while posing significant risks. Therefore, software outsourcing requires thoughtful consideration of particular business circumstances. Although you can easily find a company that provides what you are looking for, nothing guarantees that these solutions will effectively eliminate your problems. Cooperating with a partner who cannot accurately bring what you need may prevent your project from fruition. It explains why you should carefully select a partner before signing any agreement.

If you are considering a reliable custom software company to cooperate with, drop by the NAPA website (https://napaglobal.com/) to find out more,

You can also reach us immediately at [email protected] so we can provide solutions and further details.