Advantages and Disadvantages of Outsourcing Software Development Projects

Outsourcing Software and Product Development offer many advantages and disadvantages. Let’s get to know all pros and cons details about this digital development.

6 min read
Aug 13, 2021

Outsourcing is not just another trend that’ll cease to exist in this rapidly evolving digital world. If deployed shrewdly, an outsourcing business model can do wonders for your business. However, it comes with its own set of risks and challenges a business may face at an early stage. This definitive guide delves deep into the outsourcing business model and what advantages/disadvantages it offers for Software and Product Development projects.

First, let’s quickly recall what outsourcing actually means:

What is Outsourcing?

Outsourcing essentially means hiring a third-party vendor from the same or different niche to carry out certain tasks and jobs. Big fortune companies hire small and medium-sized businesses to provide services or build goods for which their in-house team is either not sufficient or falls short of the required skills. Most companies prefer the outsourcing model rather than an in-house one as a measure to cut down costs.

Apart from the cost-cutting advantages, companies also outsource their non-core projects to entities that do a better job than their in-house team. Doing so helps them focus on improving their core internal business functions and processes and boost the efficiency and productivity of their team,

Based on the location of outsourcing, it can be categorized into three different parts: onshore, nearshore, and offshore.

  • Onshore Outsourcing: It means outsourcing your projects within the country your business is operating in.
  • Nearshore Outsourcing: Nearshore Outsourcing is where you outsource your projects to neighboring countries.
  • Offshore Outsourcing: Here, you outsource projects to more distant countries traditionally to developing countries like India or Ukrain to save costs.

Outsourcing For Software and Product Development

Outsourcing in IT Industry involves lending a range of business processes such as software and product development, testing, upgrade, and migration services to third-party vendors. IT industry enjoys a great many benefits by outsourcing their software and product development projects to an experienced and adept outsourcing partner.

Large software corporations adopt and adapt to the outsourcing model thanks to its cost-saving measures and cost-effectiveness. They hire third-party organizations or individuals not affiliated with their company to carry out their software and product development needs, otherwise not get fulfilled by their in-house team.

The third-party vendor will have a different pricing and compensation structure, which enables them to compete with others to lend projects from large enterprises. This ultimately helps outsourcing companies to save significant costs while still get the same quality software applications within the deadline.

Outsourcing software and product development come with great advantages along with few downsides that attracted criticism for this model. Here’s a brief on the advantages and disadvantages of outsourcing software projects:

Advantages of Outsourcing

Exposure to Team of Experts

Outsourcing software and product development to external agencies open up new doors to access highly qualified teams who are experts in their arena of work. Such kind of exposure is highly unlikely to get in your in-house environment. Further, the expertise of your outsourcing partner will aid in the on-time completion of projects and also boost the overall flexibility, performance, and work efficiency of your in-house team.

High-Quality Solutions

Since you’ll be exposed to a niche-specific team of experts, you’ll also get access to top-quality software and product development solutions. Such teams have the proficiency to provide you a better level of services and complete work within deadlines that too with fewer chances of errors. The high-quality solutions from your outsourcing partner will give you an edge over your competitors.

Time-Zone Advantage

Time-zone advantage is also a great benefit of outsourcing your projects, especially in the case of offshore outsourcing. You and your team might be done for the day but your offshore development team just got to work, enabling the work to continue round the clock. Initially, however, this can pose a logistical challenge, but once you overcome those hurdles, it essentially means your business is still on even when you are fast asleep.

Cost-Effectiveness

Outsourcing projects to third parties eliminates the need to hire an in-house team of professionals or build up additional resources, minimizing the recruitment and operational costs. Moreover, outsourcing teams from developing countries such as India offer services at cost-effective rates that you can afford. For this reason alone, most organizations opt to outsource their projects to India.

Simplified Project Management

The brilliance of outsourcing is simplified processes and project management. Your outsourcing partner brings not only technical expertise and rich experience but also brings specialized knowledge to efficiently handle multiple projects varying in complexity and size. Such kind of expertise is instrumental in the development of your organization as a whole.

Enables to Focus on Core Business Areas

One of the great strengths of the outsourcing business model is it enables you to focus on the core aspects of your business rather than non-core elements. This allows your in-house team to concentrate on your core business processes and come up with future strategies. Outsourcing the supporting processes enable you with enhanced freedom to improve your overall business strength.

Cost Saving on Infrastructure and Technology

Simply, outsourcing projects eliminates the need to set up your own infrastructure and avoid having to make choices for technologies. Thus, it’s more reasonable and affordable to outsource than spending money and investing in the latest technologies, software, and building up infrastructure. Rest assured, your outsourcing partner will handle all those things more effectively.

Growth Expansion

Your business is growing rapidly, which demands hiring more resources, increasing office space, employee benefits, and increased management. All these can easily be avoided by outsourcing your requirements rather than going through the relocating, hiring & recruitment, and employee management. Further, it reduces your expenses such as;

  • Expenses for New Office & Relocation
  • Hiring & Recruitment Expenses
  • Employee Benefits and Payroll Taxes
  • Expenses on Healthcare and other Benefits

Hiring outsourcing partners will help reduce such expenses to expand and grow your business further.

Disadvantages Of Outsourcing

Even though outsourcing has so many good sides, it still has some negative aspects too. Let’s uncover some disadvantages of outsourcing:

Security and Confidentiality

While outsourcing projects, organizations may need to share sensitive and confidential information with an outsourced vendor. Thus, there’s always a risk of such vital information being leaked to rival companies.

Let’s assume that the sensitive information gets exposed due to a security breach on the vendor side. This may cost either in reputation or in hefty money loss to the outsourcing organization. Further, competitors can take advantage of such sensitive information and benefit from this immensely.

Lack of Proper Attention

It may just so happen that your outsourcing partner is already catering to multiple organizations simultaneously and is unable to give proper attention to your needs. Your partner may lose complete focus on your project’s requirements. As a result of this, your project may have to suffer.

Dissatisfaction with Deliverable Services

Another common disadvantage of outsourcing projects is organizations feeling dissatisfaction with the services provided by the third-party vendors. Many times, vendors stretch the delivery of their services or offer products at sub-standard quality. Such kinds of malpractices leave a negative experience, making organizations reluctant to try outsourcing again.

Other disadvantages of outsourcing include misunderstanding of the contract agreement, poor communication, not up-to-the-mark quality, and others.

ashutec: A Trusted and Desired Outsourcing Partner

Ashutec Solutions Pvt. Ltd. is one of the leading and trusted outsourcing partners offering software and product development services. We have a team of expert professionals with vast experience in serving small to large-scale enterprises and delivering top-quality solutions.

To ensure we become the most trusted outsourcing partners, we are open to follow the security and confidentiality norms by signing NDA to give surety. All of us at ashutec are committed to make sure you are 100% satisfied with our work and are ready to go the extra mile for the same.

With dedicated resource allotment, we give proper attention for hassle-free completion of your project. Further, we use modern communication channels to ensure there are no misunderstandings or confusion throughout the project.

Conclusion

Organizations choose to outsource purely because of reducing added expenses and get services at cost-effective rates. Also, it can do wonders for large enterprises if deployed shrewdly.

Outsourcing will aid organizations like yours to promote innovation, disrupt the industry and get access to a vast team of experts outside your organization and even country. This detailed guide on the advantages and disadvantages of outsourcing will help you make a better and informed decision about your outsourcing needs.

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