12 Jan 2018

Can software development outsourcing work for small businesses?

The power of “it depends”

There are few topics as controversial as software development outsourcing. That is because each company going for it stands to either gain or lose a lot – depending on many factors. Although the cliché non-answer “it depends” fits the title question quite well, it’s still far from being satisfying. To make up for it, let’s go deeper and find out what it exactly depends on – why small businesses should or should not outsource, what to outsource specifically, how and to whom.

As the global IT spending increases, reaching new, mind-boggling heights[1], so does the size of software outsourcing industry. It is true for both large and small companies. According to the State of Software Development Report 2017, as many as 56.3% of all startups are now outsourcing software development to external partners[2]. The extent to which companies are satisfied with their outsourcing vendors varies greatly. The same goes for reasons why they use them in the first place – ranging from expected reduction in overall cost or need for innovative and difficult-to-obtain-otherwise skills[3].

This points to an obvious conclusion – your satisfaction from software outsourcing depends on the quality of services provided by the vendor as well as your expectations as to what you want to gain from it. It’s true regardless of the size of your company. For advice on how to get the best value for money in outsourcing, read one of our previous entries. From here on out, let’s focus on the specific circumstances of small business that go beyond general best practices.

Why might software development outsourcing be a good idea for a small business?

Some of the most desirable benefits software outsourcing brings to small businesses include:

  • Improved flexibility

For small businesses especially, the intensity of software development work may vary greatly even in the short term. It doesn’t go well with the interests of in-house employees, who expect job security and need to be paid regardless of how much work there is to do. With outsourcing, you can use staff augmentation to extend your team in response to actual needs.

  • Reduced cost

It’s not a good idea to pick an outsourcing vendor based on their rates alone as it will be almost certainly to the detriment of quality. However, one way or the other, you will still avoid recruitment costs, save on equipment, space and more.

  • Better time-to-market

In many innovative fields, it is time-to-market that makes all the difference. With outsourcing, you can go quickly from the conceptual phase to development.

  • Access to domain knowledge

It is especially true when you are in need of highly specialized skills that may be difficult or even impossible to obtain in your home market.

What to outsource?

Just about any kind of software development or IT work that is not your core competency could potentially be outsourced. This includes web or app development, infrastructure, cloud hosting or quality assurance & testing.

Technical support is another field, in which outsourcing might be the best way to go. The most straightforward reason for this is that it is the most cost-efficient option. Additionally, most of the time, technical support simply doesn’t affect the quality of an existing solution significantly.

What NOT to outsource?

Not outsourcing one’s core competency is one of those age-old pieces of advice that most of the time prove correct, as relying on this questions the very existence of the business. Any IT or software development work that can be automated should also definitely be automated rather than outsourced.

Non-obvious benefits of software development outsourcing for small businesses

Some benefits of software development outsourcing for small businesses are easy to overlook, or can only be observed in the long run.

  • Fewer hidden costs

From hiring, through managing, equipping, training and retaining – there are many factors that affect the total cost of hiring in-house developers. They all should be taken into consideration when pondering outsourcing options.

  • Tax-related benefits

It is quite common for countries that specialize in supplying outsourcing services to offer relatively low taxes when compared to countries that create bulk of demand for such services. Therefore, companies interested in offshore software development may save a lot of money that would otherwise be paid in taxes on their employees’ salaries.

  • Acquired expertise

Nowadays, quality software outsourcing vendors provide more in terms of value added to your company than just their work. They share their expertise, which often remains in the organization long after they are gone. With innovative outsourcing models such as managed services, even small companies can improve their practices, structures and productivity.

Can it work? Yes, but…

Software development outsourcing is a treasure trove of benefits for small businesses. But it needs great caution when choosing the best vendor, types of work to outsource and models of cooperation. It is the effort put into making these informed choices that will make all the difference in terms of satisfaction from outsourcing.

Software Mind is a major Polish software house that specializes in providing outsourcing services. Our philosophy is to hire the best talents and equip them with all the outsourcing know-how we accumulate with each project (and which you can find out all about through our Outsourcing Toolbox). We understand the specific needs and limitations of small companies and can offer a tailor-made solution for your development needs. If you would like to find out more, just let us know. Let’s determine together what successful outsourcing means to you.

Footnotes

[1]  https://www.gartner.com/newsroom/id/3482917
[2]  State of Software Development Report 2017
[3]  Survey Report On Global Software Outsourcing 2017 by pliXos

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Tomasz Misiak
General Manager
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Jacek Szmatka
VP of Business Development
Is IT outsourcing on the horizon for you? If so, let's discuss your needs.
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