10 Aug 2018

The Secret Art of… Software Development Outsourcing – Part II

Types of outsourcing

Are you considering making use of software development outsourcing services? If the answer is “yes”, that makes you one of a multitude of companies around the world that are doing just that as we speak. But while your decision to use outsourcing is hardly unusual, your needs and circumstances as a company are as unique as they come. So, what kind of software outsourcing services should you choose? What are the different types of IT outsourcing services and why you should know them? Let’s take a look.

Chances are that at this very moment you are trying to find a software company that can turn your startup idea into powerful market-ready software. Or, you are a representative of a company that requires a specific type of software specialists (say, Java developers familiar with the Spring Framework) for a short period of time and is hesitant to search for full-time workers. As your needs change, so does the relationship between you and your software outsourcing provider. But different types of outsourcing services can also be based on the circumstances of the provider itself. The distance between the client and the provider is particularly notable.

We’ll shortly go over various types of software outsourcing services based on both distance and client-provider relationship. But before we do that, let’s answer a very basic question:

Why do you need to know the various types of software development outsourcing?

If you are yet to use software outsourcing services, you may be wondering why it is necessary to divide them into various types. After all, most of software companies will probably gladly accept your project regardless of its nature and try to act accordingly. Well, the word “try” is a key here. In reality, some software companies are only worthwhile for very specific tasks. Similarly, you may find out that certain aspects of a given type of software development outsourcing resonate really well with your business model. Choosing the right type of outsourcing and then finding the best outsourcing provider may become a crucial part of your long-term strategy as a company.

Sounds interesting? Let’s start with those based on distance.

Location-based types of software development outsourcing services

When you begin searching for the right outsourcing provider, you will find out you have essentially four different options:

  • Onshoring (homeshoring) – you may try to find your Prince Charming in your own country. Since prices within one country rarely differ greatly, it’s difficult to find a software company that is significantly cheaper than those in your immediate vicinity without compromising quality. However, extending your search to the entire country greatly widens your potential pool of specialists you have access to.
  • Nearshoring (nearshore outsourcing) – feel a bit more adventurous? Then, you may try to step foot outside of your native country and take a look at other countries located nearby. That way, you can find service providers that charge less than in your native country for the same quality[1]. Since the distance isn’t too big, time differences aren’t a major problem. Remote cooperation is fairly easy. For a country such as Germany or UK, Poland would be an example of a country that provides software development services that could be classified as nearshoring.
  • Offshoring (offshore outsourcing) – since you already took a peek outside, you may as well go all out and consider the entire world your hunting ground for an outsourcing provider. If you do, you’re going to try offshoring. Companies that use offshoring often benefit from very low costs of outsourcing services in countries such as India or Pakistan. On the other hand, time zone and cultural differences usually grow accordingly. What’s more, very low prices may result in poor quality, which may end up backfiring. The more ambitious your project is, the more likely it is to happen.
  • Multisourcing – if you mix various types of outsourcing based on the distance between the client and the provider, you’re engaging in multisourcing.

 

OnshoringNearshoringOffshoring

Cost efficiency
Poor  Very goodVery good


Bringing teams together

Very easy  EasyPoor


Time difference

None  0-4 hours4-16 hours


Cultural differences risk

None  None to fairMay be significant

Range of services

Any serviceAny service (with minor   limitations)Limited range of services

 


Just how much time difference are we talking about?

The table below shows you just how many hours of difference there are between typical outsourcing destinations and countries that often use outsourcing services. As you can see, there is little to no time difference between countries such as Poland and other European countries such as Germany or UK. Multisourcing can be potentially used to hire developers from around the world and have your projects developed around the clock.

Time differences between popular outsourcing clients and providers by time and date[2]

New York
   London    Berlin   
Brazil+2 hours   -3 -4

Argentina
+2   -3 -4

Poland
+6   +1 0

Romania
+7   +2 +1

Pakistan
+10   +5 +4

India
+10.5   +5.5 +4.5

 

Client-provider relationship-based types of software development outsourcing services

When it comes to the types of outsourcing based on the relationship between the client and the provider, things get a bit complicated. There could be no end to their varieties if we attempted to list every possible scenario. Fundamentally though, three scenarios are particularly common:

Staff augmentation (body leasing) – is your company working on an ambitious software project and found itself in sudden need of some support? Chances are you may need experienced specialists – but only for a little while. Instead of hiring full-time workers, you may use staff augmentation. Your outsourcing provider essentially lends some of their developers. While technically they are not your employees, when it comes to the project at hand, they are de facto your employees for all intents and purposes. If your company’s demand for developers tends to change quickly, this may be a great way to save money.

Dedicated teams – staff augmentation is great and all… but what if your company doesn’t have much in the way of software development capability to begin with. If you don’t have a skilled project manager experienced in IT, you may not be able to make a good use of the developers you borrowed. In that case, you can need more than just single developer manpower. Level of responsibility may vary here from outsourcing only development functions to outsourcing whole delivery and management of the entire project to your partner.  It has long been believed that if software development isn’t a core capability of your company, this type of outsourcing can be very useful[3].

Dedicated development center – if you consider resources in a specific country/area to be particularly valuable, you may decide to move some of your management to this place and tap directly into its labor potential. If you are not convinced you have the ability to easily operate in a market you don’t have any experience with, you may use the services of an outstaffing vendor. A company like this will hire the developers and then let you use their services for a fixed fee.

Staff augmentationDedicated teams

Dedicated development center

 

Client-Vendor relationshipThe client purchases developers and gives them instructionsThe entire project is overseen by the outsourcing providerThe client hires developers in a different country

 

What’s client in it for?Individual skilled specialists needed to complete the projectFull range of functions e.g. development and management of the projectSkilled specialists and favorable market conditions

 

Risky when…You don’t have proper managing capability in-houseYou outsource your core competencyYou don’t know much about your target market

 

Best suited for…Software companies in need of new developers to accomplish a specific task, usually on a short term basisCompanies with limited IT capabilities that want a software house to take over development of one of their products or develop software for them from scratchLarge companies with strong management capability

 

There is more to it…

There is even more to the topic of software development outsourcing types. In the next article, we’re going to analyze the most common pricing models for outsourcing services.

Software Mind is a Polish software house that aims to provide software development outsourcing services that have the very best value for money. Located in Kraków, often referred to as the Polish Silicon Valley, it has long been polishing its outsourcing prowess, completing projects for clients from around the world. Tell us all about your projects. We will find the most efficient way to turn it into reality. That’s just what we do.

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Tomasz Misiak
General Manager
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Tomasz Gunia
Business Development Manager
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