Software Development Outsourcing Hub

Why Do Companies Choose to Outsource?

September 6, 2023

Building a critical product for your business can be overwhelming. As you chart the way forward, you may be wondering how best to meet your company’s digital demands. Should you use an in-house IT team or opt for software outsourcing?

Some CEOs or CTOs may be hesitant about outsourcing at first. They may worry about keeping control of the budget, sensitive data, IP and more. 

Yet, there’s a reason why 92% of G2000 companies are using IT outsourcing. By choosing the right outsourcing partner, your business can relieve your technical burden. Ultimately, this can result in cost savings, a rapid time-to-market and a top product. 

At Netcorp, your next business product is in good hands. Here’s why you should choose software outsourcing with our top-tier teams. 

What Is Software Outsourcing?

Outsourcing has become a go-to option for companies. Software outsourcing hands off the development of a product to a third-party provider. This means that your business doesn’t need to hire an in-house IT team. Instead, you choose a partner to manage the full-scale software build. 

During this process, your partner will be your technical expert. Typically, they will take care of all phases of the project. This includes discovery, development, deployment and post-launch support. 

What’s more, outsourcing has become a common practice for the software industry. A developer shortage worldwide has led to companies choosing outsourcing – with great results. In 2023 alone, IT outsourcing spending grew 22% over the previous year

What Does Software Outsourcing Look Like?

Outsourcing may once have had a bad rap – but no longer. Today, 78% of businesses who outsource experience successful outcomes

With the right outsourcing development partner, your business can enjoy a professional relationship. Essentially, you’ll work with the outsourcing team just like with your own employees. 

However, there are a few clear differences between outsourcing vs. in-house developers. To start, you don’t have to worry about:

  • Hiring, onboarding and training costs
  • Managing teams and workflows
  • Dealing with turnover and replacement costs
  • Creating competitive salary and benefits packages
  • Investing in workstations and equipment
  • Handling local taxes and regulatory compliance 

Your partner will exclusively deal with these concerns. Instead, you can focus on other areas – without the hassle of overseeing the project. 

Why Do Companies Choose to Outsource?

(Source: UpCity)

IT outsourcing is booming. Experts estimate that revenue will reach $587.3 billion by 2027. But why outsource software development? CEOs and CTOs often cite flexibility, efficiency, expertise and more. Let’s take an in-depth look at why companies are choosing outsourcing in new numbers.

1. Reduce Software Development Costs

Cost is always a top priority, especially when investing in a business-critical product. It’s no wonder then that 70% of companies choose outsourcing due to potential cost savings

Overall, hiring in-house staff can be a hefty investment. In this case, your responsibilities go beyond salary and benefits. You’ll also have to pay for onboarding, equipment, training, taxes and more. That’s why experts estimate that the real cost of hiring a developer costs 2.7x their base salary

In comparison, you don’t have to worry about these costs with software outsourcing. Outsourcing lets you access technical expertise without paying these extras.

2. Save on Recruitment Resources

Recruiting the best developers can be a major challenge, especially in today’s market. With a shortage of 85.2 million developers predicted by 2030, the competition is fierce.  

When you build an in-house team, you’ll have to invest in actively recruiting top developers. You may even be recruiting developers in regions of the world where you don’t have expertise. 

Unless your company has built-in knowledge of tech recruiting, leave it to the experts. Your outsourcing partner will deal with building and training these teams. In this way, you can minimize the time and resources sunk into recruitment. 

3. Get Access to World-Class Talent

Perhaps the most important reason why outsource software development is talent. For companies who don’t have in-house developers, it’s useful to get access to experts through a partner. 

This is especially true considering that not all developer talent is created equal. Your company will want the world’s best tech professionals working on your product. 

Outsourcing partners are specialists in filling their teams with top developers. They have the expertise in recruiting from regions that you may not understand well. Overall, they have much better odds of recruiting elite engineers. 

4. Access the Right Project Managers

The success of a software development project often hinges on the manager. When you choose an outsourcing partner, you’ll have an assigned PM to handle these issues. 

Outsourcing lets you access a manager who is well-versed in team responsibilities. They may even know the developers personally. Their tasks include reviewing progress, handling HR, providing quality assurance, etc. 

Having a manager on-hand can give you peace of mind. Plus, you don’t have to concern yourself with hiring and paying for one on your own.  

5. Enjoy a Faster Time-to-Market

Why do companies choose to outsource? Outsourcing is synonymous with efficiency. Your partner will have top experts and processes in place. That’s how they can build your product as effectively as possible. 

In turn, your partner will complete the project with a faster time-to-market. Since their core competency is software, they know how to maximize project productivity.

Like a well-oiled machine, an outsourcing partner will efficiently build your product. During this process, they’ll apply industry best practices, processes, technologies and more. 

6. Leverage the Latest Technologies

Unless you’re in the software industry, your business isn’t prepared to keep up with trends. Technology is constantly evolving. That’s why it’s vital to trust in your outsourcing partner. Their specialists can recommend what your product needs to thrive in the long-term.

Take advantage of your partner’s panel of experts. Leverage today’s technology and trends for your tech stack. With their help, your business can stay innovative. 

7. Make Use of Domain Knowledge

In the same vein, your outsourcing partner knows best when it comes to domain knowledge. Lean on their expertise to determine the path forward for your product. 

Your company’s software skills will never be as powerful as your outsourcing partner’s. And domain knowledge for software isn’t the kind of thing you want to get wrong. 

Often businesses want to cut corners to achieve their product. Yet, making big mistakes during development can lead to brand-damaging results. To correct them, your business will also have to incur higher costs. 

8. Increase the Flexibility of Your Project

According to UpCity, the #1 reason why outsource software development is flexibility. 21% of companies said that they choose outsourcing to stay nimble and adapt quickly. 

Additionally, outsourcing is perhaps the most effective method for scaling up your project. Hiring more or fewer developers can be resource-intensive if you do it yourself. 

In contrast, outsourcing partners have a slew of back-up developers available. They can scale up your project by assigning more engineers from their on-call list. Or, they can cut back without the pains and costs of a traditional company. 

This high level of scalability in outsourcing means that you can pivot as needed. Ramp up or slow down your project with zero interruptions or added costs. 

9. Focus on Your Core Business

If you’re wondering “why do firms outsource project work?”, the answer usually lies in their core skills. 

Essentially, do what you do best. It’s worth handing off your software development project to a trusted partner. This way, you can focus on your core business and innovate in your sphere of expertise.

Prioritizing your core skills also will help you discover your value proposition. Hone your best abilities and leave the rest to an expert partner for maximum effect. 

10. Minimize Your Project’s Risks

Data breaches, IP theft, scope creep… you always face risks when undertaking a new project. And while there’s no guarantee, a top outsourcing partner can reduce these threats. 

The best outsourcing partner will have protocols in place to:

  • Protect sensitive data
  • Maintain product security
  • Clearly define IP ownership
  • Outline in-depth project scope in contract
  • Use the latest tools for project management, programming and more

Note that many of these considerations are technical in nature. That’s why a specialized partner can help handle them. 

Key Factors to Consider for Outsourcing Software Development

(Source: SmallBizClub)

Before you get started, let’s discuss outsourcing software development pros and cons. To build your product, you’ll want to define your outsourcing project wisely. Be sure to:

  • Identify your project requirements. Ideally before you start interviewing a partner, go in-depth to define your vision. 
  • Be realistic about your budget. It’s true that you get what you pay for. Make an investment that meets the scope of the project.
  • Search for the best provider. Check their past projects, customer reviews and referrals. 
  • Do a trial run of communication. At 57%, miscommunication is the top reason for outsourcing failure. Get to know your partner’s working style and communication standards beforehand. 
  • Understand your partner’s company culture. Staying aligned about communication practices, deadlines and more can help your project succeed. 
  • Ensure the security is strong enough. Your partner should recommend industry-best protocols to keep your product safe. 
  • Consider the logistics, such as the partner’s time zone and availability. You’ll want to work seamlessly with them for the best results. 

Ultimately, the #1 trait that businesses were looking for in a partner was “transparency” (54%). Opt for a partner that you really feel you can trust to do the job right.

Why Outsource Software Development With Netcorp?

Saving money isn’t the only good reason to outsource. With an outsourcing partner, you’ll get a high-quality, scalable product in record time. You'll also forgo the risks and investment of an in-house team.

Take advantage of outsourcing’s many benefits with us. At Netcorp, we’re ready to provide the high-caliber technical partnership you require. 

Reach out to our team to learn about our software development outsourcing expertise. We offer tailored outsourcing solutions aligned with your vision and business requirements.

Paavo Pauklin
Executive Board Member

Paavo Pauklin is a renowned consultant and thought leader in software development outsourcing with a decade of experience. Authoring dozens of insightful blog posts and the guidebook "How to Succeed with Software Development Outsourcing," he is a frequent speaker at industry conferences. Paavo hosts two influential video podcasts: “Everybody needs developers” and “Tech explained to managers in 3 minutes.” Through his extensive training sessions with organizations such as the Finnish Association of Software Companies and Estonian IT Companies Association, he's helped numerous businesses strategize, train internal teams, and find dependable outsourcing partners. His expertise offers a reliable compass for anyone navigating the world of software outsourcing.

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