The idea of outsourcing is no longer novel. Nowadays, a lot of large corporations outsource their production to smaller ones.
Cost savings is the primary advantage, right?
Purchasing goods from a small manufacturer will always result in cost savings. Also, you can avoid the headaches associated with hiring workers. Outsourcing projects is a popular practice among software development organizations these days.
Nowadays, offshore development is very common. Here, money is the main factor to consider. Many nations, such as India, help companies hire remote developers at far lower prices.
It implies that if the task is given to developers in these nations, you might obtain the identical product built for a lot less money.
When outsourcing your projects, there are a lot of additional factors to take into account besides cost.
Let’s begin the discussion by understanding things that you should focus on before Outsourcing.
Make an objective plan that tells you what your goals are. Objective goals can be either to include cost reduction, get access to specialized skills, enhancing your service quality or scaling the operational efficiency.
Identify what tasks or services are well suited for your outsourcing needs. A few outsourcing needs would include IT services, customer support, human resources, etc. or any process which is not a core business function.
You also need to make the right choice in your software development outsourcing model, choose the ebay option from offshore, nearshore or onshore outsourcing based on your business needs, budget and preferences regarding communication and control.
Find potential outsourcing partners. Look for vendors having expertise in your industry, an efficient track record, and positive client feedback.
Recognize the risks, including those related to data security and privacy, and make sure the vendor abides by all applicable laws and regulations.
Determine the budget for an outsourcing project and be realistic about what outsourcing can help you achieve within the defined budget by setting clear expectations for both the parties.
Create a detailed request for proposal document stating all the requirements, deadlines and benchmarks for success, doing this will help you receive a detailed proposal from the potential vendors.
Build a communication strategy which underlines how often you will hold meetings, what communication tools will you use and key contact points.
Organizing a transition plan to ensure that you are transferring the tasks to the selected outsourcing partner in a seamless manner, this would include knowledge transfer, integrating systems and processes, etc.
Establish precise measurements and KPIs (Key Performance Indicators) to assess the outsourcing partner's performance. This will support tracking progress and making required modifications.
Let us move the discussion by understanding what is Offshore software development outsourcing?
More developers are needed as the need for outsourced app development rises. The cost is becoming a major consideration since smaller businesses are now aiming to have their mobile apps. Companies that develop mobile applications are searching for methods to cut expenses and create products at a lower cost.
When a product is developed "offshore," it indicates that developers from other nations are working on it. There are developers who charge far less in several nations, such as India. Additionally, it will lower the product's cost. For the mobile application development company, this is a huge benefit.
Software development is not the only process that is outsourced to foreign nations. Customer service, cold calling, data services, and other BPO and KPO tasks are frequently outsourced by businesses. In the US or the UK, doing similar activities would be far more expensive.
Outsourcing is not solely motivated by cost for businesses. Large businesses can stay away from the HR problems that come with hiring employees. Time differences are advantageous in a variety of ways. By hiring outside firms to handle the task, you'll be able to focus more on your main business.
But are there any other types of Outsourcing?
Yes, there exist two other major types of outsourcing, one is Nearshoring outsourcing and the second one is onshoring outsourcing.
Projects involving the development of mobile apps might be contracted out to a developing firm or an individual developer. While some businesses merely ask contracting agencies or offshore development centers to handle a portion of the project, others outsource the entire undertaking to them. A project can also be delegated to a group of developers under the direction of your project manager.
It is not a smart idea to outsource the work to individual developers. A project cannot be finished by one person. Experts are needed at various project stages.
Therefore, it is preferable to contract with a development business or engage remote developers.
Moving further let us first discuss a few statistical analysis of offshore development
Outsourcing has witnessed tremendous growth over the past decade which was driven by the digital transformation and globalization of the markets. Below are a few statistics that talk about the impact of outsourcing.
Market Size: As per one report by Grand View research, the global outsourcing market is predicted to expand at a CAGR of 8.5% until 2030, from $245.91 billion (as of 2021).
Cost Savings: Organizations reported an average cost reduction of 15-30% through their outsourcing initiatives, which affected the bottom line. This was specially seen in sectors like IT, where the companies saw a reduction in the labor costs as well as in their expenses.
Productivity Improvements: Outsourcing software development can improve productivity by up to 24% as found in various sectors like manufacturing, software development, etc, where the specialized outsourcing partners enhanced the operational efficiency.
These figures not only support the advantages of outsourcing but also emphasize how crucial it is to choose the best outsourcing model in accordance with particular company objectives and demands.
Now, let’s understand Nearshore and Onshore outsourcing.
Employers who hire remote developers from nearby countries to fulfill services are engaging in nearshore outsourcing.
Nearshore outsourcing has a number of benefits, such as lower costs, better cultural fit, closer location, and similar time zones. For instance, there are situations when the prices are too high to maintain operations in your nation of origin; nonetheless, nearshore locales can offer excellent long-term outsourcing options.
Although there is occasionally a misconception that nearshore outsourcing cannot scale as well as onshore outsourcing or offer the same level of customer care, these worries can be dispelled with excellent training and well-designed customer experience (CX) technologies.
So, after understanding what the term nearshore outsourcing means, let us next understand what is onshore outsourcing.
The practice of hiring services from outside an organization but within the same nation is known as "onshore" or "domestic" outsourcing.
The fact that contact center employees are familiar with local concerns and customs and have similar experiences to your customers is one advantage of onshore outsourcing. Sensitive information, security, and data privacy can all be monitored and stored more readily in one's own nation.
Now, moving ahead let us understand the differences between the three outsourcing models in detail.
Outsourcing has become a critical strategy for businesses seeking to improve efficiency, access specialized skills, and reduce costs. There are three primary models of outsourcing: offshore, nearshore, and onshore. Each comes with distinct advantages and challenges that can significantly impact a company's operations.
Feature | Offshore | Nearshore | Onshore |
Cost Efficiency | High cost savings due to lower labor rates in countries like India and the Philippines. | Moderate cost savings with benefits of geographic proximity. | Lower cost savings, higher labor costs but no travel expenses. |
Communication Efficiency | Potentially challenging due to language barriers and significant time zone differences. | Easier communication due to minor time zone differences and cultural similarities. | Highest efficiency, with real-time collaboration and no language barriers. |
Cultural Alignment | Often challenging due to significant differences. Training and adaptation may be required. | Better alignment than offshore due to similar cultural traits and business practices. | Strong alignment with local market understanding and consumer behavior. |
Time Zone Differences | Major differences can hinder real-time interaction but benefit round-the-clock operations. | Minimal differences allow for better real-time collaboration. | No time zone differences, facilitating immediate communication and decision-making. |
Now, moving further, let us understand the advantages of offshore outsourcing?
The majority of businesses opt to outsource to other countries in order to save money. Software development is one area where outsourcing can save labor expenses by up to 70%. Offshoring can also help businesses save money on raw materials and increase productivity, both of which lower costs.
Hiring specialized developers domestically can be costly and competitive, particularly in fields like finance or IT. Knowledge process outsourcing, or offshoring these specific business functions, allows businesses to hire workers with specialized expertise at a cheaper cost and with less competition, potentially leading to better business outcomes.
Market research, intellectual property research (such as for patent applications), legal services, training, research and development, and design are some of the most often outsourced knowledge activities worldwide.
Offshoring can help businesses access innovation in other domains, such as machinery and processes, in addition to using specialized talent.
When developing a physical product, for instance, a company may be able to use specialized equipment that is already in place and has been developed for a particular use by outsourcing the development process rather than investing the time and money to develop or assemble the equipment required to make the product internally.
Customers of today expect service around-the-clock. For businesses like retail and entertainment, conventional business hours have all but disappeared thanks to the internet; customers now demand their problems with your service fixed right away, even if it's two in the morning.
Offshoring allows businesses to take advantage of personnel across many time zones, which increases their ability to provide 24/7 technical support and other round-the-clock services.
Apart from the financial benefits, the main advantage of outsourcing is that it can free up resources that you can use to concentrate on your main business operations, which will ultimately lead to higher profits.
Let's take an example where your HR department reviews and approves employee timesheets by hand for five hours per week. Although it is a vital duty, its contribution to commercial or intellectual output is negligible.
You could free up 20 hours a month by outsourcing this work to an experienced offshore partner. Those hours could then be used on revenue-generating activities, including hiring experienced salesmen.
By utilizing external knowledge, tools and resources, organizations can reply to the consumer demands and bring in new products to the market faster, thus giving them a significant competitive advantage, specially in industries that are driven by rapidly shifting trends like fashion and technology.
Diversifying your operations' geographic location is crucial for maintaining business continuity. Let's say there is a server or hub for production in the home country that goes down. If that is the case, an offshore headquarters firm can seamlessly continue operations by leveraging its other sites to cover any gaps.
Now, further let us understand the Cons of Offshore development?
Fixable issues can grow to multiple times their original size and minor delays can become major backlogs when you're not there in person to monitor deadlines and address difficulties. Offshoring horror stories involving missed deadlines, excessive supply markups, and the delivery of "final" items containing errors fill an entire Reddit thread.
Losing control over the portion of your business that you are outsourcing is one of the primary worries associated with offshore. It's difficult to underline how crucial it is to do due diligence and thoroughly screen any overseas talent or business you intend to collaborate with instead of choosing the lowest priced option.
Working with a partner halfway across the world presents logistical obstacles that even the most reliable offshore companies may face in addition to operational ones.
The language and cultural barriers come first. Despite the fact that many remote teams are fluent in English, conducting business entails subtleties that are frequently lost in translation. Do you have a strategy in place for handling communication in the event of a complicated technical issue?
And then there are those pesky time zone issues. If both businesses are mostly active during regular business hours in their respective nations, this could result in communication gaps of several days, which could slow down projects.
For instance, you might not hear back from Beijing, where it is midnight, if you send an email at noon from New York. This could take up to eight hours. This implies that your response will probably be sent the next working day, and so on.
Reduce the impact of time zone differences by clearly outlining the times when important leaders will be accessible for communications. Ideally, this will occur during a window of time when both sides are available at the same time, allowing decisions to be made right away. It's also a good idea to have multiple points of touch on both sides.
Knowledge about a certain portion of the business is also limited to that region when it is handled in a different geographic location. Within the organization as a whole as well as amongst individuals, there is little knowledge transfer.
Security is a top concern for businesses these days, especially cybersecurity. Transnational sharing of sensitive data can make data breaches and cyberattacks more likely. Nations with laxer IP rules may likewise pose a threat to intellectual property.
Now, further let us understand how to choose the right offshore location.
As you find out different options for offshore outsourcing, consider the below factors which may impact the success of the right choice for location.
In some businesses, time zone might not matter that much, whereas in some others it may make or break the ability to communicate effectively. If time zone compatibility is a priority then consider “nearshore” i.e. choosing an offshore location which is geographically close to your country.
Search for a country that has a stable government, a legitimate legal system and a pattern of strong economic growth, as all of these would indicate a secure place to conduct operations.
Having a reliable infrastructure can help in smoothening business operations by helping you assess the quality of a country's power grid, communication networks and transportation infrastructure to determine whether you can do the business with them without any hassles.
Understanding the regulations of the nation as they apply to your company is crucial before choosing an offshore site. Keep an eye on data privacy legislation and corporate rules.
Successful collaboration is more likely among nations that share similar values. It will be simpler for personnel in different locations to engage if they have similar work ethics and communication styles. Take into account the country's standard of living as well, as this will affect the morale and output of offshore workers.
Worldwide, it is believed that one in five individuals can speak English, and among working adults, the percentage is significantly greater. To make sure it lives up to your expectations, it's crucial to know the demographic you wish to interact with and the degree of language competency.
Now, further let us talk about how Acquaint Softtech can help with offshore development?
Founded in India 11 years ago, Acquaint Softtech is an offshore software development outsourcing company that specializes in offering IT staff augmentation and high-end software development outsourcing services. As an official Laravel partner, we are experts at creating cutting-edge Laravel apps.
Acquaint Softtech is the perfect partner if your company needs remote developers. We can integrate developers into your team in as little as 48 hours thanks to our quick onboarding procedure, which will ensure that your projects are not adversely affected.
We are a great option for any demands requiring software development to be outsourced because of our affordable hourly fee of $15. Whether you need specialist outsourcing services, or want to hire MEAN stack developers or hire MERN stack developers, or remote developers, Acquaint Softtech has the knowledge and resources to satisfy your needs quickly and effectively.
Contact us today and get your customized software developed at ease. Are you an SMB? Are you an eCommerce startup or any other industry business owner who wants help in software development, then we are at your rescue. Let’s talk!
Outsourcing, especially in software development, has become an indispensable strategy for companies aiming to optimize costs, access specialized skills, and enhance operational efficiencies. Whether it’s offshore, nearshore, or onshore outsourcing, each model offers unique advantages tailored to different business needs.
Acquaint Softtech stands at the forefront of this trend, providing expert offshore development services that blend cost-effectiveness with high-quality outputs. Engaging with a trusted partner like Acquaint Softtech can significantly streamline your project execution and bolster your company’s growth trajectory.
Outsourcing software development primarily helps companies reduce costs while accessing specialized skills and technologies not available in-house.
Offshore outsourcing involves transferring work to countries with significant cost advantages, such as India, while nearshore involves neighboring countries and onshore refers to outsourcing within the same country.
The risks include less control over the operations, logistical challenges, communication barriers, and security concerns, especially regarding data privacy.
Effective strategies include thorough vendor screening, establishing clear communication protocols, setting realistic expectations, and aligning on security practices.
Acquaint Softtech provides rapid onboarding of skilled developers, leveraging its status as a Laravel partner to deliver high-quality, cost-effective software solutions tailored to your business needs.
I love to make a difference. Thus, I started Acquaint Softtech with the vision of making developers easily accessible and affordable to all. Me and my beloved team have been fulfilling this vision for over 15 years now and will continue to get even bigger and better.
Office trips are always we look up to. This year, Team Acquaint has decided to explore Jaisalmer. In this blog post, we have shared all our memories.
Do love to develop Android apps? If yes, then these 12 practical tips will take you to be among the top 5% of Android developers and master it.
Both Angular and React are popular & efficient frameworks supported by major firms. Which one is right for your business solution?
