Both offshoring and outsourcing started as a cost-cutting measure, but businesses that know how to create real and sustainable value routinely use these two sourcing strategies for far more strategic ends-to gain capabilities and strengths that they don't have or can’t have in-house, or to strengthen the existing ones that they already have.

Outsourcing began small. Firstly focused on finding a cheaper alternative for manpower, outsourcing has grown from telemarketing and data entry to more complicated and skilled functions like digital marketing, account, human resource and IT functions like support and software development. More than 70% of the companies outsource a business process or a specific function to a third-party contractor. From its early introduction in the manufacturing industry to becoming a universal strategy with as many uses and definitions, industries will always have a business function that can be outsourced.

“About 50% of executives state that reducing costs is the top reason for outsourcing”, which includes those that sent their IT offshore. As with manufacturing outsourcing, the offshoring of IT and application development services has developed its own set of risks and hidden costs as well as falling short on providing expertise in areas lacking in the client organization.

Michael Corbett, The Outsourcing Revolution.

Software Development Projects for Outsourcing

In this new world, developers no longer need to design a unique algorithm for each problem. Most work focuses, instead, on generating datasets that reflect desired behavior and managing the training process. Pete Warden from Google’s TensorFlow team pointed this out as far back as 2014:

“I used to be a coder,” he wrote. “Now I teach computers to write their own programs.” 

Forbes

• Application Development

  Outsourcing application development can be done from different perspectives. Businesses can choose to outsource the whole project from planning to maintenance stage or to outsource certain phases like low-level coding, system architecture design, software quality assurance testing, up to development and implementation of additional features to the existing application. While most businesses choose to outsource the project from the start, there are still cases where minor to major modifications of existing applications are required to meet certain business requirements.

  For this type of software development project, it is usually not enough for the outsourcing service provider or partner to just deliver the developed software or finish product but also to give the clients the support and maintenance services after the main product is launch the market.

• Systems Integration

  Integration refers to the summing up of different activities in order to achieve a vital goal. Systems Integration refers to the linking of current applications or mechanisms to a shared architecture to achieve the intended functionality.

  In order to implement this, outsourcing service providers must be well-equipped with the technical expertise, industry knowledge, and experience to meet the client’s request. These functions are not usually found within the in-house team. Therefore, system integration is usually done by a third-party contractor. This is done to maintain the business’ edge in the highly competitive market.

• Database management

  Good database management plays a significant role in the success of the business. Smart companies store and treat their database with utmost care and security at different locations as it is needed for critical tasks. Outsourcing service providers streamline this task by implementing a database management system and process at the user’s location. Database outsourcing packages also offer services like data cleansing and migration on top of the basic services like data storage and retrieval.

Benefits of Outsourcing Software Development

During recent years software development outsourcing has been adopted by more and more companies. Most of them state that this is only to reduce costs, and some say that this is due to the technical expertise. According to a survey, the cost reduction is the major factor which is influencing a lot, for this, it can be observed that the average annual salary for an engineer in the USA is $70,000 during the year 2004, compared with $13,580 for an engineer in India.

• Cost

  Lower cost is the most recognizable benefit of software development outsourcing. But is cheaper cost the only major benefit to the companies or are there any more benefits?

  When software development is outsourced, the business doesn’t need to through the tedious and costly recruitment process of hiring and training highly skilled individuals for the project. The work will be handed over to the team of developers who are already experts and experienced in that trade

• Scalability

  Outsourcing providers offer businesses the flexibility to increase or decrease the project resources depending on the demand of the project. This flexibility doesn’t come with fixed costs or additional investments.

  During peak business seasons, some applications may require more updates and support more than others. It's impractical for businesses to consider purchasing new technology to handle consumer demand and training junior developers to perform minor applications updates. However, outsourcing these functions to software development companies eliminates these obstacles. A software development partner already has a team of developers who are already fully trained to handle these kinds of situations and are prepared to solve more complicated problems should the need arise.

• Risk Management and Operational Capacity

  Most software development companies have their own system and tools to manage the risks that can happen throughout the application development cycle.  Contracting an outsourcing partner to maintain established software and applications systems and transfers can efficiently manage the risk of fluctuating resources and operation capacity that can occur at any time throughout the software development process.

  Even though outsourcing software development risks have increased over time, many businesses continue to manage their relationships with their outsourcing partners at arm's length.

  Companies like the toy manufacturer Hasbro accomplish this by viewing their external relations as strategic partners tightly integrated with their domestic operations or overseas subsidiaries. That's a major reason why Hasbro was largely unaffected by the toy industry's lead paint crisis in 2007. Among its sourcing safeguards, the company prequalifies and continually monitors its overseas factories to ensure that quality management systems are in place. The risk of a quality issue arising can't be totally eliminated, of course. The key is to limit potential problems and act quickly when one occurs to keep it from happening over and over again. - Forbes

• Increase Internal Focus on Core Business

  Most businesses do not consider the recruitment process and managing a team of software developers among their revenue drivers and core competencies. Leaving these compound activities to an outsourcing partner removes a major distraction and frees up time in the calendar that the business owner can spend on more critical tasks at the heart of the main business such as research and planning, product innovation and development, and more activities that give the business its competitive advantage.

  This has been the major benefit for many of the businesses that outsource application development nowadays. Some companies have included policies where third-party contractors can be hired temporarily if the required skills cannot be produced in-house. As software application development requires intensive experience and highly skilled workers, the majority of the companies choose to outsource.

• Additional Financial Benefits

  In addition to the lower cost of getting an outsourcing partner to perform the software development job, outsourcing can shield the business from different payouts and high overhead including in-house employee benefits, government taxes, service and maintenance fees for infrastructure/facilities, and legal or administrative support for government regulations.

• Technical Expertise and Quality

  Software development outsourcing can provide businesses with top-of-the-line technical expertise that is not currently in their current technology portfolio. This plays a significant role in developing a new service or application product.

  Outsourcing software development also highlights the quality of work. The majority of the businesses that have tried outsourcing these services can attest to the fact that the quality of the software application product produced is incomparably good compared to the works done by the in-house IT team.  Many of these businesses mentioned that they can collaborate with the offshore developments partners and can perform the development 24 hours round the clock because of the time difference. For instance, in a business with different locations, for example in the United States and Asia, the offshore development team stops the work while the team in-house can continue to start where the other team left off. This also means that quality is never compromised as there will always be enough allotted time to complete, test, and adjust projects whenever needed.

  Improving the quality of the code not only generates higher value, but it also helps to protect the business investment in the light of new requirements that may arise in the future.

• Exposure Process Expertise

  Having an outsourcing partner for software development naturally, expose businesses to the best practices of the software development cycle and project management. These best practices are tested and proven by not just the current outsourcing partner but of the software development industry in general. Outsourcing software development gives businesses a new light in terms of processes that might not even have been explored.

  Scaling the remote team with the goal of developing a more solid solution and including ample time for thorough product testing will greatly increase product stability and lead to a much better user experience.