Outsourcing is a business practice that means hiring a third party to perform jobs or services. Normally, it is done to minimize labor costs, salaries, equipment, or technology. Outsourcing helps to focus on the main aspects of the business while delegating less important tasks to outside providers.
What is software outsourcing?
In IT it can affect a wide range of jobs but generally, there are two categories: infrastructure outsourcing and application outsourcing. Outsourcing emerged in 1989 and became an effective business strategy in the 1990s. Software outsourcing is necessary when the company needs to improve efficiency and productivity or increase competitiveness. The other advantages of IT project outsourcing are the following: accelerated time to market, access to extra resources and innovations, flexibility. The main drawback can be the lack of control.
There are numerous outsourcing models and it depends on your particular needs which model is the best for your software development. Companies can use outsourcing onshore (in the same country), nearshore (in a neighboring country), or offshore (in a developing country).
Also, it is necessary to describe all types of outsourcing contracts.
Time and material pricing model
This type is widely used if you understand your final goal when the scope of work as well as specifications and functionality are clearly defined. Good model if you are sure in your System requirements specification document, otherwise you can overrun your budget.
The fixed-price model
Here it’s a project-based model and payment doesn’t depend on the vendor’s time and resources. However, be ready that the budget can fluctuate by up to 20%.
Team-based model
In this case, the company hires an external team and it can include designers, business analysts, project managers, etc. A dedicated development team is an ideal option for IT software outsourcing because you can manage each of the team members. You can use the following pricing models: cost per resource, management fee, and the hourly rate.
How to choose an outsourcing company?
After you have decided which type of software development you need, the next step is to choose the right company according to these requirements:
1. Reliability
Make sure the company has a long BPO experience and they provide the same outsourcing software development services as you need.
2. Analyze the outsourcing venture
Ask them to fill out an RFI (Request for an information sheet), also the company should provide a list of references. RFI includes all essential information about the company (number of clients, website, social media pages, list of directors, competencies, the most significant projects, clients, etc).
All the engagement should be covered by contracts. If you have any questions left, prepare a list and ask them during the meeting. It’s better to remove the company from your lists if it refuses to fill out RFI, doesn’t have a website, active social media pages, or business papers are outdated.
There are a few common mistakes that should be avoided when you are working with outsourcing companies for your software projects.
1. Not understanding the risks
Even with the best preparation, something could go wrong and you may need additional investments or the quality of service would not be sufficient.
2. Failing to achieve the consensus
If you can’t set clear objectives or negotiate the contract it will be difficult to evaluate the process according to your business model. Make sure you have a defined workflow in place and the required content.
3. Lack of technical knowledge
Check regularly the ongoing project, if you are not a technical expert, you should have a person in your team who can control and fully understand software development and outsourcing service. Choose outsourcing companies synchronized with modern trends.
Evercode Lab has worked in various areas of software development including blockchain, monitoring systems, CRM solutions, e-commerce, etc. Our company has developed multiple apps, multicurrency light wallets, BPA systems, educational programs and we can propose custom software solutions with a qualified software development team. And if you want to know how outsourcing can help your business to scale and increase the profit, please feel free to contact us and get a free consultation with our specialist.