The When and Why of Outsourcing Software Development

If you are like many other companies today, you are considering outsourcing some or all of your software development. Are you between a rock and hard place trying to figure out the best company to hire for your software development? Innovating digital products to include mobile apps, web apps, SaaS/BaaS platforms requires a lot of resources and a specific skill set as well as time and money.  It requires more talent, precise budgeting, and horizon planning. Enterprises and smaller companies alike often question whether they should hire within or outsource their software development. A successful enterprise like Microsoft has 181,000 employees, but still has nearly 7,000 engineering position vacancies. A small startup like Grapevine AI only has 10 employees and 4 open positions, that’s nearly half their workforce. Companies everywhere are itching to innovate but are forced to delay their progress because they can’t fill their positions. To minimize delay and perform at levels higher than competitors, outsourcing to dev agencies is more of a consideration than ever before. 


There are different types of software development agencies that will be discussed in this article to help you make a more informed decision when considering outsourcing. There are advantages and disadvantages to both, which will be discussed below. 


Internal Hire


If your enterprise or company has an engineering team, you may consider utilizing your existing resources for building out web platforms or features on a mobile app. It can be time saving because they are accustomed to the company culture and know the resources and co-workers available when in need of assistance. This increases efficiency if the current team stays intact, and in today’s hiring environment that is a big if. Additionally, by developing and promoting an employee, they are less subject to poaching and more likely to stay at the company. By promoting employees, you are enabling them to grow, explore new opportunities, and obtain more responsibility, which ultimately leaves them more fulfilled.  



On the other hand, software development is a team effort, and it takes more than one to successfully build most digital products. Hiring within requires a massive amount of everyday work and succession planning. The hiring team must determine whether or not they have enough internal talent with the needed experience or have enough time to develop new skills. This requires the creation of job listings on internal job boards, scouring through hours and hours of resumes, conducting interviews, finding replacements for the positions that will now be vacant… and don’t forget about the weeks and weeks of onboarding work that will be required by many members of the existing team if the new hire is to be set up for success out the gate. 

Prior to any internal promotions, a long-term succession plan should be defined. Without long-term thinking, you may not need the team of employees you promoted after the first couple projects they work on– leading to unused talent and increased cost. 

Outsourcing Software Development Agencies 

If you have a small internal team, or do not have an in-house engineering team, and you’re considering outsourcing for SaaS product development, web development, and/or mobile app development, you must first understand the different types of agencies available. There are offshore, onshore, nearshore, and hybrid. The global IT outsourcing market earned $85.6 billion in 2018 and is expected to grow to $396.3 billion this year, showing a positive growth in the industry. What model is the right fit for your company?



If you’re a US based company, offshore dev agencies are located outside the U.S. and North America, usually in a different time zone. Companies with a well-defined project and capability for hands-on project management would benefit from offshore development. Around 300,000 companies outsource annually and 24% of small businesses outsource to increase efficiency. 



By hiring outside of your country, you are reaching a global talent pool with larger workforces that result in the ability to kick off your project quickly. With a larger workforce, these agencies have access to a wide range of skills at a lower cost. Therefore, offshore agencies are often less expensive than hiring onshore. Additionally, in-house maintenance is often outside the scope of what businesses can afford, making it easier and cheaper to outsource. 



With that said, there are tradeoffs. It can be difficult to effectively communicate with teams overseas and the scope can get lost in translation or distorted. This can result in scope creep and refactoring. Cultural differences such as attitudes toward hierarchy and responsibility can cause friction and misinterpretation. The dev agency may find a solution to a problem that does not apply to your target audience, so having a project manager from your company or a US based one collaborating with the offshore team is critical. 



For US based enterprises, onshore development agencies are agencies located within the United States. Onshore agencies are known for high quality andhigher costs than offshore, and excellent customer service. Fast growing companies with a budget and a tight timeline between 3-12 months would benefit from outsourcing to an onshore agency. Also, with the ever increasing need for security, companies within certain verticals, to include healthcare and financial services, often have to outsource to onshore teams. 



One of the biggest benefits of onshore software development is the ability to meet early and often within local time zones with the team to discuss scope, progress, and obstacles. These web development and mobile app agencies have hands-on customer service and quick response time. Onshore gives you the opportunity to collaborate in person to build a long lasting relationship. Because communication is effective and streamlined, onshore development produces higher quality work with fewer iterations. There is less room for misinterpretation and if the team veers off from the scope they can be redirected more quickly than most offshore teams. Onshore teams often have tighter cybersecurity measures than offshore because the U.S. has stricter copyright and IP laws than other countries. Thus, your sensitive data is less at risk.



Because onshore development produces high quality work with effective communication, it can be a bit more expensive. You are paying for expertise, experience, and a strong relationship that can potentially continue after the first project is complete. While offshore development can be less expensive, refactoring is costly. With onshore development you are less likely to have to worry about the inevitable reworking of the software design and architecture caused by gaps in communication. Additionally, don’t discount the fact that with onshore development the understanding the team has of your project without cultural nuances can lead to faster development times and overall less cost. 



Dev shops in a neighboring country with lower cost talent are considered nearshore. For example, if you are located within the United States, nearshore would be Mexico or Canada. Nearshore outsourcing is a balance between onshore and offshore in terms of cost and quality. By utilizing nearshore, there are minimal time zone differences and less cultural differences. 



With the pros and cons discussed above, you have the tools to make an informed decision when hiring for your software development. Innovation is the key to competitive advantage and having the capability to hire a team of talented software developers will keep you at the top of the leaderboard. With the hybrid model becoming more and more popular to maintain quality yet reduce costs StudioLabs has positioned itself well to meet this ever growing demand. 

After all, are you in the software business, or are you in the staffing and recruiting business trying to keep up with today’s talent challenges to develop your software?