The trend towards outsourcing in the tech industry is growing. Today, 92% of G2000 companies are using IT outsourcing, and as many as 37% of small businesses outsource at least one business process. No wonder that the global IT outsourcing market size is expected to reach $1.18 trillion by 2030.
Outsourcing development teams comes with numerous benefits, including cost savings, flexibility, and access to specialized skills, just to name a few. Still, choosing the right outsourced development team can be a challenge. How can you select a team that’s aligned with your project goals and company values? What factors should you take into account to maximize benefits and minimize potential risks?
Understanding outsourced development teams
Are you looking to bring a new innovative feature or product to life but lack the relevant in-house resources or expertise? Consider partnering with an outsourced software development team. These teams have the necessary skills and experience to successfully execute projects. As a result, companies can focus on core activities while still achieving development goals.
An outsourced software development team is a group of specialists hired externally to work on specific software projects for companies. They can be located anywhere in the world and provide a wide range of services, from developing to maintaining existing software. Yet, even though working under their direction, they operate independently and rely on their own technologies.
Why outsource software development?
Why do companies decide to outsource? While there are many reasons why an organization may choose to outsource various roles or services, it ultimately boils down to a few key factors:
Cost-effectiveness and reduced operating expenses
Cost reduction is the biggest reason for outsourcing, as cited by 70% of businesses. Outsourcing helps companies reduce expenses associated with hiring, training, and maintaining in-house staff. Once teaming up with an outsourcing partner, it’s their responsibility to cover all the development costs. As a result, businesses can prioritize their core business.
For example, in Eastern Europe the costs of living are lower and rates for software development fluctuate between $25 and $50 per hour.
Access to a skilled talent pool and deep expertise
This is another reason why so many companies opt for outsourcing. 87% of businesses are experiencing gaps in their IT teams or expect them within a few years. Outsourcing gives them an opportunity to tap into a global pool of specialized expertise.
However, it’s not only about filling the talent gaps. What also matters is the new ideas and solutions that come together with the outsourced teams. This enables companies to leverage expertise from around the world, expand their capabilities, and stay competitive in the market. Here, the Polish developer market stands out in many aspects—Poland is ranked as one of the top outsourcing countries for technical and functional reasons.
Scalability and flexibility
Companies can increase or decrease their outsourced workload based on current demand. This way, they can avoid the medium- and long-term commitments of hiring full-time employees. Outsourcing offers flexibility that helps organizations to adapt to market changes, seasonal demands, or other unexpected challenges, giving them a competitive advantage.
Focus on core activities
By outsourcing software development teams, companies can free up internal resources to focus on core business functions. Employees may then devote more of their time to core business functions, enhancing overall productivity and generating more revenue. Almost 57% of businesses say that outsourcing helps them hone the company’s core competencies.
Faster time-to-market
Probably, most businesses think about getting their product to market faster than their competitors. The truth is that when you’re building an in-house team from scratch, you spend a considerable amount of time on hiring and training new workers. With an outsourced software development team, things are different.
Companies can scale up development capabilities quickly and effectively. This gives them an opportunity to concentrate on bringing their product to market as effectively as possible.
Risk mitigation
With the diverse skills and expertise of a software development partner, the risk of project failure is low. Outsourcing provides access to experienced specialists who have successfully completed similar projects. This means companies are more likely to get what they need on time compared to relying on a new, inexperienced in-house team or a poorly matched outsourced team.
Competitive advantage
To thrive in today’s competitive market, businesses must be innovative. If not, they risk falling behind. With outsourcing, introducing innovative solutions becomes easier. By accessing a wide range of skills and the latest technological advancements, companies gain a competitive edge.
Importance of choosing the right outsourced team for software development
Choosing the right outsourced development team is an important step in ensuring the success of a software project.
A reliable team:
- Ensures technical compatibility.
- Meets scalability needs.
- Supports flexibility.
- Prioritizes security and compliance.
- Offers cost-effective solutions without compromising quality.
By selecting a team with a strong reputation for innovation and problem-solving, companies can enhance their products and maintain a competitive edge. It’s also important to consider the potential of long-term partnerships, as a strong collaboration can lead to sustained success and continued growth.
Types of outsourced development teams
Outsourced development teams might be categorized based on their location and the nature of the relationship.
Onshore outsourcing
Onshore outsourcing means that an external team is located within the same country as your company. So, this is probably one of the most convenient options. The developers may live in another city, state, or region. Collaborating with a team from the same country eliminates major concerns about time zone differences as well as language or cultural barriers.
However, this outsourcing model can be costly, especially for companies based in the USA, Canada or Australia. Then, hourly rates for software development may reach up to $150. This is the cost that not only startups but many companies can’t afford to bear.
Nearshore outsourcing
Nearshore outsourcing involves delegating work to a software development company from nearby countries. Costs in neighboring countries vary due to differences in living standards, economic conditions, and currency exchange rates. This potentially makes it a more cost-effective choice to look for tech specialists outside your borders.
In addition to that, geographical proximity means that there are fewer time zone differences, if any, and it’s easier to travel for face-to-face meetings. For example, if a company is based in Germany, it can outsource a team in Poland.
Offshore outsourcing
Offshore outsourcing, on the other hand, is about hiring external teams from distant countries where labor costs are significantly lower. For instance, a company in the USA might outsource development to European countries.
This approach is usually the most economical because it takes advantage of the lower wage rates in these countries. However, it may come with various challenges. These can include time zone differences and communication issues.
IT staff augmentation
IT staff augmentation, also called an extended team, involves outsourcing a few external experts to work alongside your existing development team, usually on a temporary basis. They become a part of your team, and you remain in charge of the process, having full control over the software development project.
It’s a good solution for businesses that need to fill skill gaps or increase their team’s capacity in specific projects without long-term commitments. Learn more about the pros and cons of staff augmentation here.
A dedicated team
It is an outsourcing model where you hire an entire team of developers to do a certain scope of work. Dedicated software development teams perform tasks that your internal employees might not have the necessary skills for, or that your company doesn’t want to invest in developing.
Oftentimes, the dedicated team model also includes project managers, designers, and QA engineers. These specialists work independently from your in-house team, but remain aligned with your goals and strategies. Typically, they report to their PM or directly to the client.
Project-based model
This model is the most common type of software outsourcing. In this case, you delegate software development to an outsourcing company to handle the whole process, from planning to release. You define the project requirements, schedule, and budget. Then, an outsourcing partner takes full responsibility for delivering the final product. This approach works well for companies that need to implement a project without involving internal resources.
Full-cycle development team
A full-cycle development team handles every step of the product journey, from the initial idea and design to development, launch, and ongoing updates. Unlike a project-based model, this team continues working with you after the product is launched, making improvements and updates as needed.
They’re responsible not just for the product’s delivery, but for its future growth, making them a good choice for companies that need ongoing collaboration and support. This approach is great for projects that need regular updates or continuous development to stay relevant.
Evaluating an outsourced development partner
While the benefits an outsourced development team can bring are numerous, it’s important not to be blinded by them. Instead of jumping at the first opportunity, try to keep a clear perspective and carefully assess potential outsourcing providers. After all, you’d rather partner with a team that’s competent, reliable, and aligned with your business requirements.
Here are some important considerations to help you make the right choice.
Technical expertise and skills
Start by checking if the team has the necessary talents and expertise for your project. This would include proficiency in certain programming languages and frameworks. However, skills are not everything that matters. There are also problem-solving abilities to consider. How does the outsourced team approach complex tasks? Can they easily come up with effective solutions? What’s more, pay attention to their coding standards and commitment to quality. Is their code clean and maintainable? High-quality code is crucial in the development process.
Experience and portfolio
Another key part of the evaluation process is examining past work and portfolios. This will give you a clearer picture of what external developers can deliver. So, dive deeper into their range of projects, industry experience, and quality of work. Did they have similar projects to yours? If they’ve successfully completed similar projects, it’s more likely that they’ll deliver what you need.
Client testimonials and references
Client reviews turn out to be invaluable when looking for a professional development team. They offer a glimpse into what it’s like to work with the team, providing valuable insights that you won’t get from a portfolio or an interview. Not only do they shed light on the team’s strengths and weaknesses, but they also say more about the delivery, reliability, and overall satisfaction of their previous clients.
Communication skills
Good communication is the foundation of any successful outsourcing relationship. That’s why it’s important to evaluate the team’s communication skills at the very beginning. Oftentimes, external developers are not native speakers of your language. So, check if they have enough language proficiency to communicate clearly and effectively, both in writing and verbally. Moreover, find out what communication tools and channels they use. Are these compatible with those you have in your company?
Another thing worth checking out is how they receive feedback. Are they willing to listen and make necessary changes? Without being open to constructive feedback, you risk problems along the process.
Project management approach
To check how effectively the team can plan, execute, and deliver your task, you need to know what project management methodologies they use. Is it Agile, Scrum, or Waterfall? Make sure you also know the team monitors progress, handles documentation, and reacts to unexpected changes in the project.
Pricing structure
While pricing may not be the most critical factor in choosing the right team, it does matter. We all know that the team’s expertise and quality of work should come first, but it’s impossible to ignore how much the services cost. A clear pricing structure helps you avoid hidden costs, stay within budget, and get good value for your money.
Cultural fit
It often happens that the aspect of cultural fit is overlooked. Yet, it also plays an important role in determining the success of the outsourcing project. Pay attention to the team’s work ethics, values, and approach to work. Are they aligned with yours?
Security practices
Before making a decision, ensure that the outsourced team adheres to strict security protocols. This includes safeguarding sensitive data, using secure communication channels, and following industry standards. A security-focused team can help protect your project and avoid potential breaches or risks.
Scalability
A reliable outsourced team should be able to scale in response to the project’s requirements. Whether you need to expand the team for faster delivery or reduce the number of developers during slower phases, make sure the team is adaptable and can adjust to changing requirements.
Quality assurance processes
Quality is what matters in every software project. Ensure that the outsourced team has a robust QA process in place. Check if the team does regular testing, bug tracking, and validation.
Time zone compatibility
Consider how the team’s time zone aligns with yours. If there’s a significant time difference, ensure that communication will not be delayed and the project will continue to progress smoothly. The right balance between time zone compatibility and flexibility will help keep the project on track.
Tips for managing outsourced development teams
Once a company has decided to work with an outsourced development team, ensuring smooth collaboration is crucial. This applies not only to managers but also to how in-house developers work with their third-party colleagues. Let’s take a look at some simple tips that may improve communication and help you achieve your project goals:
Tip #1: Define leadership structure before the project launch—Although it might sound harsh, clearly defining who is responsible for what is key. This will help avoid misunderstandings and ensure that everyone knows their role.
Tip #2: Align the outsourced team with the project vision and goals—Starting a new project and ensuring that both the in-house and outsourced teams are on the same page may be difficult. That’s why internal employees should take the time to familiarize external staff with their processes and work environment and generally make them feel welcome.
Tip #3: Implement clear communication channels and project management systems—Clear and concise communication should be a top priority. After all, it’s difficult to successfully get projects done if miscommunication stands in the way.
Tip #4: Use project management tools for transparent organization—Asana, Basecamp, Monday, and Trello—there’s a wide range of tools that help managers and team members track progress, assign tasks, create deadlines, and set goals.
Tip #5: Treat outsourced developers the same way as in-house team members—Show the same respect and inclusion to build a cohesive team. Treating everybody in the same way fosters a positive and collaborative environment.
Tip #6: Supply comprehensive training resources—Make sure you provide the necessary training materials to keep everyone on the same page. The truth is that well-trained teams can work more efficiently and effectively.
Tip #7: Foster collaboration between in-house and outsourced teams—Because it improves the quality of work through diverse perspectives and builds trust among team members. So, encourage regular meetings or video calls where both teams can discuss updates, brainstorm solutions, and share knowledge.
Overcoming common challenges
Software development outsourcing is a great option when in-house teams can no longer handle their workload. Although outsourcing is a life-saver for busy companies with too much work to do, it sometimes seems a bit of a daunting project. Here are some challenges organizations can come across and advice on how to overcome them.
Communication challenges
Language barriers and the lack of face-to-face meetings lead to confusion and misinterpretations. To overcome this, companies should have clear documentation and frequent check-ins to confirm understanding.
Time zone management
Time zone differences don’t make the cooperation easier—scheduling difficulties and delayed responses cause disruptions. Organizations should consider using overlapping working hours and setting clear expectations for response times to make sure smooth communication is there.
Cultural differences, team cohesion, and motivation
Differences in work ethics, expectations, and holiday and time-off discrepancies are likely to affect team dynamics. To make communication smoother and foster a positive work culture, it’s good to incorporate regular virtual meetings and recognition of achievements.
Quality assurance
It goes without saying that keeping consistent coding standards and resolving bugs can be tricky. However, companies can implement thorough testing protocols and continuous feedback loops to ensure high-quality output.
Knowledge transfer and training
Onboarding and keeping skills up to date may be challenging with remote teams. To make it easier, organizations can use detailed documentation and encourage continuous learning through training programs.
Project management complexities
Project timelines might get complicated because of tracking progress and managing risks remotely. Adopting Agile software development or Scrum methodologies may be a good solution to improve task allocation, monitoring, and progress tracking.
Technology and infrastructure
Compatibility problems with software and tools may cause delays. To reduce interruptions, every team must have the required equipment and a reliable internet connection.
Data security and intellectual property
Outsourcing may give rise to data protection concerns. Strict confidentiality agreements should be established, and data protection laws should be followed.
Cost management
Outsourcing relies heavily on cost control. Hidden costs and budget overruns can cause problems, so clear contracts and regular cost checks are critical. When working with international teams, currency fluctuations can have an impact on costs. So, companies should consider fixed-price contracts or hedging to protect the budget from exchange rate fluctuations.
Ready to overcome outsourcing challenges? Choose Neontri
We all know that selecting the right outsourced team might be challenging and time-consuming. Neontri, however, can give you a helping hand. For over 10 years, we’ve been recruiting top talent and verifying technical skills. That’s why we understand the industry and can find top-notch candidates.
Our goal is to provide you with the talent you need to achieve your business goals. Whether you need to scale your team up or down based on project demands, we offer flexible outsourcing models such as staff augmentation, RPO, EOR, try and hire, or permanent placement. Make the process easier for yourself, and reach out to us today.
Conclusion
Choosing the best outsourced development team can be a complex decision, but it can also be a rewarding one. By carefully considering your needs and following the tips we outlined above, you can find a team that will help you achieve your project goals.
Paulina Twarogal
