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Three strategies for outsourcing software development effectively – Information Age

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Technologies such as artificial intelligence are promising to make organisations more productive by automating existing processes. In some cases, these technologies are replacing old processes. Nevertheless, human beings will always have a role to play. But putting together a team of software engineers capable of producing such innovation is no easy task. This is why many companies in developed countries have been outsourcing software development from abroad for many years, for example employing an offshore development centre or outsourcing to a software development company.
In this way they hope to expand their engineering teams. To some, this is an effective way to source scarce talent as well help stretch engineering budgets. To others, the outsourcing software development strategy backfires and is highly counter-productive. For example, a recent State of DevOps report found that low-performing DevOps teams were nearly four times more likely to outsource a part of the software development and delivery process than the highest performers.
We take the view that outsourcing software development is valuable and highly useful, when done right and for the right reasons. Otherwise, like any strategy that is implemented incorrectly, it could indeed stifle productivity. This article summarises several scenarios in which we believe outsourcing can work.
Is this the end of offshore outsourcing as we know it? With RPA spending on the rise taking over critical mechanical and transactional processes from the hands of people. I had a look at a recent survey by HfS Research and KPMG for some insights.
Businesses must always remember that they can’t outsource success. In other words, it’s important to treat outsourcing software development as a way to supplement the core work of a business and its central team. Companies should therefore focus first on building an internal team of developers that have extensive knowledge of the product line and possibilities for future product innovation, all while keeping the customer top of mind.
Organisations can then leverage outsourced teams to fill in the gaps. For example, outsourcing to a software development company can be an extremely effective way to increase the bandwidth and productivity of a business, enabling it to delegate work that still requires a high level of skill, but which falls outside the focus of the core developer team.
Today’s leading technology companies, including Google and Apple, have used this strategy to their advantages. A number of successful startups have done the same: Fab, AlertBoot, SeatGeek, Gliffy and others have all relied on teams of outsourced developers, outsourcing a software development company, for example, at some point to complement their in-house teams with specific projects or tasks.
Successfully implementing this strategy requires organisations to make smart decisions about when they seek help from outsourcing providers. When a company has invested in critical and knowledgeable internal IT talent that knows the business, yet needs to accelerate engineering bandwidth and time to market, outsourcing with the right partner as a way to complement a core team can prove highly productive.
Igor Tkach, CTO at Daxx, looks at the global software outsourcing trends, and how distributed teams can empower digital transformation
Software engineers vacancies are among the hardest positions to fill worldwide. But this talent shortage isn’t just a matter of quantity; quality matters more. It has become increasingly difficult to attract and retain quality developers, Forrester predicts employers could end up paying 20% above market rates for the talent they need.
By looking to outsource a portion of their development process, companies can find and secure the specialised talent they need at a much lower cost — without sacrificing quality. A number of countries throughout Latin America and other parts of the world have recently begun churning out a growing number of talented engineers. Such outsourced developers often specialise in skills that aren’t available or are too expensive to hire locally.
Additionally, even with an in-house team, certain tasks or projects don’t always align with any team member’s expertise. “In-house tech teams…will have a nuanced understanding of your company’s product but may only offer broad know-how,” writes David Semerad for Forbes. “This is fine for day-to-day operations but could prove to be problematic when a more specialised skill set is required for certain projects.”
As such, outsourcing offers a cost-effective and productive alternative which can ease the search for developers by providing access to a larger talent pool. Rather than wasting months trying to hire and train a top-notch team of in-house developers, companies can turn to outsourcing teams, outsourcing to a software development company, for example, to start new projects immediately with an equally skilled, and even more specialised group of engineers.
Adding external developers can also help improve current development processes, as they can offer valuable advice and a fresh perspective.
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Nowadays, close communication is critical for the success of any software development project. This is exactly why the agile and DevOps methodologies have emerged and remained in use. These frameworks enable close collaboration between team members to quickly learn from their mistakes, and rapidly iterate and improve their software products.
However, working closely together and reaping the corresponding productivity benefits can easily be complicated by employing an outsourcing team. As explained in the recent State of DevOps report, aptly summarized by Caroline Donnelly, the main reason outsourcing negatively affects productivity is that it “tends to result in portions of work being batched together, which means it takes longer to complete and get the resultant code into production.”
This is where the idea of “nearshoring,” or offshoring development to nearby countries, can help.
Traditionally, when outsourcing software development, work to distant countries, poses an immediate problem for communication given the extreme time zone differences. This is why an increasing number of US companies, for example,  have begun to look to nearby countries in Latin America, in a process called “nearshoring,” for their software development outsourcing needs. For Western European companies, nearshoring options may lie a little to the east, such as nearshoring to Poland, or nearshoring to Lithuania.
Nearshoring allows companies and their in-house developers to work with others in close geographical proximity, giving them the advantage of being able to remove barriers to communication. As a result, this type of software development outsourcing can enable a working process that isn’t based on batched production, but rather on a continuous interaction and shared status of a project that allows the local client and offshore team to solve problems together, iterate a solution together so that they can get to market faster.
So, while the risks of outsourcing outsourcing are clear, they can be overcome. By using outsourcing strategically — as a way to supplement in-house developers, gain access to a larger talent pool, and improve communication and collaboration with a nearshore team –organisations can boost their productivity and build a technology that finally does the same.
Alejandro Vásquez is the VP of Business Development at PSL.
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