Software and IT Solutions – Should I Develop in-House, Buy or Outsource?
This is a question that has been asked a billion times and yet you can find billion other business folks wondering about it all the time. Many modern day entrepreneurs see the advantages of outsourcing development work overseas, while there are others who had to stay away from outsourcing due to terrible past experiences. But the question remains — should you outsource development to an offshore IT company or it’s better hire resources and develop in-house?
The tricky thing about software solutions is that there are usually 3 distinct ways in which an organization can achieve the intended business goal.
- The efforts to build the intended product can be outsourced to another software services company.
- An already available product that does “most” of the intended features the target product can be bought as an off-the-shelf solution.
- Or the organization may choose to hire a team and develop the intended product, in-house.
The typical reason why organizations discard the middle option above is that it is usually difficult to find a product that already does “most” of your business requirements. And those that come close, need so much customization and extra effort that it usually doesn’t make much business sense to bother about them.
That leaves us to either “build it in-house” or “outsource to another IT services company“. In this article, we are going to list top 7 reasons why most clients and organizations decide to go for outsourcing.
1) Reduced Overhead Cost
This is one of the major factors that has kept outsourcing alive amidst of all those naysayers. For clients who are from the USA, UK or even Australia, the whole set up for an in-house development team can cost them a fortune. Add to that the factor of uncertainty involved and it can be a pretty strong reason not to build in-house. Outsourcing such development projects, on the other hand can avoid such huge investments. By outsourcing, client organizations just need to pay for product development cost and not for any other operational, technological or educational expenses.
2) Reduced Cost of Labor
Talking about operational cost, labor arbitrage is often seen as the most obvious advantage of outsourcing. Many entrepreneurs believe that if you can get more productivity out your expense by getting the job done elsewhere, then it doesn’t make sense to pay higher for someone who is local.
This is often criticized by many but the fact remains that many offshore development companies are offering IT services outsourcing for only a fraction of the on-site cost. However it is always important to realize that offshore development, in certain contexts, may require unforeseen and extra management and traveling expenses, which can in turn quickly add up, making the overall project cost higher than originally expected. But this can be easily avoided by picking a reputed IT services provider for your outsourcing needs and proper, clear communication is the key to your success.
3) Good Riddance from Long Term Commitments
This one is probably the most underrated advantages of outsourcing. Most organizations go for outsourcing because of the ability to hire a team of professionals on a project on “as needed basis”. This gives them the freedom from committing long term and paying any such associated costs like medical insurance, gratuity, annual bonus etc that are often associated with hiring an in-house team.
4) Better Productivity due to Diverse Geographical Presence
Though at first this may sound like a paradox, many entrepreneurs actually find that outsourcing offers them to manage productivity better. In a typical outsourced project the parent team usually resides at a geographical location that has a god amount of time zone difference than the offshore company. Thus, this overlapping of time zones are usually exploited by smart client managers who use their offshore division’s non-working hours to match their own working hours so the product development effort’s feedback loop is maintained as short as possible, thus speeding up production.
5) Freedom from Tools and Technology License Woes
Today there are many software development tools that are available for free and do not need any permission for distribution. But there exist many other tools and technologies that do require expensive license fees for usage and distribution. By opting for outsourcing, organizations need not worry about procuring the right tools and technologies for development and their respective licensing costs.
6) Freedom from Infrastructure and Resource Maintenance Woes
After project’s completion, maintenance of development and back-end infrastructure and resources often become huge liabilities; both in terms of required resources as well as amount of money. But this setback is easily avoided when a company outsources the project to an offshore IT team.
7) Outsourcing Saves Time, Money and Resources
While management typically have the best intentions, in some cases in-house projects can lead to delayed deadlines, wasted money of investors and wasted efforts. Often in such circumstances, companies panic and try everything to fix the project only to break it even more. But by outsourcing the project with a milestone and delivery-based pricing model all these uncertainties are avoided.