Are you considering outsourcing your software development? Our guide will provide you with all the important information you need to decide on the best solution!
Your company is a “tech company” – at least in the broadest sense and regardless of which sector you operate in. Software solutions are just as integral a part of business operations in manufacturing and industry as they are for a real estate agent.
It is becoming increasingly common for companies to require individual software and develop it themselves. After all, the solution is guaranteed to meet your requirements or those of your customers and you are not dependent on a software provider.
Sounds like a sensible plan at first, but it has a few weak points: Internal IT capacities are often fully utilized, good developers are hard to find (keyword: shortage of skilled workers), specific know-how is often lacking and the whole thing is not necessarily cheap.
Outsourcing is an efficient solution for software development. At least if you go about it the right way. We will now show you how this works.
What is outsourcing software development?
Outsourcing means that you implement software development with the support of an external software development partner. This collaboration can be short-term or project-related, as well as long-term. The partner provides you with the missing expertise and additional capacities, while you minimize your business risk and effectively save costs.
External software development: outsourcing in various models
If you are considering outsourcing your software development, you can choose from various models. In addition to the question of how many external developers you need, the location is particularly important. We show you an overview of the various options for external software development:
Software development with freelancers
One obvious solution for software outsourcing is to work with freelancers. This is true as long as the projects are time-limited and easy to manage. However, as soon as things become more complex, freelancers quickly reach the limits of their capacity and expertise.
In order to scale up, you would therefore have to 1. find and 2. manage various freelancers who have probably never worked together as a team before. In these cases, you are better off with a development partner who can provide an entire development team.
| Advantages | Disadvantages |
|---|---|
| High flexibility | Not scalable |
| Suitable for short-term bottlenecks | Management overhead required |
| Dependent on one person |
Offshore teams for software development
Offshore outsourcing is probably the best-known option for external software development. In this case, you outsource the development via a provider to a team that is geographically far away, usually on another continent. The advantage is that this gives you access to an international talent pool and sufficient capacity for complex and long-term projects.
However, offshore software development is also the reason why many companies are skeptical about outsourcing. Face-to-face meetings are virtually impossible, different time zones make project management more difficult and (work) cultural differences hamper collaboration. Political stability is also not a given everywhere.
| Advantages | Disadvantages |
|---|---|
| Access to a large talent pool | Geographical distance & time zone |
| Lower costs | Cultural differences usually present |
| Political stability not always given | |
| Communication in English | |
| High management overhead |
These are all reasons why nearshore vs. offshore nearshoring solutions are increasingly in demand.
Outsourcing to a nearshoring partner
The main difference between nearshore and offshore is the greater geographical proximity. In the DACH region, nearshoring often takes place through cooperation with European development teams. However, even here there are sometimes major differences between the countries, which is why the right choice of location is crucial to success.
For example, we opted for a location in Slovakia because the country has a stable economy and wage development compared to others in the region, the work culture is compatible and it has an excellent network of specialists. So nearshoring has some advantages if you know the important criteria and choose the location accordingly.
| Advantages | Disadvantages |
|---|---|
| Access to a large talent pool | Sometimes high job-hopping rates |
| Lower costs | High demand for ICT workers |
| Cultural proximity & compatible work culture | Communication in English |
| Remote, but on-site presence possible | |
| High level of training |
Find an onshore team in the DACH region
Last but not least, there is onshore software development. However, it is obvious that this outsourcing model is problematic – again, the keyword here is shortage of skilled workers. Because onshore means that the team comes from the DACH region. But where there is already a shortage of young talent, there is not much to be gained. In addition, the costs are often exorbitantly high, even compared to the total costs of a permanent position.
On the other hand, it makes a lot of sense to rely on an onshore partner who offers nearshore software development. This gives you a direct contact person with whom you can communicate in German and who in turn has access to a talent pool that you need to scale your project.
| Advantages | Disadvantages |
|---|---|
| Cultural background & work culture | Limited talent pool & skills shortage |
| On-site presence easily possible | Higher wage level than near- / offshore |
| No language barriers | |
| High level of training |
In-house vs. outsourcing:
Which strategy is right for your company?
Of course, you don’t have to implement software development via outsourcing. Software sourcing can take place via various channels and of course you can also implement your project in-house. Which solution is better for you depends on your individual problem.
If you are not quite sure yet, you should ask yourself the following three questions:
- Do you have the know-how and experience in-house to implement a complex software project?
- Can you fill all the necessary roles in a team and do your employees have free capacity?
- To what extent do you need to be able to scale up or scale back capacities after the end of the project?
One thing is clear: outsourcing allows you to compensate for missing resources and knowledge gaps while remaining as flexible as possible. For example, you can decide for yourself whether to outsource individual roles, a software team or the entire software department. Above all, it is important that you take stock honestly so as not to jeopardize the success of the project.
Advantages & risks:
What you should know before you make a decision
Software development via outsourcing has many advantages for your company, but there are also certain risks that you should be prepared for. Let’s look at the benefits first:
- Gain resources or lack of expertise in the short term
- Faster go-to-market times & flexible scaling of software projects
- Access to an international talent pool without your own personnel costs
- Easily calculable cost structures & less business risk
- Relief for your own IT department with simultaneous knowledge transfer
- Less management overhead for more efficient project management
On the other hand, software development in the outsourcing model also means that an external partner is involved – and that always raises legitimate questions. So let’s take a look at some typical objections and how they can be overcome:
| Risk | Solutions |
|---|---|
| Communication problems & language barriers | Selection of a location with cultural proximity, use of chat tools & translators – experience shows that technical expertise is more important than flawless German |
| Competencies & quality of software development | Detailed control & selection criteria according to technical suitability as well as quality control should be provided by the provider |
| (Data) Security | Partner should be transparent & convey trust; nearshoring location in the EU offers greater legal certainty than offshore solutions |
As you can see, the decisive factor for successful software development with an outsourcing partner is, above all, the right choice of partner!
7 tips:
How to make the right decision when choosing a software development partner
To help you make the right choice, we have put together some tips for you on how to find the right partner if you want to outsource your software development:
- Analysis & advice: off-the-shelf outsourcing solutions only work for very few companies. Make sure that a potential partner offers you an individual analysis and advice on your problem.
- Scalability & flexibility: This is not just about a development partner being able to provide you with a certain number of developers – the team provided should also be available for as short or long a period as necessary.
- Agile software development: Outsourcing is particularly (cost) efficient if you implement your project pragmatically, across departments and using agile methods. Look for a partner who has mastered this approach.
- Cross-functional team: Your development partner should be able to cover all the roles you need for your project, from software developer to project manager or DevOps engineer.
- Clarify location: Where the development team is based is not only important when it comes to on-site meetings. Cultural proximity, a similar work ethic and being in the same time zone are also crucial for smooth collaboration – which brings us back to nearshoring.
- Cost structures: An individual software project has an individual cost – a trustworthy partner will provide you with a transparent cost plan in which you can see exactly how much is incurred for which service.
- Case studies & references: Let us show you meaningful or industry-relevant case studies and explain exactly what criteria your development partner uses to assess the competence of their team members.
Efficient software development & flexible outsourcing with Riwers
With Riwers, you gain a flexible development partner who offers you software outsourcing tailored to your individual requirements – regardless of whether you need short-term support from a software team or want to outsource a software department in the long term.
Thanks to our two locations in Switzerland and Slovakia, we can also provide you with all the benefits of nearshoring directly on site if you wish. All our team members are selected according to specific criteria and fit seamlessly into your communication, work or code structures.