The outsourcing industry is growing and is expected to show continued growth. Start-ups as well as established companies of different sizes outsource their product development. According to the State of Software Development Report (2017) published by Coding Sans, 56 % of start-ups outsource their software to an external partner (a freelancer or an outsourcing company). The Global Outsourcing Survey conducted by Deloitte in 2016, in which 85% of respondents were from organizations with over $1 billion in annual revenues, states that 31% of IT services have been outsourced.
Some of the biggest tech giants – Skype, What’s Up, GitHub, Basecamp, Slack – relied on outsourcing services. Alibaba, now referred to as the “Amazon of China”, is another example how outsourcing can help a small company build a multi-billion business. Google is also reported to have relied on outsourcing in its earliest days. Even now they still outsource some non-core activities like software development, IT infrastructure management and maintenance to IT services companies.
Before you make a decision, take a look at the reasons that prompt other companies choose outsourcing:
Source: Deloitte’s 2016 Global Outsourcing Survey
Most projects are outsourced primarily for budgetary reasons. It is much more cost effective to trust an outside partner to build your product than hire and keep your own in-house development team. It has been estimated that a company can save up to 60% in operational costs.
Moreover, it saves not only money but also time. Outsourcing can lift the heavy work for you of devoting time and resources to product development and allows you to allocate them to your business development. In addition, if time is of the essence for launching a new product or developing a tool to solve problems or optimise your business, the “do it for me” option is the obvious choice.
Needless to say that when you do not have the infrastructure or staff for a particular task, outsourcing can be a wise business decision. One of the perks is that you will not have to address every challenge or problem encountered on the way. You can focus on improving the efficiency of your business or expanding your enterprise in new directions.
Last but not least, we are all well aware that there is a shortage of IT professionals in developed countries, particularly in the United States and Western Europe. It might be a good idea to look for talents in countries where there is a larger pool of professionals.
It is only natural to have doubts about outsourcing. Many managers are afraid that they will lose control of product development or the whole project. However, you can retain full control by establishing proper work and communication procedures. Others are concerned about company’s privacy and security. This issue can be resolved by finding a trustworthy outsourcing partner and ask them to sign a solid non-disclosure agreement. You may also worry whether the team working on your project is knowledgeable enough to deliver a high-quality product. If you pick up a reputable outsourcing firm, it will guarantee you that they will recruit top talents with experience in your industry. Furthermore, you may provide additional training to ensure that the team is acquainted with all your requirements and processes as well as with your company culture.
Although most companies outsource product development mainly to lower costs, it certainly provides many other advantages, such as flexible staffing, skilled expertise, reduced turnaround, etc.
Deciding to outsource product development may not be an easy task and might seem a little bit risky. Notwithstanding, it offers a plethora of benefits, and risks can be avoided by explicitly communicating your expectations with your provider and setting out guidelines.
If well planned and strategically executed, outsourcing your product development can be one of the best business decisions for your company.