Outsourcing vs Offshoring: How Do They Differ, and What is the Right Option for You?
Updated March 3, 2023
So you need a software development service? Hiring an in-house development team is not an option; it is more expensive and time sufficient. Secondly, you require guarantees and a high-quality app. What to do? The most obvious thing that comes to mind is to entrust outsourcing. Outsourcing software development can be done by a local IT company or a team from other countries. The second option is often called offshore.
What is the difference between offshore and outsourcing development? Outsourcing vs offshoring — what is better to choose? Let’s figure it out.
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Outsourcing and its benefits
First, let’s find out what outsourcing is and how it works. Outsourcing is when you hire a developer or a team of developers. They are not part of your company’s staff. Instead of looking for and adapting new employees and paying them a monthly salary, you delegate several tasks to another company. Another variant is just to ask a company for full app development service.
Read more about outstaffing vs outsourcing using a link.
Why do people choose to outsource? Firstly, outsourcing mobile development saves time and money. To start a startup, you need to develop an MVP urgently and show it to investors as soon as possible. The startup owner does not know much about technical issues; the owner only has a general idea of the project.
Moreover, the entrepreneur is not sure that the project will take off at all, which means the startup can promise little to the employees. Also, startups usually have a limited budget. Add recruitment services, taxes, and employee bonuses—it takes a tidy sum, not to mention the effort it takes to get the team together from scratch.
Software outsourcing services make life much easier: you decide a contractor, explain your idea to the project manager and conclude a contract. Prices in this contract are likely to be more profitable than when hiring your employees.
Read more about outsourcing mobile app development in 2023.
The entrepreneur must pay a salary to the in-house developer and give a specific social package. No matter how busy the employee is this month, he gets paid anyway. Meanwhile, outsourcing development allows businesses to adapt the budget to real challenges if we talk about offshore versus outsourcing.
In addition, it sometimes takes more than a month to recruit staff and build up workflows from scratch in a new team.
When you give the software development to an outsourced, you delegate it to the team, in which
- people have already worked together
- are well versed in your question.
Of course, it’s only going to be like this if you work with a good team.
Outsourcing Challenges
Finding a software outsourcing service provider seems like a pretty cool solution. However, there are risks in everything, and outsourcing is no exception.
Fortunately, they can be reduced, and in the case of outsourcing, it is within your power. We have collected the most common outsourcing risks with tips on how to avoid them.
Incorrect selection of IT processes
This challenge can lead to a loss of competitive advantages of the enterprise. We are talking about the essential tasks unique to business IT processes—in any case, they should not be given to IT outsourcing. What can not be said about profile tasks—they are just great for handing over to the contractor. This challenge can be avoided by detailed business analysis and description of your goals.
Uncontrollable result
You do not manage the process in real time and are forced to essentially trust an unfamiliar team of professionals. And it’s not always possible to check their results and cases. In addition, there is a human factor: failure to meet deadlines and lack of regular information about the work process. Note that such shortcomings are inherent only if you entrust freelancers or companies with unconfirmed reviews and case-studies.
Outsourcing partner doesn’t know all nuances of the niche
The outsourcing partner may not know specific details that are important for your field. Accordingly, it does not consider them in the development, because of which the result suffers. In this case, you need either active personal participation in the project of the customer and his expert explanations on functional design, design, etc. Or you can check the outsourcing companies’ portfolios. Do they have similar cases?
Concerns about information protection
But just so you know, giving essential data to a third party increases the likelihood that it might fall into the wrong hands. So what to do? Yes, there is an NDA and respectful outsourcing partner.
Now let’s describe features of the offshoring model. What is the difference between outsourcing and offshoring?
Offshoring and its benefits
Considering the growing tech talent shortage, which has already reached 40 million by 2039 and will increase to 85 million professionals, offshore development is often the only way to hire experienced developers to launch the products. And the more qualified the specialist, the higher chance to hire a developer in another country for a good price and in good time.
Access to a global talent pool
Hiring developers from developed countries is more expensive than others, as their skills are more in demand. For example, in the United States, there are more than 250,000 job opportunities for developers, which is growing.
Developers are not enough for all new startups in one country. Offshore development opens doors to developers with a lot of experience. In addition, offshore partners have experience in international projects to develop mobile applications for other customers; they understand and accept the rules of this game.
Inspiring innovation and quality
As offshore companies operate in the global market. They are forced to constantly improve themselves and learn new technologies and tools to keep up with competitors and not get lost in the market.
Delegation and optimization of staff
Another company handles all processes. You do not need to spend time monitoring and tracking staff. It allows time for other, more important tasks and not to be heavily involved in the project.
You do not have to support additional employees and pay office, electricity, and other expenses. In addition, optimized taxes because you are not cooperating under an employment contract.
Small cost for high-quality developers
Not everyone has the opportunity to hire and serve a team of talented and experienced developers. Through offshore software development, you can save internal resources and increase productivity. For example, an American entrepreneur wants to start a development team in Poland.
Calculating all costs, including a workplace and wages, is only half the cost if you create an in-house team. The reason is low living standards in developing countries.
Time for other projects and recruitment
Offshore development allows you to focus on the core business strategy instead of worrying about the management of the team, the technical aspects, and the process, which is difficult to understand. It will help the company focus on the project without extra loading.
Recruitment and staffing are becoming more complex as labor protection laws are tightening, and the role of trade unions and various platforms where employees rate their employers is increasing. In these circumstances, hiring a team and firing them quickly when the product is created can be pretty troublesome.
Offshore outsourcing almost eliminates this problem by providing you with the best professionals from around the world that you can hire quickly and fire just as quickly when their job is done.
You do not need to worry about insurance, social packages, and various social and tax payments. You hire a contractor (offshore development company), give it a task, control the development process and take the finished result—as quickly and simply as possible. So, if you have established the process of outsourcing development offshore, then hiring a developer and designing the job will take you a few days.
Corporate flexibility
If you spend a lot of time and money on a software development project and thereby divert essential resources from your core activities, operational failures such as lack of budget and the frequent absence of meetings could have catastrophic consequences for your business.
And even if these kinds of problems do not lead to critical mistakes, they can still severely limit the development of your business and narrow the horizon of available management solutions – which will make your business more fragile. Working with an offshore development company can save you from such problems and increase the flexibility of your business.
Offshoring Challenges
Still you need to be ready for the challenges when you choose an offshoring model.
Location and Time Zone
If we talk about factors to consider when outsourcing software development, it is the first challenge that comes to mind. Contacting a team in a different time zone may be difficult, so make sure your working hours are the same.
Level of English
English is the universal language of the IT industry. However, the level of skills varies in different countries. It is better to select a development company than a freelancer—usually, they have English-speaking managers.
Cultural differences
It is essential to understand the cultural characteristics of the country you are outsourcing. It will help you to cope with the differences. Frequent communication and organized teamwork are the main factors to be considered.
Outsourcing vs offshoring. What model to choose?
Now you know all about these two models. Firstly, your partner has the experience necessary for the timely implementation of the project within the budget, which will reduce the time of entry into the market and help recoup investment much faster. Secondly, the outsourcing model allows you to quickly add to the development team as needed or hire people with particular (rare) skills. It allows you to easily and quickly scale development in the desired direction. And third, when hiring an offshore developer, you can choose any IT outsourcing model best suited to your business. Let’s compare and describe the difference between outsourcing and offshoring.
When do you need an outsourcing model?
The choice always depends on the specific project
Outsourcing will be the most beneficial solution if you need a quick start, lack technical expertise, and the budget is limited. It is a flexible way of cooperation: you can outsource the implementation of some features or the whole development. Custom application development allows you to get a working product and not hire developers quickly. The main thing when working with outsourcing companies—is to find a decent contractor.
Get rid of the resource hole
Imagine that the entrepreneur is developing a web application and wants to release it in four months. It has two React Native developers. But they support the current project in the post-release phase and can not deal with the new application. In this case, you can contact the company to develop the product quickly and get a high-quality result.
Get funding
Outsourcing development helps to develop the product’s first version (MVP) and release it to the market. Business angels and other investors are more willing to invest in startups – when they see a ready-made application, not just an idea. Investments help to develop the product, eliminate errors, and complement its functionality.
Solve a non-core problem
Imagine that the startup has HTML/CSS developers. But for the project, you need to develop a mobile application. In this case, outsourcing will help to pass the task to a specialist who will create the correct application. At this time, the in-house team will deal with other issues and save time.
When do you need an offshoring model?
If you have a long term project where you need a high-quality developer, it is better to choose an offshoring model. Hiring an offshore development company to develop the software you need allows you and your team to focus on core activities and not dissipate your human resources into multiple tasks.
It often leads to a marked decrease in the quality and speed of work. Your offshoring partner will take over all development tasks while you focus your internal resources on more pressing or valuable tasks, such as training your team or selling.
An excellent offshore strategy helps companies expand their business functions worldwide. Take customer support. You can have a head office in the United States and several support offices in important regions for your company. They will have no communication problems due to language or cultural barriers.
In addition, you can use a mixed development model when internal and remote commands overlap (so now run most prominent IT companies: Apple, Microsoft, Google, IBM, etc.). If two teams work eight hours a day, you do twice as much daily work, and you get the product on the market much faster.
What do you need to get a high-level software development service?
Our team prepared for you a special check-list ‘’How to find a reliable outsourcing partner and how to get a high-level software development service’’.
Set goals
You need to define what you want to achieve and set clear goals for candidates so the team can understand what tasks they will need to solve.
Choose the right candidate
When looking for an outsourcing partner, you must evaluate their software and hard skills. Learn their previous work experience and how they resolve conflicts and interact with others. Do they have experience in your industry?
Stay informed
Cooperate with the offshore team to learn about the current progress of the project and any problems or obstacles. Success in maximizing participation when staff is fully responsible for problems.
Give the outsourcing partner as much information as possible about the product
In addition to the technical assignment, provide examples of designs you like, tell more about your needs, and explain what function should perform the required app.
Indicate deadlines
It is best to divide the process into stages and negotiate a date for each of them and the completion of the project as a whole. This way, you can control the work process and get the finished project on time.
Establish feedback
You need to establish feedback while the development process so project stages do not hinder the whole process. Thus the project will be accelerated, and the probability of obtaining a qualitative result will increase.
So you read and understood that you want to cooperate with an offshore outsourcing team? Glorium Technology will be happy to help you: we will allocate a team for your project and launch MVP from scratch in three months. Do not worry about the technical assignment and other details: tell us in the form below what your idea is, and we will find the optimal solution to implement it.
