Outsourcing Software Development: How to Optimize Costs with Remote Cooperation

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Key Takeaways

• Outsourcing serves as a cost-effective solution for businesses lacking an extensive in-house development team, streamlining project durations and representing a widespread practice across industries.
• Around 30% of surveyed GBS organizations prioritize outsourcing as a primary delivery model.
• Outsourcing software development offers benefits such as cost control, rapid solution delivery, efficiency enhancement, risk mitigation, and heightened security.
• Global companies like Google, Skype, and US Health Portal have successfully leveraged software development outsourcing to enhance their products and services.
• The IT outsourcing market is expected to grow from $129.13B in 2024 to $171.5B in 2028 with a CAGR of 7.4%.

In a world led and powered by technology, staying competitive means constantly adapting to evolving trends. Software outsourcing emerges as a strategic solution for companies aiming to manage costs and accelerate development.

Both startups and established businesses opt for outsourcing to tap into global talent pools and maintain the primary service focus. According to Clutch’s findings, 83% of small businesses intended to either maintain or boost their investment in outsourced business services in 2023.

Acropolium has matched talented, dedicated teams with numerous great businesses from different industries through the last 20+ years. In this article, we are delving into the current state of software IT outsourcing, sharing practical strategies for implementation and our clients’ success stories.

What is Software Development Outsourcing?

Software development outsourcing involves enlisting a third-party provider to manage software development tasks. These services include creating custom software for internal use, overseeing business operations, and developing and sustaining client products.

While businesses can handle these tasks internally, it takes skilled developers and resources, leading to higher costs and longer project durations. Outsourcing offers a viable solution for companies lacking an extensive in-house development team, representing a widespread practice in various industries.

Unlike outstaffing, the outsourcing model implies the vendor’s full responsibility and control over the development process and product outcomes. As a client, you oversee progress on the desired level of control and validate decisions.

Global IT Outsourcing Market

In recent years, the software IT outsourcing market size has shown robust growth. As observed by Deloitte, approximately 30% of surveyed GBS organizations prefer outsourcing as a key delivery model. Thus, the market is projected to increase from $129.13 billion in 2024 to $171.5 billion in 2028 at a CAGR of 7.4%.

6 Benefits of Outsourcing Software Development

Building software in-house can be costly and time-consuming since not every business possesses the necessary technology and skilled developers. Cooperation with a reliable software development outsourcing company offers enhanced product quality and improved customer service with a competitive advantage.

However, there are many more reasons to outsource software development, from faster time to market to risk minimization.

Access to Global Tech Expertise

It’s challenging to constantly keep up with the latest technology trends and skill requirements internally. Hiring an experienced company grants access to a global pool of skilled software architects. Software development outsourcing ensures top-notch quality by leveraging global expertise cost-effectively.

With a third-party agency, you can find backend developers or DevOps engineers with the desired proficiency at a decent rate. Moreover, you can easily augment your team with narrow experts like SRE specialists with guidance and training to your existing members.

Cost Efficiency

Creating an internal software team entails considerable costs, including recruitment, training, and salaries. In contrast, outsourcing offers cost-effective solutions, allowing businesses to pay only for the services they need.

Companies can ensure quality while reducing expenses by hiring a dedicated team and turning to software outsourcing services for specific project components.

Faster Time to Market

Outsourcing software development accelerates time to market by enabling simultaneous project work, leading to quicker product launches. It provides valuable feedback for rapid adjustments, keeping companies competitive. As a result, cost savings from staff and overhead expenses enhance profit margins.

Expertise from the outsourced developers ensures high-quality project completion while allowing companies to focus on core competencies, enhancing customer service and competitiveness.

Focused Strategy

Software development outsourcing provides the time and focus needed to drive business growth. By relieving internal resources from tasks outside their expertise, you can allocate them to achieve key business objectives.

This is a precious advantage when it comes to legacy systems modernization. As your partner works on upgrading your tech assets or migrating the software to the cloud, they will ensure you can still perform your core tasks with little to no interruptions.

Scalability and Flexibility

Outsourcing short-term projects is more practical than hiring full-time developers internally, especially if software development isn’t your core business. For example, if you need to develop an app but don’t have ongoing projects to keep a full-time developer busy, outsourcing offers flexibility and scalability.

You can regulate the size of your development team based on project requirements and scale it as needed, saving significant costs.

Minimized Risks

Outsourcing IT development mitigates risks by avoiding heavy investments in infrastructure, recruitment, and maintenance, which is advantageous for small teams and tight budgets.

Additionally, it reduces the chances of technical challenges and errors, as the outsourced team possesses the necessary skills and knowledge, minimizing project delays and customer dissatisfaction.

Software Development Outsourcing Challenges & How to Overcome Them

When considering software development outsourcing services, you should be aware of the risks such cooperation might pose if you skip vendor evaluation. Different outsourcing vendors offer varying cooperation terms to assure you their processes are established enough to overcome the following challenges.

Communication Barriers

Differences in language, culture, and time zones can lead to misunderstandings and delays. To address this issue, you need to establish regular communication protocols and leverage collaboration tools to bridge communication gaps.

Quality Control

Ensuring consistent quality across geographically dispersed teams can be challenging. That’s why your outsourced software development company should implement robust quality assurance processes with regular reviewing practices.

Security Risks

Outsourcing may expose sensitive data to security threats and breaches. To safeguard your digital assets, seek a vendor that follows stringent security protocols, including data encryption, access controls, and regular security audits.

Lack of Control

Limited oversight and control over outsourced teams may impact project management and delivery. In IT development outsourcing, the vendor and the client must foster an environment of agile methodologies. This includes regular progress updates and performance metrics to maintain control and visibility.

Hidden Costs

Hidden expenses, such as management overheads or additional resources, may unexpectedly inflate project costs. To minimize the risk of financial overruns, clearly outline the project scope and budget.

Also, pay attention to outsourcing partners that are transparent with their development rates and offer flexible, subscription-based forms of cooperation.

Successful Software Outsourcing Case Studies from Global Leaders

The Clutch’s software development outsourcing statistics say that the global need for remote cooperation is primarily driven by reducing expenses and accessing industry experience. And there are lots of impressive cases where businesses uncover the advantages of outsourcing software development.

Google

Google, with its vast workforce of over 178,000 employees, still faces significant workloads, prompting it to utilize outsourcing. For instance, its AdWords project, crucial for revenue generation, involves over 1,000 outsourced representatives from 60 countries.

This reliance on outsourcing has grown, with contractors outnumbering direct employees in 2018, highlighting its importance, especially for AdWords, a tool reaching over 90% of internet users.

Skype

Skype, founded in 2003, outsourced its development to an Estonian software development outsourcing company, resulting in the widely recognized communication platform we know today. With innovative features like video chat and instant messaging, Skype became indispensable for individuals and businesses. Its success was evident when eBay acquired it for $2.5 billion in 2005, followed by Microsoft’s acquisition for $8.5 billion in 2011.

US Health Portal

The health portal encountered challenges finding the right software vendor to realize its vision, as previous attempts failed due to skill shortages. To address this, they engaged with an outsourced software development company to design and implement their system, ensuring alignment with their specifications. With the new system, which serves over 5,000,000 users annually and is growing, clients can focus on their core medical business while third parties handle the technical aspects.

Finding The Right Software Outsourcing Company

To successfully outsource software development, you need to thoroughly evaluate vendors first and set clear goals and specifications for your future product. Here’s a short list of essential steps you should take when looking for software outsourcing solutions.

• Define your requirements. Clearly outline project specifications, goals, scope, timeline, and budget upfront to guide potential vendors accurately.
• Do some research. Explore outsourcing options extensively, seeking verified vendors with relevant experience, reputation, and positive client feedback mentioned on reliable reviewing platforms like Clutch.
• Evaluate vendor capabilities. Assess vendors based on technical expertise, industry experience, team size, and available resources to ensure alignment with project needs.
• Prioritize transparent communication. Choose a software development outsourcing company with transparent communication channels and responsiveness to inquiries for smooth collaboration.
• Consider cultural fit. Seek firms with similar values and work ethics to foster a positive working relationship.
• Outline project management processes. Establish clear milestones, deliverables, and reporting mechanisms to align expectations.
• Review contracts carefully. To ensure clarity and agreement, investigate contract terms, including pricing, intellectual property rights, and dispute resolution.
• Monitor progress regularly. Stay involved, schedule check-ins, and address issues promptly to keep projects on track.
• Foster collaboration. Treat vendors as strategic partners, nurturing trust and cooperation for mutual success.

Why choose Acropolium as a reliable software outsourcing partner?

Acropolium is a seasoned software outsourcing partner with a proven track record of delivering secure, GDPR-compliant SaaS, web, and app development services. With expertise spanning industries from healthcare to fintech, we follow ISO-certified processes to ensure quality and reliability in every project and consultation.

Our proficiency in serverless solutions guarantees efficient and scalable deployments, whether you need to outsource custom software development or legacy system modernization. Acropolium Case Studies Through years of delivering bespoke software solutions and tech consultations, we are proud to share the success cases of our trusted partners and clients.

Acropolium Case Studies

Through years of delivering bespoke software solutions and tech consultations, we are proud to share the success cases of our trusted partners and clients.

SaaS-based Live Event Streaming Platform

Our client was looking for a software outsourcing company to develop a live-streaming app enabling easy management and broadcast of events to a global audience. To enhance their services, they opted for a SaaS-based product with upgraded features, emphasizing the need for robust payment systems.

Solution

• We optimized platform performance for scalability during peak usage, ensuring a seamless experience.
• Robust security measures with encryption and access controls were implemented to protect user data.
• We integrated secure payment gateways and financial APIs for smooth transactions and revenue tracking.
• Our developers added interactive features like live chat and polls to enhance audience engagement during live events.

Results

• The client’s users can now effortlessly host and live-stream offline events globally, reducing streaming lags by 95%.
• Utilizing this solution, they achieve global streaming with end-to-end latency of two seconds or less.
• The SaaS platform dynamically scales during peak viewing hours, ensuring seamless viewer accommodation with increased elasticity and intelligent load balancing.

Fintech AI Contracting Software

Our client, a legal firm, relied on AI contract software to manage contracts globally, initially using basic AI for drafting, reviewing, and monitoring. As contract complexities grew, they needed an upgraded solution and approached our software outsourcing services to handle modern nuances and stay compliant with industry standards and legal advancements.

Solution

• Starting out with a consultation, our project managers determined the tech scope for future implementation.
• Our dedicated team improved data visualization with charts and graphs, making complex data more user-friendly.
• We also implemented interactive reporting features to enable detailed insights for decision-making.
• Thorough compatibility assessments ensured seamless integration with existing systems.
• Robust APIs facilitated secure data transfer between systems.
• Integration with financial systems and CRM tools enhanced data availability and usability.

Results

• Contract review times decreased by 75%.
• Improved precision in contract analysis for better risk management and compliance.
• The client reported reduced operational costs and decreased reliance on external legal services.

Final Thoughts

By outsourcing software development, businesses of any size can broaden their operational horizons without losing their core focus. The beauty of this cooperation model lies in the cost-effective delegation, where you assign industry-top professionals with your dream project at a reasonable rate.

In this software outsourcing guide, we have covered the fundamental steps of vendor evaluation and the benefits your business can experience with the right partner. At Acropolium, we will happily take you on a journey of top-notch software development.

We offer software development as a subscription — in this form of cooperation, you achieve maximum flexibility with your budget prioritized. Contact us to explore your new growth opportunities!

Sources of Information

• IT Outsourcing Global Market Report, 2024 — Research and Markets
• Global Shared Services and Outsourcing Survey, 2023 — Deloitte