Software development projects don’t always go to plan - the vast majority of them run into complications, but often for very preventable reasons. For example, many companies have in-house software development teams that handle their projects. Companies that can afford an in-house team tend to just be more comfortable with that which is understandable.
However, in-house teams are not without risk; for example, let's say a company is taking on a big process automation project. The in-house team gets the brief and notices that some of the requests are not in their ballpark of expertise. This is a simple problem, it happens often. These are 6 common consequences of ignoring it:
Going over budget
Significant project delays
Low-quality final product
Dissatisfied stakeholders
Damaged team morale
Damaged company reputation
This is just one very simple instance of something that can go wrong in-house and there are endless potential challenges all with their own set of consequences when it comes to developing software. However, effective execution during software implementation has a major emphasis on RISK MITIGATION which is why businesses often choose to seek consultancy.
Alibaba Example
To give you a real-world example - we’ll examine Alibaba. Alibaba is a company doing well over $140 billion in revenue today - but it wasn’t always that way. In the early stages of being a startup, Jack Ma, the company's founder, was facing trouble accessing the resources he needed while living in China.
What he needed was web development, and when he eventually found specialists in the United States, he outsourced development to them and started seeing results immediately. This led the company to set a record in funding at $25 billion by 2014.
What It Means To Outsource
Outsourcing software development doesn’t always mean you bring a project to a third-party right from the jump and get them to take care of it. It can sometimes, but outsourcing can also involve project takeover which is needed in cases where the project has been done poorly or the in-house team has too much on its plate and it’s not a priority at the moment.
Whatever the case may be - bringing in a third-party development team can be a great move for businesses and avoid the trap of project failure before the project even has a chance to be completed.
With that said, when the process is executed optimally, there are 3 key benefits seen from outsourcing that you wouldn’t see from in-house development:
Cost reduction: Software development is expensive, and when you add employee benefits and vacation time off to that, it adds up to paying for results you’re not getting. On the other hand, when you outsource, you're only paying for the results of the project you get from the team. You’re not paying the same salaries when work is slow or results aren’t optimal. With outsourcing, you quite literally get what you pay for and nothing less.
Talent pool: Software developers have a lot of flexibility in terms of their working conditions. Some may work for a company and freelance on the side, or even work at several companies each for short terms. The point is, top talent may not want to be confined to one company. So yes, while an in-house team will have developers with an employee mindset and dedication - their capabilities may be limited in certain aspects of performance that you could only get from a diverse portfolio.
Further domain knowledge: Outsourcing companies will have experience working with various companies in your industry which means that their experience level is fueled by observing different approaches to serving other businesses. This is not disregarding the expertise of an in-house team, however, there is a tendency to follow the “do things the way we’ve always done it” mentality which is not sustainable in 2023.
When a company hires an outsourcing team, they now have access to new mindsets and opinions, not just from an outsider looking in - but from trained professionals who’re ready to pivot and take on whatever you give them.
Deciding Whether Or Not To Outsource
Anytime you’re faced with the question “Why should we outsource this project?” start by examining why you shouldn’t outsource it. When an investment is being made for the greater good of an organization, it makes the most sense to start by analyzing all the risks involved.
From that point, you can see if the benefits outweigh the risks and make an informed decision. The reason we recommend the “negative first” approach is that oftentimes teams get caught up in fixating on all the potential rewards that they neglect to construct proper contingency planning.
Challenges From Outsourcing
The most common industries that outsource IT services include Finance, IT, Payroll, and CRM services. The most common projects companies from these industries typically reach out for include cloud services, process automation (especially robotic process automation), API integration and customer service support.
While all this is going on, some obstacles will arise but the whole idea is that with an experienced team of experts, you won’t have to worry about these obstacles impacting your project. With that being said, here are some of the most common issues to look out for:
Project Delays
Delays often occur when there are communication barriers between the service provider and the client. Both parties can be at fault for not properly outlining the scope, timeline, deliverables, or even changes made to the project. To avoid this, both parties need to prioritize having regular check-ins that ensure that the project is on track.
Quality Issues
Outsourcing a software development project can also come with some quality risks. When working with a third-party provider, there is a chance that the quality of work may not meet your expectations. This can be due to a lack of understanding of the project requirements or inadequate skills on the provider's end.
For this reason, It's non-negotiable to have a proper quality assurance process in place that will catch any issues early on. In addition to this, there needs to be sufficient communication before the project starts to ensure expectations are understood and that the outsourcing team can support your needs.
Security risks
The phrase alone emphasizes how important it is to team up with a reputable software development firm. Now, when you think you have the right team, remember that you will be sharing sensitive information. For this reason, companies looking for outsourcing services need to make sure they ask about the teams' security and confidentiality measures.
What’s Important to Understand
There is risk involved with any level of change in an organization, however, we’re living in an era where change is inevitable with technology, especially watching AI becoming more advanced by the day. Companies need to re-evaluate their business processes in 2023 and find ways to implement this technology to still be operating in 2033.
Businesses need to asses their assets and find any that are expendable. In some cases, it may make sense to delegate work to a third-party software services provider. This is a recommended path if it means it’s going to help your business succeed.
Written By Ben Brown
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ISU Corp is an award-winning software development company, with over 17 years of experience in multiple industries, providing cost-effective custom software development, technology management, and IT outsourcing.
Our unique owners’ mindset reduces development costs and fast-tracks timelines. We help craft the specifications of your project based on your company's needs, to produce the best ROI. Find out why startups, all the way to fortune 500 companies like General Electric, Heinz, and many others have trusted us with their projects. Contact us here.
