IN OR OUT? The Benefits of Software Outsourcing vs. In-House Staffing

Access to talent:
Bypassing the shallow domestic talent pool.

There’s no doubt the United States has outstanding tech engineers. The question is: Can you attract them and afford to pay what they can demand? Simply put: not enough of them exist and they aren't always conveniently located. For most companies, the reality is they can’t compete with the big, high-status companies that can afford the premium compensation that these engineers command for software development services.

You can go looking for up-and-coming developers and may get lucky, but the same problem applies. There are simply not enough graduates to fill the demand. Microsoft predicts that by 2025, the global workforce will need around 149 million new technology-oriented jobs – with nearly 100 million of them in software development alone.

It’s very difficult for recruiters to find the right talent for clients and when they do, there’s no guarantee the developer will be interested or that they’ll have the high-level engineering skills that you need for your software development project. The technology skills shortage is a problem that isn’t going away. While the pandemic struck a blow to employment in most sectors, the tech industry is rapidly rebounding and U.S. companies’ need for technical talent continues to outpace supply, leading to greater interest in outsourcing software development.

The pandemic-induced boom in remote work hasn’t eased the technology-talent shortage on the domestic market because the emerging trend is for Big Tech to soak up talent beyond state borders as the requirement to have staff in-house is relaxed. The good news is that smart outsourcing software development teams with the skills you need in application development, quality assurance, and more do exist – but they may be in another part of the world. Removing geographic limitations is another one of the advantages of outsourcing software development.

Cost-effectiveness:
Making the numbers stack up.

Lower costs inherently follow software development outsourcing and nearshore outsourcing. The total cost of engagement can be reduced by up to 30% compared to staffing, with much of the savings coming from reducing overheads such as rent, office equipment, and staff benefits. The other significant saving is in the hourly rate you’ll be expected to pay. In cities such as New York or San Francisco, for example, a senior software developer can charge up to $150 an hour.

On average, outsourcing software development should at least double the value of your money. At Accelerance, we have an equivalence benchmark of $50-$55 per hour to find a senior engineer with the level of skills and expertise that costs $100 per hour in the US for software development services.

Costs are substantially lower in South and Southeast Asia than in any other part of the world – and Accelerance has high-performing outsourcing company partners in the region. If you have budget restraints and are comfortable working across time zones, then you’d do well to consider software outsourcing in these regions.

Flexibility and scalability: Adjusting to your changing business needs.

One of the great advantages of an outsourced team is being able to quickly scale your software project. Once you’ve chosen a partner with core competency in the technology stack you’re looking for, they’ll have a pre-screened pipeline of engineers with the right skills and experience ready to bring on board in weeks. That’s a big advantage compared to recruiting on the US domestic market, where the process can take months, one of the key advantages of outsourcing software development.

Scaling down once a project is completed, meets a development target, or goes into a different phase is also much easier with an outsourcing partner than reducing headcount in-house. When faced with a crisis like the COVID-19 pandemic, it's easier to scale back if you outsource software development than if you're using in-house teams alone.

An exciting new trend is co-sourcing to multiple offshore partners, which opens up even more opportunities for speed and flexibility – an approach explored in a recent article for InfoQ.com. “I have spoken to several companies that have been outsourcing IT services, product development, or web development for a long time,” writes Swati Sharma, an executive with global web development company Classic Informatics. “The majority of them plan to explore the multi-vendor approach, especially for IT software outsourcing.”

Co-sourcing also diversifies your risk and makes it possible to divide your software development outsourcing between different teams according to the specialist expertise required, whether it’s in artificial intelligence (AI), cloud computing, or robotic process automation (RPA).

Core competency focus: Freeing up resources to concentrate on strategic skills.

Having all your engineers in-house - including those brought in through staff augmentation for a specific software solution - is like having all your eggs in one basket. It means your internal leadership needs to be well-versed in the skills required for each strategic project.

You (or your designated project manager) are responsible for assigning tasks, setting deadlines, overseeing the work, and managing quality assurance. It’s a risk if the technology you want to build is not part of your company’s expertise or core competencies. You need to ask yourself whether you have the knowledge required to ensure your project stays on track, and the skills to manage the process so your staff achieves the standard required.

The right offshore software development partner can provide not only the global talent needed but also the strategic advice to build your project and meet your project requirement in the best possible way, explains Accelerance CEO, Andy Hilliard.

“It’s human nature to want to control your assets and micromanage everything, but organizations that acquire knowledge and then let go of it when it’s no longer useful can pivot more effectively,” he says. “It used to be possible to be a jack of all trades when there were only a few trades and those trades were simple. In today’s world, there’s too much to know and things are changing too quickly.

“Software development is a science and it’s an art. It’s about living and breathing what you do, versus doing it as a side project. You can choose to be mediocre and micro-manage, but you’ll soon be out of business.”

The shift from headcount to skill count has been flagged as a global megatrend. As Andy says, “When you factor in the time and cost of ramp-up and ramp-down, getting into areas that are not your core business is a lot of wasted effort and that means you can’t be agile in the competitive landscape. You have to be more like a speedboat than an ocean liner.”

Working across time zones: Getting in sync.

The wide range of efficient communication tools now being widely used means it's never been easier to work with offshore and nearshore partners. This week, I’ve been on calls to the Philippines, Australia, and India. No matter what the time zone, it’s easy to jump on Zoom and talk to people in outsourcing companies all around the world.

Many of Accelerance’s clients work with nearshoring firms in Latin America because of the work-day overlap. Being able to connect virtually at the same time creates an agile work environment that’s similar to running an in-house team. Other companies choose to partner with outsourcing companies in South Asia or Eastern Europe to benefit from double-shift “around the sun” development – with the offshore team picking up where the domestic team leaves off at the end of their working day.

This option requires great communication, a strong relationship, and a degree of trust, but it can dramatically speed up the development process – an ideal solution for projects on a tight deadline. Of course, there’s the risk of rework costs if the project derails, so doing thorough due diligence on your outsourcing partner is critical. Your development partnership must be built on a strong foundation with clear boundaries and expectations.