Simply put, outsourcing is an avenue to fulfil internal business functions using external resources. It was first developed in 1980 as a way for companies to gain a competitive advantage in the global market.
Outsourcing is used in industries galore today and strongly links with three strategic goals: cost reduction, flexibility, and speed. Businesses wanting to cut labor and head expenses are relocating internal position auxiliary functions to third-party contractors.
Outsourcing works as a partnership-based dynamic. The digitization of services and substantial advances in communications technology were essential drivers for expanding the concept of outsourcing. Big tech firms now want to outsource companies that help them improve their core strengths. But instead of focusing solely on cost reduction, businesses highlighted the importance of flexibility and achieving successful and effective results.
No matter your company’s size, software development outsourcing can be the way onward. Whether your company is a startup or a global enterprise, there are countless benefits.
What's more significant when outsourcing software development services is the time-to-market (TTM) with the implementation of cutting-edge technology: JavaScript, Python, C++, Swift, Angular and React are among the most popular programming languages for the best software development. This kind of cutting-edge technology will provide a powerful competitive advantage for your business for years to come.
Take a look at the app we developed for Jinga using Swift!
Let's look at both pros and cons of outsourcing software development.
It might be a little scary to outsource software development if you've never done it - this is completely understandable. Taking a leap of faith into a new organization to deliver the results you want is an important decision, but it's more so when the success of your whole company depends on it.
Businesses currently outsource for having many advantages, as we just saw, in order to achieve one or multiple goals. They will eliminate half of the operational tasks for their in-house teams and employ external professional teams to fulfill their business objectives.
Simply put, businesses outsource for the following main reasons:
Also known as contracting out, any business industry can hire outsourced services: from customer support service, finance to web development services. If your business falls into the latter, here are a few guidelines to follow when getting started with your outsourcing strategy:
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Simply put, hiring outsourcing companies or teams:
When offshoring, operations are shifted to a different country, being the geographical location irrelevant. For example, Offshoring has two subdivisions: Nearshoring (neighbouring nations with or without a shared border, like you will see below) and Farshoring (distant countries from the hiring company’s country).
Let’s say you’re in Sweden. Offshoring software development companies include:
Businesses will usually hire offshoring companies to reduce recruiting and internal staff costs. Its effectiveness, however, is contingent on several factors, one of which is communication. A strong internet connection is critical in order to communicate effectively.
Offshoring also enables the establishment of new markets, allowing your company to broaden its customer base to other countries. Also, foreign employees may offer a better understanding of the national trends, markets, business risks, and cultural norms in their country or the surroundings so you can understand how to better target international markets that may be prospects for your business.
Although time zones can be quite different, the truth is that nowadays most companies would rather focus on valuable expertise than on how many hours apart they are from the outsourced company. Being willing to offshore will enable you to have a greater talent pool available in any part of the world you wish. Also, today modern technology and management tools can minimize inconveniences so communication can always be handled well.
In simple terms, nearshoring is a subcategory of offshoring. Nearshoring refers to outsourcing business activities to companies in neighboring countries - locations with similar time zones and cultural characteristics, allowing better communication and regular offline meetings, especially when important decisions need to be discussed.
Let’s say your company is based in Belgium. You can nearshore your software development project in countries like:
Nearshoring is becoming popular for outsourcing IT services, such as web development projects, testing, and maintenance. Because the keyword is "near," countries have a limited pool of potential partners. Nearshoring is a less risky solution for startups and SMEs.
You might be wondering why you should even consider nearshoring when you can hire a company in your own country. However, nearshoring provides advantages galore, ranging from obvious cost savings to professional team availability and choice, both of which are sometimes hard to obtain in your own country. Let's go over the main benefits below:
Onshoring refers to outsourcing to another city or region within the same country. Companies that wish to improve their services through third parties without the hurdles of language and cultural barriers and foreign policies typically engage outsourced teams from their own countries.
The good thing is that onshore partners share similar experiences with your customers and are aware of local customs and problems. Data privacy, security, and sensitive information are also more easily monitored and retained. However, when onshoring, you may experience limitations when getting the best skillset to get your job done as the talent pool is limited.
Onshoring is also not ideal for businesses that only want to cut costs in their operations as labor and resources costs may vary depending on the location of your outsourcing partner. This means that since you’re hiring a company within your home-country, the average market rates will be little to no advantageous as you’ll be paying the agency’s margin, thus this is only an option if you’re looking for flexibility and quick access to resources.
At first glance, the only distinction between offshoring and nearshoring seems to be the distance. However, in today's digital environment, geographic closeness should not be your primary consideration when determining which outsourcing options to pick. First, you must establish your goals and describe what you expect to accomplish by bringing in fresh talent to your team. What are your expectations? Do you want the cheapest option, the least bumpier road, do you mind the different timezones, or want better time management?
All in all, the choice between nearshoring and offshoring will depend on the kind of relationship management your company wants or requires for your projects.
As of 2021, India, Ukraine, China, Poland, and The Philippines are at the top 5 best countries to outsource software development although each one of them has their own particular cultural, time and political challenges, however, Portugal has been climbing its way up in this scenario. The country has recently risen three places in the Digital Competitiveness Ranking based on knowledge, technology, and future-readiness.
It becomes important to mention that over the past decade, Portugal has also become a prime destination for nearshoring and offshoring services. The operating costs are some of the lowest in Europe, without compromising quality and level of service.
Just for more context, the Competence Centres in Portugal has made a substantial contribution to the consolidation of Portugal's technical center, for which the country is beginning to gain international recognition. What’s more, according to recent investments monitored by AICEP - Portuguese Trade & Investment Agency -, the key factor when choosing a location for Competence Centres has been the availability and quality of talent in Portugal. Many companies report having already experienced Portuguese talent abroad, as a good premise for the potential that the country can offer.
These are some of the reasons why Portugal has become a popular outsourcing services provider:
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We can work with you and help you identify the specific needs and objectives of your web development project, and assemble a team of the right people to make it happen. And, if the size of your web project has to be scaled up or down, our human-centric approach allows us to do so quickly and seamlessly!
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