Today, a major chunk of IT firms prefer outsourcing their software projects to skilled professionals or a dedicated development team. Outsourcing refers to the process of hiring a vendor agency for executing the process of product development. Herein, the vendor provides the client firm with the necessary resources including proficient developers, a project plan as well as the necessary technological tools.
Business enterprises choose to outsource owing to the following reasons.
- The lack of adequate financial resources, scalability, and flexibility
- A dearth of in-house expertise and the requirement for specific skills
- The increasing demand for uninterrupted services and the urgency to enhance productivity
Outsourcing undoubtedly helps a company to reduce their operational costs, enhance product quality, access a huge pool of talent, and enable a firm to concentrate on core competencies. However, to reap the benefits of this strategy, one must pick the right one amongst several lucrative outsourcing models available.
This post compares the pros and cons of the most popular outsourcing models and will help you to select the best-suited outsourcing model based on your project/business requirements.
Prominent Outsourcing Models: An Overview
The three most prominent outsourcing models are – offshore software development, onshore software development, and nearshore software development. Check them out!
Onshore Outsourcing: Under this model, companies outsource product development tasks to service providers based in the same country.
Nearshore Outsourcing: This model involves outsourcing projects to countries that lie in close proximity with similar or minimal time zone differences. For instance, a nearshore location for a US-based firm looking to outsource would be either Mexico or any of the South American nations.
Offshore Outsourcing: This model indicates outsourcing projects to countries that are located far away with substantial time zone differences. To cite an example, an offshore software development agency in India or other South Asian countries would be the ideal offshore location for a U.S. firm seeking outsourcing services.
Comparing the Advantages and Downsides of Various Outsourcing Models
Onshore Outsourcing
Advantages
Since the client and their technology partners are located in the same country, there are no chances of encountering barriers concerning language, culture, or time zone differences; resulting in an easy, speedy, and comfortable communication process. Moreover, this approach enables the client firm to closely monitor the product creation process in real-time, makes it easy to touch base with the development team, and allows them to apply new changes quickly.
Downsides
The onshore model incurs huge expenses and turns out to be way more expensive as compared to offshore and nearshore models. Furthermore, the range of services offered by an onshore development agency is narrower because of the lesser talent pool available, leaving the client firm with much lesser choices.
Nearshore Outsourcing
Advantages
Nearshoring promises geographical proximity and minimal time-zone differences between the client and the vendor agency. Therefore, it allows better communication with the vendor and more convenience and flexibility in controlling the development process; in comparison to the offshoring approach. Besides, despite the presence of some cultural differences, these are not significant enough to affect the project’s functioning.
In comparison to the onshore model, nearshoring involves lesser labor costs and greater access to development expertise.
Downsides
Nearshore development may involve risks concerning Patent and Copyright violations on account of different copyright rules followed by the country in which your vendor is located. Furthermore, clients nearshoring a project have to incur more expenses than the clients who choose to offshore their project.
Offshore Outsourcing
Hiring an offshore software developer for IT projects is the most preferred and trending practice as client enterprises can reap the benefits of premium quality software development services at budget-friendly rates. Given below are the benefits and drawbacks of this approach.
Advantages
- Cost reduction: The most popular outsourcing pools are concentrated in locations with lower hourly rates for developers. This allows you to reduce project costs to a great extent and hence provides significant savings for long-term as well as short-term collaborations.
- Access to better skillsets: Clients can access a humongous talent pool, harness the potential of a wider range of skillsets, and also hire experienced, specialized, and trained developers who are capable of architecting top-quality software products from scratch.
- Effortless scalability: Software development happens to be quite tricky as it’s difficult to predict the exact resource requirement prior to the commencement of the project. Offshoring resolves this issue by allowing the clients to easily scale their development team up or down as per the need. Remember that it’s way more convenient to add extra developers to your offshore development team instead of appointing new employees for your in-house team.
- Reduced time-to-market: The client company saves time as hassle-prone responsibilities like hiring and training employees passes on to the vendor agency.
- Adherence to deadlines: The right Offshore vendor firm will ensure the creation of a top-notch product and maintaining strict product delivery deadlines at the same time.
- Gain innovative opinion: Companies working with offshore development teams will benefit from the innovative opinions of offshore professionals for obtaining another vision to enhance the final product.
Downsides
- Communication woes: Communication woes are likely to crop up due to differences in time zones and language barriers. Moreover, it may not be always feasible to visit the offshore production site. However, this issue can be resolved by streamlining the communication procedure using advanced technologies.
- Cultural differences: The work culture of an offshore team may be different and in such cases, adjustments are needed from both sides.
Advice on Choosing the Most Befitting Option
The most befitting outsourcing model entirely depends upon your priorities and the specific needs of the project. So, you need to ponder; “Which of the following are you looking for – The best price, highly proficient developers, more security, the least amount of hassles, or a uniform blend of all of these aspects?”
Onshoring allows you convenience but involves high expenses. Contrarily, offshoring allows you to leverage skilled development services at lower costs, but the time-zone differences may create roadblocks at times. Nearshoring, on the other hand, perfectly balances the advantages of offshoring and onshoring. However, the offshore model happens to be the most popular outsourcing option.
Final Verdict
Outsourcing, particularly the offshore model, has turned out to be immensely profitable for several start-ups as well as the big market players. Thanks to innovative technologies for digitally connecting the entire world regardless of cultural and time differences, the strategy of hiring an Offshore Software Development services Company for executing software development projects, has ushered in unprecedented gains and provided a competitive edge to client firms.
In case you require assistance in picking the right outsourcing agency, contact Biz4Solutions, a prominent Offshore Software Development firm and reliable technology partner!