Why do you need outsourcing when there is LinkedIn

Did you know that at the initial stage of its existence, the Chinese giant Alibaba used outsourced development services? Skype has the same experience, the software part of which was written by an Estonian outsourcing team (then all this, except for outsourcers, of course, was bought by Microsoft for $8,500,000,000). At one time, GitHub, Slack, Basecamp, Fab, Opera Software, as well as many other companies and services that many people hear about, cheerfully outsourced. And MySQL, in general, uses outsourcers all the time. By the way, if you use the BranchOut recruiting application in your work, you should know that it was also developed on outsourcing.

How do outsourcing companies attract customers? What is it like to be part of an outsourcing  or education software development company? What are the pros and cons from the point of view of employees of such a company and customers? Let’s figure it out.

What developers get in outsourcing companies and what they don’t

Working as a full stack developer or in any other capacity in such companies has its pros and cons.

The positive side of working in such companies

If you are attracted by the variety of tasks and products that you have to work on, then you are in an outsourcing company. Somewhere, where, but here the developer is guaranteed to be able to “get his hand” and try his hand at working with different products and technologies (tired of working with C # – I tried myself in Python, etc.). In product companies, diversity is often only a dream, because the stack is chosen seriously and for a long time.

Another weighty argument in favor of outsourcing is planning. Very often in a product company, development looks like a chaotic process. Staying at work late or arriving on the weekend, getting a vague task is normal here. When working on outsourcing, in most cases, you work according to a clear plan. Know exactly what needs to be done and by when. So, this is a great option for those who do not like to “jump” and work in emergency mode.

Stability is another plus in favor of outsourcing. Most product companies focus on one or two or three projects. And no one knows if they will shoot (if not, you may have to find a job in a new way). Here everything goes more or less smoothly, and there is always work. And it should be noted that stability in this context does not mean the absence of development. In such a company, a developer (smart and ambitious) knows that in a conditional N years he will become a senior, after some more time – a team leader.

Relatively low entry threshold. Not every novice android developer, for example, can immediately get into a product company like this. It just so happened that here, as a rule, they are looking for “experienced” specialists, not wanting to waste time coaching beginners. In outsourcing companies, with a high probability, there will be work even for beginners.

And outsourcing is a “no end” for those who want to travel the world and work for their own pleasure. The companies in question are much more willing than grocery companies to implement a remote form of cooperation with their employees.

What repels developers from outsourcing companies?

The developers highlight the following points:

• The inability to enjoy the result of your work – a working software product. As a rule, everything is done here like this: you did the work, and that’s it, you can forget about the project. So if you’re the type of developer who wants to see how a product benefits people, this might not be the option for you.
• A lot of metrics for evaluating the work of a programmer. The number of lines of code per day, the number of errors per 100 lines, etc. etc. In outsourcing companies, as a rule, it is practiced to evaluate the performance of an employee based on many different indicators. So, for those who are not used to being in some kind of rigid framework, but want to feel more at ease, this will be a minus.
• Rarely do you have the opportunity to participate in a very complex and non-trivial project. Whatever one may say, but really “global” things are outsourced by a few customers. Many people think that it is better to spend time and money on hunting staff who will perform tasks in the office – this way it is easier to control the process.

In general, to each his own. If one developer is comfortable working in an outsourcing company, then another may not even look in the direction of such an option.

The drivers of the IT outsourcing market include:

• shortage of qualified inhouse specialists
• growing market demand for IT services, a vector for import substitution
• increasing the level of accessibility and efficiency of third-party development
• growing need for business process optimization coupled with a trend towards cost savings
• If earlier IT was considered as a necessary cost, now the change in attitude towards IT as a generator of business value is becoming more and more noticeable.

Barriers to IT outsourcing include:

• uncertainty of the economic situation
• Difficulties in long-term planning
• insufficient managerial maturity, when it is difficult for the company’s management to determine what to outsource.

Pros and cons of outsourcing from the point of view of the customer

The taste and color … as they say. But still, it will not be superfluous to consider the features (which can be both minuses and pluses) of working with outsourcing companies.

Among the minuses that most customers note are:

• Concerns about information security. Yes, there is an NDA. But judge for yourself, transferring sensitive data to a third party, even with a super-thought-out NDA, increases the likelihood that it may fall into the wrong hands.
• The emergence of dependence on external developers. When outsourcing development and other processes, it is important to understand that in this way you make yourself dependent on another company, which is why you should carefully choose a contractor such as Softformance.

What are the advantages of outsourcing software development?

•  Using this option, you can quickly “start” without hiring your own development team.
• In some cases, development according to such a model will be cheaper than on your own (but this is far from always the case – it is important to weigh the pros and cons).
• Outsourcing is an opportunity to get the necessary resources for a specific task in a short time.

Key IT outsourcing trends in 2023

• Increase in outsourcing volumes, incl. transfer of work on the creation of websites and mobile applications, tasks related to web and product analytics. The main reason is the SARS-CoV-2 coronavirus pandemic, which has forced many companies to carefully evaluate their operational efficiency and, in some cases, choose IT outsourcing as a way to reduce costs.
• The growth of competition, which means an increase in the level of flexibility of outsourcing companies, both in terms of contractual conditions and in terms of the development methods used.
• Enlargement of the IT outsourcing market: starting from 2019, small players are being squeezed out or bought up by larger ones.
• As the market develops, the number of projects to change the IT outsourcing provider naturally grows.
• Automation of routine tasks. The pool of opportunities here is extremely wide – from organizing a distributed database for remotely working employees of the company to creating analytical dashboards.
• A change in the principles of choosing suppliers dictated by remote work: now it is no longer necessary to go to the office to get acquainted, the whole world is open in the browser window. This significantly expands the possibilities of finding external contractors in neighboring countries, as well as in the provinces, where the cost of services is still noticeably lower than in million-plus cities.
• Continued growth in the fintech sector. According to a study by Moonward, an eighth of the entire fintech budget is spent on outsourcing, as it allows for rapid and efficient scaling, closes knowledge gaps in existing teams, and speeds up the development process.
• Distribution of low-code and no-code solutions, primarily due to increased development speed. Unlike no-code platforms, low-code still requires some programming skills, but promises to speed up software development by allowing you to work with pre-written code components. According to Gatner, by 2024, 65% of developed applications will be low-code.
• The growing popularity of new areas, such as IT consulting, when a third-party company is involved minimally, mainly at the stage of creating a task and assessing the resources needed to solve it.
• Entering the IT outsourcing market of insourcing companies that have accumulated sufficient expertise to sell it.
• If during the formation period IT outsourcing was the prerogative of large companies, then with the onset of the pandemic, small businesses began to look closely at it, in 2023 this trend will continue.

Conclusion

In-house development is most often suitable for small companies in which a full-time IT department copes with both support and development of internal information systems. For the optimal development of the company, its management should pay attention to the effective conduct of core activities, and it is advisable to outsource non-core business processes.