IT companies are now hubs for delivering quality services to their clientele both local and international – mostly on an outsourcing basis. As businesses expand operations to include international customer bases or to simply accommodate growth, leaders are just as keen to maintain multinational teams if that means hiring the best talent they can get. Add to this the normalisation of distributed teams and remote work environments, which has hence made even the most conventional companies jump onto the bandwagon of outsourcing.
With software outsourcing being one of the most common when it comes to technology outsourcing in general, companies that are new to this or have only ever used a specific model up until now may find it helpful to know about the varied software outsourcing options that exist. In this article, we drill down on the many software outsourcing models that are common today, as well as some tips on how the right set of strategies can be built to choose the model that is ideal for your business needs.
Offshoring involves working with a software development team that is hired via a third-party company based in a different geographical region. It is the most common IT and software outsourcing model, as it was the first one to gain popularity even before remote work environments became a norm.
IT and software outsourcing companies hire developers on behalf of you, taking care of headhunting as well as administrative duties such as paying salaries and offering other employee benefits – while you, as the business leader/owner, simply pay for the team on a regular basis to have them build your software.
Nearshoring, as its name suggests, incorporates software outsourcing but without large physical distances involved between the IT company and its client. This can mean that either both parties are located in the same country, or within the same geographical region i.e. the same continent.
Offering the added advantage of proximity in contrast to its offshoring counterpart, nearshoring is a great option for companies that want to stay within the same (or closer) timezone as they work with their IT outsourcing company – while also being able to meet with them in person whenever the situation demands it.
Multisourcing is an outsourcing option that involves multiple IT, software or other third-party agencies within one project. A key thing to remember about multisourcing is that it doesn’t just involve IT and software outsourcing companies; it can involve any range of third-party providers, such as advertising or design agencies.
All these third-party service providers come together to coalesce differing business objectives, with the software being the foundation of varied goals such as customer service, revenue, engagement and sales. For example, a marketing agency may be outsourced to deliver engagement strategies for the software or app being developed, while a dedicated design firm may be responsible for UI and UX.
As a full-service software and IT outsourcing company in Sri Lanka, EFutures is equipped to work with all these outsourcing models, depending on individual client requirements.
A fixed price model involves a one-off cost for the project, and one that is decided well before the work begins. While fixed prices offer clarity on how much will eventually be spent on the project, it may not allow for flexibility in case significant changes need to be made midway through.
A Time & Materials (T&M) model charges clients based on man hours that outsourcing teams have spent on the project, as well as resources utilised such as storage and other virtual infrastructure. T&M models enable better flexibility in case the software development lifecycle needs to be incorporated with big changes.
An incentive-based pricing model in software and IT outsourcing does exactly just that – pay agencies once a certain target or quota has been met. An incentive model is great for pilot projects that are especially aiming to release an idea that has never been tested before, thereby granting businesses a cushion of sorts in case something falls through the cracks.
IT Outsourcing
A project-based IT outsourcing model incorporates an entire team that is dedicated to working on your project. This is the most common IT outsourcing model in terms of manpower, as teams can be collaborated with on an ongoing basis well after initial release, for adhering to duties such as ongoing maintenance, patching, and SecOps.
A staff augmentation model adds an external team member (usually a consultant or expert of some sort) into an existing software development team. This team may or may not be outsourced, but an expert entering as part of staff augmentation will play a temporary role, until their job is done.
A dedicated team member functions autonomously to deliver expert services to software development teams. Unlike staff augmentation, a dedicated team member is meant to be collaborated with on an ongoing basis, making them valuable resources for long-term projects. Additionally, dedicated team members also directly report to the client they work for, as opposed to the outsourcing agency that pays their salary and addresses any other administrative needs.
There is no exact blueprint on deciding which IT outsourcing model is ideal for your business needs; even if you do manage to select the right one for existing business needs, chances are that it may not be viable in the near or far away future.
However, it is still wise to consider short-term as well as long-term necessities prior to deciding which IT outsourcing model is best for your business. While you cannot foresee every single predicament that you may have to face, considering as much as you can as of current shall still suffice in order to make an informed decision – and then iterate as you go along.
Whether it is an offshoring or nearshoring software development partner, ensuring communication is clear and timely is essential. While this isn’t breaking news, it is surprisingly common to encounter lapses in this department – with no action being taken to remedy the situation.
If important details are being communicated poorly, or worse yet, not being communicated at all, it is imperative that you build a better system/schedule for communicating key ideas and feedback – while also addressing any cultural or time zone issues obstructing your way.
With teams usually being distributed and remote in today’s software outsourcing culture, it is important to identify the KPIs that will measure productivity and success – while also building a reporting system that will help quantify said KPIs. This shall help teams see how effective their efforts have been, and where they need to improve.
IT and software outsourcing models are many, but choosing the right ones need not be complicated as long as your business needs are clarified and well established. By assessing your business needs and testing outsourcing partners for good communication skills, material resourcefulness and staff competence, the right IT outsourcing model will eventually fall into place.
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