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Types of Software Development Outsourcing Models

Republished By Plato
Republished By Plato

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In the fast-paced world of technology, software development outsourcing has emerged as a strategic approach for startup businesses aiming to streamline their operations and enhance their productivity. Startups are disruptors, and by leveraging the expertise of external development teams, they can focus on core activities while still achieving high-quality software solutions.

Software development outsourcing allows companies to tap into specialized skills, reduce operational costs, and expedite the time-to-market for their products. In the US, over 94% of companies integrate IT outsourcing into their business strategy. The IT outsourcing industry accounted for almost $400 billion in revenue in 2022, proving it’s a viable business strategy for up-and-coming and established organizations. However, choosing the right outsourcing model is crucial to achieving these benefits, and it can be confusing for newbies because there are so many factors to consider.

Location-based Software Development Outsourcing

For most, these are the most common types of outsourcing. Location plays a major part in outsourcing because it can either help you cut operational costs or significantly increase them. Below are the location-based outsourcing models:

Nearshore outsourcing

This outsourcing model widens your talent pool but limits the scope to the same region or neighboring countries. It tries to minimize costs without adding practical difficulties like time differences and cultural nuances. Depending on the region or country you choose, there may be location-based issues that need to be resolved; however, outsourcing your software development team to neighboring countries or regions will give you access to talent and expertise that isn’t readily available in your home country.

Offshore outsourcing

This type of outsourcing is usually done by a third-party provider or outsourcing company. Offshore outsourcing or offshoring allows you to outsource anywhere in the world, as long as you can find an outsourcing partner that serves your chosen location. Offshoring allows for round-the-clock software development because other countries will be working outside of your usual operating hours. As such, you need to find a reputable outsourcing company that you can trust to do quality work consistently and keep your sensitive data and intellectual property safe and secure.

Multisource outsourcing

As a business strategy, outsourcing can be very flexible. You can combine different approaches to find one that suits your business requirements. As long as you recognize what you need from an outsourcing arrangement, you can mix and match the models above and find an ideal combination to help achieve your business goals. A few things to consider include the time difference, the type of project, and how the outsourced team can work seamlessly with your in-house team.

Relationship-based Software Development Outsourcing

Although location is a vital aspect of outsourcing, it’s not the only thing to consider. How your outsourced team will work with your in-house team should also be considered, especially since your team members will be coming from different locations and backgrounds. When it comes to working relationships, there are three common outsourcing approaches:

Dedicated team model

The dedicated team model will help you outsource a team of developers that will speed up the completion of smaller tasks that are part of a more complex project. A dedicated team is focused on your business or project and reports directly to you or your assigned project manager. Because they don’t work on any other project, you can expect high-quality work that’s delivered on time and within budget.

Managed services model

In this model, your outsourced team reports to a project manager provided by the outsourcing company. They work directly with your in-house team but don’t report directly to you, making this model a task-based approach. As such, team performance is measured by how they perform assigned tasks and how long tasks are completed. Their scope of work is limited only to tasks you assign them, combined with other tasks that may be assigned to them by your outsourcing company’s other clients. A managed services team can work with minimal input from you, but they typically don’t become a part of your internal team and work according to processes set by the outsourcing company.

Project-based model

This is the outsourcing model of choice if you want to distance yourself from your software development team and delegate the management of their day-to-day workflow to a third party. In a project-based model, the outsourcing company reins once project deliverables and timelines have been set. Regular catch-ups are scheduled to discuss project progress and strategy. Team performance and workflow are managed by the outsourcing company, ensuring that project parameters are met and you’re always kept in the loop.

Why Outsource Your Software Development Team?

While cost reduction is one of the main reasons to outsource software development, it’s far from being the only reason. In a world that’s dominated by software and mobile apps, businesses are expected to come up with the best software solutions that address customer needs. Software development outsourcing allows companies to access world-class IT talent from across the globe, save time in recruitment and onboarding, and speed up product growth.

Building an outsourced team complements what knowledge and expertise your organization already has, empowering you to scale your business quickly and seamlessly. It’s easier than ever to get the best developers regardless of location—and it’s time you, and more startups, take advantage of this.

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