May 23, 2023

3 Benefits of Outsourcing Software Development

No doubt your in-house IT does a lot to keep your business running, but how much bandwidth do they really have?

Consider all of their typical IT duties, such as:

  • Maintaining and managing business IT systems
  • Leveraging software to automate business processes
  • Integrating software systems and apps
  • Managing business data 
  • Securing the network and connected systems
  • Providing technical support to internal and some external users

Looking over this list, you may notice that your in-house IT focuses on keeping the business running. What you don’t see on this list are items like innovating new digital products or services that bring in revenue. 

If building new products or services for either internal teams or your customers is important to your business model, then how will you get that done if your in-house IT is busy with these other responsibilities?

Clearly, there is a gap between what your in-house team can do for your business now and the types of software development solutions you want for your business in the future. Luckily, there is a way to fill that gap: outsourcing software development services.

Before we continue this discussion on the benefits of outsourcing software development, let’s make one thing perfectly clear: Outsourcing is not about replacing in-house IT. Outsourcing is about making your in-house team more productive by strategically delegating projects to a trusted partner.

Benefit #1: Outsourcing Software Development Services Can Reduce Costs

One of the reasons leaders may resist outsourcing is that they want IT professionals who are part of the company and aligned with business goals. That said, there’s a significant cost involved with scaling up your in-house IT in time and money.

Research from the Small Business Association (SBA) shows that employees cost more than just their salary, and in fact, can cost employers anywhere from 125% to 140% of that salary. This number includes items like:

  • Payroll taxes
  • Worker’s compensation insurance
  • Employee benefits
  • Retirement plans
  • PTO
  • Recruitment costs
  • Onboarding
  • New equipment

A study conducted by Commit indicated that almost 70% of companies spend at least 30 days recruiting, if not longer. As if that investment of time wasn’t enough, the Harvard Business Review pointed out that it could take as long as eight months before a new employee is fully productive in your business. This also assumes that your new hire isn’t the one in five who quits, per Commit research.

While these metrics may make hiring a full team sound daunting, having the right people for your in-house IT is a sound investment for long-term growth. That said, it can be expensive, and if you are in a position where you do need to scale quickly and reduce costs, outsourcing some of your software development projects may prove your best option.

One way that outsourcing reduces your costs includes the comparison between what you’re paying a new hire versus what you’re paying a software development company.

As stated above, you’re paying anywhere from 125% to 140% of a new hire’s salary, spending at least one month to recruit, and another eight months before they are productive. This is also per person on your team.

In contrast, when you hire a software development company to build a solution or develop a new mobile app, for example, you are only paying for the completion of that project. You’re not responsible for the additional costs of benefits, PTO, or recruitment. Furthermore, the software development company team is ready to go when that contract starts, so no lag time with getting teams up to speed.

See How AltSource Has Become a Trusted Outsource Partner

At AltSource, we pride ourselves on long-term partnerships with our clients. Our average partnership engagement length for most clients is around five years, but some of our partnerships have lasted far longer.

For example, Consumer Cellular (CCI) has been a long-standing partner of AltSource from way back in the early 2000s. Back then, CCI needed to scale quickly, but hiring a vast in-house team was just not feasible at the time. Go here to find out more about how their outsourcing experience with AltSource helped move their business forward for more than a decade.

Benefit #2: Outsourcing Software Development Can Better Allocate Resources

As discussed earlier, your in-house team has core responsibilities to keep your company’s tech stack running. There is always some wiggle room, and it’s not uncommon to change priorities to get certain projects completed. Nevertheless, you’re still working with a finite amount of people and productivity hours. Sometimes there simply isn’t enough bandwidth for new projects.

Despite your team’s lack of bandwidth, new projects and business initiatives happen all the time, and outsourcing software development can help you deliver while making the best use of your resources.

When you bring in a trusted software development partner, you ensure that your in-house team can focus on their core responsibilities. They may need to liaison with the software development partner to maintain business alignment, but it’s far easier to have your team lead attend a few meetings than to get your entire in-house IT department to complete a new project while falling behind on everything else.

Additionally, working with a trusted software development partner gives you access to technical skills and expertise you may not have on your current in-house team. Zippia reported that 26% of small and medium businesses deliberately outsource software development to access this higher level of solutions expertise.

If your company wants to invest in solutions that you haven’t tried before, that outsourced expertise could be the thing you need to pull it off successfully.

Benefit #3: Outsourcing Software Development Can Improve Time-To-Market

Suppose you are developing digital products and services for customers. You’ll need quality products, but you will also need to develop them at speed to beat out competitors. 

In a report from Coding Sans in 2021, in-house IT leaders reported that some of their biggest obstacles with software development for new products included the following:

  • Hiring talent = 21.42%
  • Task capacity = 20.71%
  • Time management = 11.86%
  • Prioritizing development = 11.68%

These four obstacles alone make developing software in-house at speed significantly problematic. Tacking on the issue of asking your in-house team to split their focus between core responsibilities and developing new products is setting your team up for failure.

To minimize stress and increase time-to-market with digital products, it can often make more sense to outsource these projects to a software development company. Not only are outsourced software developers more accustomed to delivering products with a shorter turnaround time, but they can also help you determine what you need and what will work based on their experience with similar projects.

By delegating certain projects to an outsourced software partner, you increase your chances of getting your product to market on time and ahead of your competitors. Likewise, you’ll empower your in-house team to keep their focus on core business responsibilities.

(If you have never outsourced before, check out this guide on how to find a software development partner who fits your business needs).