Benefits and Risks of Outsourcing Engineering Services

Today, large enterprises, small and mid-sized businesses, and even startups all over the globe use outsourced engineering services to bring their software development projects to life. An outside team is often a good solution for optimizing project costs, supplementing available resources, acquiring rare expertise, and shortening product delivery terms. However, there are numbers of less obvious yet important advantages of outsourcing engineering services.

In this article, we analyze the key pros and cons of outsourcing engineering services. We also look at ways you can address your concerns about delegating software engineering activities to outside professionals. This article will be useful to anyone considering moving software development, testing, or support outside their company.

Software companies and enterprises face a growing demand for highly qualified and experienced developers, engineers, testers, and other IT professionals. However, most of these companies don’t rush to expand their internal teams by hiring new employees. Instead, they contract out some software development activities to outsourced engineering service providers.

Outsourcing software engineering tasks to a subcontractor is often an effective solution for both large enterprises and small startups. But what forces these companies to entrust a third-party with bringing their ambitious ideas and critical projects to life? Let’s take a look at five important yet non-obvious benefits of IT outsourcing.

5 major benefits of outsourcing IT tasks

Technology companies choose to cooperate with IT outsourcing vendors for many reasons. Some struggle to find skilled professionals in the local labor market. Others require unique expertise or want to speed up project development while staying within the initial budget. A recent survey by ManpowerGroup Solutions shows that 45% of IT employers have difficulties finding fitting, well-skilled applicants for their vacancies.

Commonly accepted benefits of IT outsourcing to Eastern Europe include:

• Zero HR efforts and expenses
• No administrative expenses
• Lower hourly rates for qualified developers

While the hourly rate for a software engineer in the US ranges from $50 to $140 depending on qualifications, the hourly rate of a developer in Western Europe ranges from $35 to $80. Working with an experienced software developer in Eastern Europe or Asia may cost your company even less.

But as our own experience shows, software engineering executives actually take other factors into account.

Our clients often admit that it’s hard for them to hire IT professionals in their local markets due to a lack of specialists and the high amount of money, time, and effort required to recruit. Outsourcing appeals to them as an efficient way to overcome these challenges.

These are the outsourcing benefits most frequently mentioned by our customers in their feedback:

1. Accelerated project development
2. Quick access to niche expertise
3. Team flexibility and scalability
4. Cover a larger scope of work
5. Ensuring consistent innovations

Let’s investigate each of these benefits in detail.

Accelerated project development

Software development companies often face the need to urgently accelerate product delivery. A company may need to deliver specific functionality by a hard deadline or resolve a technical task instantly to benefit from a new business opportunity. This requires quick and effective IT staff augmentation.

However, forming a new in-house team or rearranging internal resources requires significant time and management effort. Outsourcing, on the other hand, offers a flexible resource pool and measurable services, helping to accelerate project development in a short time.

Quick access to niche expertise

Outsourcing grants you quick access to qualified software engineering specialists. Whether your team lacks regular specialists or requires rare talent, looking for the people you need on the local labor market will likely take much more time than choosing a remote team. 

Surely, you should know exactly what expertise you need for a specific project so you can evaluate and choose fitting providers, check their skills, and maybe even conduct preliminary interviews. But the process of choosing a trusted provider in many cases is still easier and less expensive than recruiting locally. Not to mention that if an outsourcing provider cares for specialization and sticks to specific industries, they can accumulate comprehensive expertise in them.

Meanwhile, Gartner predicts that by 2020, the software development industry in the USA will face a talent shortage of as much as 20% that universities won’t be able to fill. Trying to cover this shortage, IT companies will turn their attention to other alternatives and outsourcing seems to be the best one.

At Apriorit, we have over 450 IT professionals ready to turn challenging ideas into real-life projects. Our company offers a wide range of software engineering outsourcing services and provides unique expertise in such fields as reverse software engineering, data security and encryption, and low-level development.

Team flexibility and scalability

When using the outsourcing model, companies get a development team that’s much easier to scale than an internal team. An engineering manager can add or remove people from an outsourced engineering team with ease.

Additionally, not every project requires expensive skills and rare expertise in the long-term perspective. Sometimes, rare talent is only necessary at particular stages of development. 

Hiring an outsourced team is a great solution for such cases. In this way, you can access unique skills while paying only for the expertise your project actually uses according to the project plan and schedule.

Cover a larger scope of work

Cooperating with an outsourcing team is a great way to optimize the workload within your company. By delegating some tasks to an outsourcing vendor, companies can refocus their internal teams on other business-critical tasks.

Ensuring consistent innovations

Introducing new technologies and approaches may be challenging in the fast-evolving IT industry. On the one hand, innovations can significantly speed up project development as well as reduce costs and ensure better results with minimal effort. On the other hand, evaluating each innovative solution before implementing it into a project requires resources and expertise that not every software engineering firm has.

Outsourcing providers usually have a broader scope of expertise. They aren’t limited to a single set of traditional solutions and approaches, as many enterprises are, and have more opportunities for checking out the most recent industry innovations. Thus, an experienced outsourcing provider can advise you on a technology stack to achieve much-needed innovation with minimal risks.

After summarizing the key benefits of outsourcing software engineering, let’s move to the potential risks it may bring to your company.

8 IT outsourcing concerns and how to address them

Along with a number of meaningful benefits, cooperation with an outsourcing provider may bring additional risks. Here’s a list of the most common concerns expressed by our clients:

Now let’s dig deeper and see what hides behind these concerns and how you can address each of them.

Code quality

The quality of code is vital. Clients don’t just need code, they need high-quality, stable code with no bugs or flaws. Unfortunately, some code errors can only be found when you run code on a different device or under a high load. 

How we address this: At Apriorit, we ensure the high quality of our code at several levels.

• Strict coding standards — We have a set of internal guidelines and coding style standards that every developer in our company must follow. This helps us both ensure the needed level of code quality and make our code easy to read and understand. If our client has their own coding standards, we make sure to follow them to the fullest. 
• Code reviews — All code written by our developers goes through multiple, thorough team reviews. In this way, we eliminate as many errors as possible at the early stages of development.
• Quality assurance (QA) — We have an internal team of QA specialists who test our software to ensure its performance, stability, and security.
• Code support — We provide code warranties and additional QA support even after the project is finished. So even if there was a hidden bug in our code, we’ll fix it quickly.

Workflow transparency and management complexity

As our experience shows, the majority of decision-makers’ concerns come from the fact that the outsourcing team they contract with is physically remote. This often creates a feeling of having limited control over the team. At the same time, most clients want to have a clear view of their project’s state without spending too much time managing the outsourcing team. 

When entering a cooperation process, our clients pay special attention to:

• Process control
• Project status updates
• Task status monitoring
• Timely risk detection
• Delivery forecasts

However, building productive and efficient cooperation with an outsourced team shouldn’t require constant micromanagement from the client’s side. 

How we address this: At Apriorit, we provide our clients with all the information, tools, and contacts related to their projects. For every project, we create a development plan based on either the Agile or waterfall methodology and approve it with the client. We deliver only managed teams that come with a part-time project manager by default. The project manager:

• Serves as a single point of contact for the team and the client
• Ensures that the team follows the development plan approved by the client
• Sends regular status reports to the client
• Clarifies priorities and ambiguities
• Performs all team management activities
• And does a whole lot more

Inefficient communication 

The better you communicate with your outsourcing provider, the higher the chance you’ll get the results you want. Lack of quality communication may create two significant problems:

• Uncomfortable cooperation
• No clear vision for the project

On the one hand, an outsourcing team may be located in a different part of the globe, in a different time zone, and speak a different language. This may add a bit of discomfort and confusion to the overall process of product development.

On the other hand, there’s always a risk of misunderstanding and not having a common, clear vision of the project in general, some specific processes, and particular tasks. For instance, important questions may arise in your outsourcing team. If these questions remain unanswered for a long time, it can lead your team to implement your project in a way that’s different from what you expected.

How we address this: At Apriorit, we eliminate these concerns by building quality, two-way communication between our specialists and our clients. For every project, we:

• Assign a project manager who manages all project-related processes on behalf of our client and keeps them posted on the project’s state
• Specify the ways, time frames, and channels for maintaining communication among project stakeholders
• Discuss our client’s requirements and critical corporate values to set clear rules for our team to follow during the project
• Invest significant resources in improving the knowledge of English language among our specialists. (As a result, all Apriorit developers are fluent or nearly fluent in English, which reduces the risk of misunderstandings due to language barriers.)
• Use Jira dashboards for task management and other tools for sharing architectures and specifications with our clients

Also, we often create a common workspace for sharing, finding, and collaborating on the information needed to bring our client’s project to life. In this way, we not only improve communication between our team and our client but also partially address the problem of time zone differences.

Poor knowledge sharing culture 

Technology companies often worry about uncontrollable employee turnover on the outsourcing service provider’s side and knowledge transfer issues related to that. For instance, if a key developer quits the outsourcing company, it will take some time before the company finds a replacement and gets that new team member fully acquainted with the project. However, the risk of critical project delays due to the loss of a key specialist in an outsourced team can be mitigated.

For instance, you may add a term to the service-level agreement (SLA) that specifies a fixed structure of the team and the maximum acceptable period of time for replacing a team member. Also, you can look for an outsourcing vendor with an effective knowledge sharing policy in place.

How we address this: At Apriorit, we encourage our experts to share their technical expertise with colleagues. We have a well-balanced internal system for exchanging experience, so we’re able to accumulate unique technical skills and expertise within the company. In this way, we not only improve the qualifications of our current specialists but eliminate the risk of losing rare expertise due to unexpected employee turnover.

If a key specialist suddenly leaves our company, we make sure to find a replacement as soon as possible so that our client’s project won’t be affected. Apriorit takes care of recruiting and training the new professional and covers all expenses related to that.

Transferring intellectual property rights

The proper transfer of intellectual property (IP) rights is another common concern among companies working with outsourcing vendors. At this point, there are two major issues to handle:

• Assign the IP rights for the developed products to the client company (and not the actual developers)
• Make sure the outsourcing team won’t reuse the developed technologies to their benefit (in other projects, for instance)

Trusted outsourcing companies have proper client agreements where the legal aspect of transferring intellectual property rights is clearly described. Additionally, they have corresponding agreements with each engineer working on their clients’ projects.

How we address this: Apriorit signs proper non-disclosure agreements (NDAs) with potential and current clients right at the negotiation stage. These agreements suppose financial penalties in case of failure to comply with the terms. You can find an example of our NDA here.

Confidentiality and data security

When working with an outsourcing team, the client company often has to grant access to sensitive data and critical internal resources. Therefore, the outside team gets to know a lot about internal processes, technologies, and other information that’s critical to the outsourcer. It’s important for both the client and the outsourcing company to ensure that all confidential data remains confidential throughout their cooperation. 

How we address this: Similarly to the problem of transferring IP rights, we ensure data security and confidentiality by signing proper SLAs and NDAs with our potential and current clients. 

Hidden and uncertain costs

The need to cut costs is one of the common reasons for introducing an outsourcing team into a project. So it comes as no surprise that the risk of having to deal with unexpected project cost overruns concerns many software engineering executives.

Hidden costs can be created by both clients and outsourcing vendors. Every new change to the workflow, every new technology included in the scope, and every new feature added to the developed product inevitably affects the final cost. In general, hidden costs in outsourcing can amount to 25% of the total cost.

What you can do about this is plan the current and future IT needs of your project and include a full list of additional expenses that may be incurred in the contract you sign with your outsourcing team. Such expenses may include after-hours communication with outsourcing team members, software and firmware purchased for your product’s development, and so on.

How we address this: At Apriorit, we aim to make every stage of cooperation with our clients as transparent as possible. In particular, we ensure complete workflow transparency and assign an in-house project manager to every project we’re working on. Plus, we offer several cooperation schemes for our clients to choose from, including fixed price.

We provide a development plan including detailed tasks for implementation, which helps our clients evaluate the scope of their project and compare it with proposals from other companies.

Finally, let’s take a look at the key models you can use for setting up efficient cooperation with an IT outsourcing provider.

Popular outsourcing models

There are multiple schemes for building cooperation between a client company and an IT outsourcing provider. The three most commonly used IT outsourcing models are:

• Dedicated team
• Time and materials
• Fixed price

Let’s take a closer look at each model.

Dedicated team. This format of cooperation supposes assigning a dedicated team of developers to a specific project, hence the name. The key point is that this team will full focus on one project only. 

In the dedicated team model, you always have direct access to developers and can closely cooperate with them and control everything. An outsourcing engineering services firm provides you people with the skills and knowledge that you need. You get to decide what processes they will be integrated into, what tasks they will work on, and what their responsibilities will be within your project.

This model works well for long-term, ongoing projects that require continuous support and workflow changes. Usually, this model offers multiple billing options: you may pay per specialist or for a specified period of time (per month or per hour). Being the most cost-effective option, this model is a great choice for long-term agreements.

Time and materials. The key characteristic of this model is flexibility. Everything — the workflow, deadlines, budget — can be changed multiple times as the project develops.

This model works best for raw projects with no clear vision of the desired result, strict deadlines, and unclear specifications. As the name of the model suggests, you pay for two things: the time of the outsourcing team and the materials or resources they use to bring your project to life: hardware, software, services, and so on. The team, in turn, provides you with a detailed report on the scope of work that was done at the allotted time.

Fixed price. The key idea of the fixed price model is that you’re guaranteed to get a predefined scope of work done for a predefined, or fixed, price. This model works best for small, time-limited projects.

Note that this cooperation scheme doesn’t allow any changes to tasks set for the outsourcing team. Therefore, it’s important to have a clear vision of what should be done when you choose the fixed price model.

Apriorit works with all these models. Furthermore, we can offer you a combined approach: start with a fixed price model for a limited scope of work and then move to the dedicated team model for implementing a more complex task. 

Conclusion

Software engineering companies use IT outsourcing to cut costs, speed up product development, enrich their teams with rare talent, and introduce innovations with minimal risks. However, collaboration with outsourcing vendors is also associated with a number of risks: sudden employee turnover, communication challenges, data security risks, cost overruns, and so on.

Thorough planning, quality two-way communication, and clear rules are the keys to building efficient cooperation that benefits all parties involved.

Delivering engineering outsourcing services for nearly two decades, Apriorit has seen hundreds of projects and businesses in different situations and with different goals. This experience provides us with exclusive technical knowledge and skills as well as high-level project management outsourcing. Apriorit professionals possess unique expertise in different fields including outsource reverse engineering, driver development, data encryption, cybersecurity testing, and artificial intelligence.