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The Pros and Cons of Software Development Outsourcing Models: How to Choose the Right One for You

When a company decides to outsource their software development, they face a difficult choice. With a multitude of options on the market, ranging from onshore software development firms to offshore and nearshore to individually contracted freelancers, leaders need to look at all the facts before committing to one alternative over another. 

A while back, an acquaintance of ours came to us with a burning question. She was trying to decide whether it was better to hire a software team using an on-demand freelance website, or if she should opt for a team abroad contracted through a proper company. Both options were very attractive to her, especially the savings they represented in contrast to an onshore outsourcing firm in the US, but she needed to determine how to weigh either alternative to choose the right one.

Considerations Beyond Price

There's no cookie-cutter answer to our acquaintance's question. There are lots of factors to consider when it comes to making the right decision.So, we decided to analyze the pros and cons of going with a freelance team and contrast them to the pros and cons of using a software development outsourcing model.

This is what we found:

The Case for Hiring Freelancers Online

Pros Cons

Cost Savings
Sites that gather freelance developers can offer cheaper rates than established firms thanks to light overhead (no location costs, rent costs, insurance fees, training expenses, etc.)

Possible face-to-face
As long as your engineers are located within enough proximity, you could potentially arrange in-person meetings on a regular basis.

Fast Hiring Process
Given that the "friction" that comes from adding extra resources to the talent pool is so low for a freelance website, it's probably reasonable for a site to find talent in 2 weeks or less.

Faster Development
Freelancers are very interested in getting the job done quickly. They'll often rush to finish a project in order to jump into their next engagement. This can mean faster releases and production cycles.

Disjointed Team Dynamics
When you need to hire more than one resource, and then have them work together, a freelance team that doesn't share a company culture is more likely to drop the ball, assign blame, and end up causing delays due to miscommunication. You also run the risk of losing knowledge if one or more of your freelance resources leaves the project.

Quality Concerns
It's hard to gauge your freelancer's skill level from an online platform. This can mean losing time hiring a freelance resource that doesn't match up with your requirement, only to have to restart your search later.

Long-term Dependability
Longer projects suffer from hiring freelancers, that are accustomed to deciding their own schedules and work at their own pace. There's also no guarantee they'll stick around after they find another project, meaning they take the knowledge they've learned with them.


The Case for Hiring a Software Development Outsourcing Company

Pros Cons
Competitive Costs
Working with a firm from another country means overhead costs are lower (you save 40-100% versus hiring with a local firm.)   There're also the added advantages of hiring a consolidated company that include:
·         Defined company culture
·         Trained resources
·         Minimized churn
·         Leadership and management
·         Long-term orientation  

Similar time zones
A nearshore outsourcing firm will usually share (or at least be very close to) your time zone, so remote teams can communicate with yours in real-time via chat, Skype or any other tools you've agreed upon.

Guaranteed quality
Firms have a reputation they need to uphold. This means that when they deploy a team, they make sure the team delivers and delivers the highest quality possible.

+3-hour difference
If your firm is in a time zone with over 3 hours difference, the benefit of "time zone compatibility" may lose its edge; you can experience some lag in communication and projects can slow down.

More Expensive than Freelance
It's still probably more expensive than a freelance site, regardless of geography.

Longer hiring times
Companies that deploy their own engineers are usually interested in keeping everybody busy. So, building up a team for a specific project will likely take a bit longer (reshuffling internal initiatives, hiring additional people, etc.) In our experience, a sizable software development outsourcing company can take up to 8 weeks to staff a team of 8-12 engineers.

Final Verdict 

 The right solution for your outsourcing needs is going to come down to your business' specific traits. From this specific situation we see that:

  • Hiring freelancers works best on small, short-term projects. Longer, larger projects benefit more from hiring a software outsourcing firm that can manage accountability, churn, knowledge-perpetuation and team challenges.
  • Onshore freelancers do, in fact, result in 30-50% savings in comparison to onshore firms, but a nearshore software development firm in a developing country can also be as—if not more—cost-effective.
  • Hiring onshore freelancers can produce highly capable specialists quickly, but the freelancing model isn't built for the long-term. It doesn't provide a cohesive culture, team monitoring and accountability that a corporate environment can; so, developing a line of business with freelancers may not be the wisest choice.


Ultimately, your project will benefit from a committed team in the long run but bringing in help when there are very specific requirements that can be completed quickly can be handled by freelancers. However, counting on a long-term partner will ensure your project benefits of the attention to detail and drive to continuously improve that goes beyond doing what's expected.



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Sunday, 15 September 2019

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