Outsourcing vs. Offshoring: What Is Better for Your Software Development Project

A company that hires a third-party developer to build a personalised application is an excellent example of outsourcing software development. The developer may be from anywhere in the world. The same holds for a company that opts to use an off-the-shelf software package but has a consultant adjust it to meet their requirements. The consultant may work from any location in the world.

Offshoring – What Is It?

Offshoring refers to a scenario where a company chooses to relocate all its operations to a secondary company located in a different country. A company can decide to offshore its operations for several reasons, including:
• Boost the quality of its workforce
• Gain access to a larger labour pool
• To benefit from lower operating costs

Multinationals looking to expand rapidly may choose offshore software development because it offers them better access to specialized skills. When it comes to software development and testing, offshoring will involve creating a development centre in a different country.

The country will then hire local developers to work at the new facility. Business leaders constantly must decide on the best offshore service provider. A key decision revolves around deciding whether to outsource or offshore the company’s software development.

Offshoring Benefits

1. Cost Savings

Offshoring can lead to significant cost savings as the labour costs charged by an offshore team are much lower. It’s one of the main benefits of offshoring software development.

2. Access to a more talented labour pool

Your business will have better access to a more talented pool of developers through offshoring. The outsourcing companies can find you the best developers for the project without worrying about geographical constraints.

3. It enhances productivity

Increased productivity is another benefit linked to offshoring. An offshore team will have more time to focus on software development instead of juggling administrative tasks with software development.

Outsourcing in Software Development

Outsourcing involves hiring a third party to complete a project that would, in previous instances, get completed internally. In the case of software development, it means hiring external developers to develop business processes or applications for your company.

Management may choose to outsource a part of the project or have it all outsourced. Partial outsourcing often targets a portion of the codebase that needs fixing before the internal coders can progress any further.


The Benefits of Outsourcing Software Development

1. It allows the company to focus on its core abilities

This is the main reason companies outsource software development. By outsourcing, they get to focus on the areas they excel in, allowing a specialized team to handle the rest. The process enables the company to gain access to more talented developers than it has in its in-house team.

When done correctly, it can save the company money and time. Experienced developers will likely produce a more viable product than someone who is getting started in software development.

2. Outsourcing Can Reduce Operating Costs

Outsourcing can enable the company to lower its operational costs by having an outsourcing company source for the developers. An outsourcing company will typically have more experience handling different types of projects.

Their experience in this field makes it easier for them to locate the best software solutions at a much lower rate. In some cases, the companies may find experienced developers charging friendlier rates, which would benefit your business in the long term.

3. It makes it possible to hire the best talent in the world

The ability to hire the most talented developers regardless of their location is one of the main benefits of this process. Outsourcing companies have a much wider reach than individual companies and can hire talent from all cultural backgrounds.

4. Outsourcing can assist small businesses in expanding much faster

Small businesses that outsource software development have a chance to expand their operations faster than they would in a normal scenario. Outsourcing allows them access to experienced developers leaving them to concentrate on their primary areas of expertise.


What Separates Outsourcing from Offshoring?

While outsourcing and offshoring both refer to different types of outsourcing, you can’t use the two terms in an interchangeable manner.

Comparison Chart

Offshoring Outsourcing
Definition Offshoring involves getting the software development project completed in a foreign country. Outsourcing refers to the process of having a third-party or external organization complete the software development project.
Risks and Criticisms The process faces heavy criticism for transferring software development jobs to foreign countries. Additional risks include poor communication, language differences, and geopolitical risks. The main risks associated with outsourcing include misaligned interests between the clients and vendors, lack of in-house software development knowledge, and over-reliance on third parties.
Benefits Benefits include lower costs, quick access to experienced developers, and getting the software development project completed fast. Benefits include labour flexibility, cost efficiencies, and the ability to take advantage of a more talented labour pool.

When Should You Outsource or Offshore Software Development?

Outsourcing is the preferred option for a small business with a limited budget or limited access to resources. It enables your personnel to focus on their core strengths while leaving the technical work in the hands of experienced developers.

Larger companies that would like to increase productivity and save money should consider offshoring.

Overall, the question of whether to outsource or offshore a software development project depends on various factors, including:
• The availability and cost of hiring offshore skilled labour
• The resources and skills available in-house
• The type of software development project available


Some software development processes are best offshored, and others outsourced. It all comes down to what the company needs. Consider outsourcing if you want access to custom software without hiring a permanent development team. But, if your business will need ongoing software development and wishes to retain proprietary data within the company, it should consider offshoring.

Author Bio:

Ian Carroll is the owner of Digital Funnel, a Digital Marketing agency that specialises in SEO in Cork and SEO in Dublin alongside Web Design. Ian and his team have helped numerous local businesses increase their online presence.

Check out all the software testing webinars and eBooks here on EuroSTARHuddle.com

About the Author


Ian Carroll is the owner of Digital Funnel, a marketing agency in Cork.
Find out more about @dfunnel

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