Outsourcing vs. Offshoring: What is Better for your Software Development Project?

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Software Development

Outsourcing and offshoring are terms that are often used interchangeably. However, they’re by no means the same thing. In the case of outsourcing, a company might contract the services of a third-party developer to design and build a piece of software for them.

With offshoring, a company will instead redirect in-house tasks overseas. Both approaches can be cost-effective, helping free up internal resources and ensure that large-scale projects are delivered on time and within budget.

Ultimately, you’ll need to consider the scope of your software project development to decide whether outsourcing or offshoring is the better option.

SmartOffice, an office automation company will explain what each is, the best qualities of both, outsourcing and offshoring and which option is best for your business.

Outsourcing Explained

Outsourcing is a popular option in the software development sector. Many companies choose to outsource tasks to third parties, rather than rely on internal teams. Typically, outsourcing involves the recruitment of third-party developers to customize applications and business processes that will be used internally. By the end of 2023, software development outsourcing is expected to grow by 70%.

Third-party developers may be tasked with completing entire projects. More typically, a third party will be charged with handling a specific objective. Once realized, internal teams can take over. This approach isn’t always practical.

The advantages of outsourcing

Most companies turn to outsource to free up internal resources, allowing in-house teams to focus their efforts elsewhere. It’s often the best way forward if internal teams are highly skilled in certain areas, but lack the necessary expertise to complete business-critical tasks.

The cost-saving benefits of outsourcing are obvious. Generally speaking, companies that employ an outsourcing model can slash their operating costs. It’s also far easier to source the right talent. By outsourcing to high-skilled developers in the short term, companies don’t have to budget for expensive onboarding costs.

Outsourcing to third parties also makes it easy to find the best possible talent around. Just about any software development project can be realized remotely. Ultimately, companies have unlimited reach when it comes to finding the right talent for every project.

Planning on expanding? Outsourcing can help you realize your goals. With no onboarding and dramatically reduced costs, startups and smaller outfits can expand their operations incredibly quickly.

Offshoring Explained

Unlike outsourcing, offshoring involves a company relocating most, if not all, of its operation to a new territory. There are several reasons why offshoring might be the way forward for a business.

If a company is struggling to recruit for roles, shifting operations to a new country can simplify the procurement process. Furthermore, salary expectations and operating costs tend to be lower in other countries.

Offshoring isn’t always an option for smaller organizations. However, businesses with an eye on international expansion can benefit from this approach. Offshoring doesn’t always involve upping sticks entirely. In the case of a software development company, establishing a dedicated development center in a new territory can yield significant benefits.

The Advantages of Offshoring

Why choose to offshore? If you’re looking to make significant savings and reduce your labor costs, offshoring is a great option. Salary expectations and working conditions vary between countries, but you’ll almost certainly find a better deal elsewhere.

Struggling to find suitable talent to take charge of software development projects? It’s not uncommon for businesses to struggle with talent procurement. This isn’t always down to a labor shortage. Sometimes, businesses will struggle to outcompete competitors when it comes to salary and benefits. By offshoring your operations, you get more bang for your buck.

Unless you’re relocating your entire operation, offshoring might seem counterproductive. Offshoring can be a boon for software developer productivity. External teams are free to focus on software development tasks, without being pulled from pillar to post to support internal tasks.

Choosing the right approach for your business

For smaller businesses with less money to play with, outsourcing tends to be the preferred option for software development. In-house teams are free to focus on their objectives, with third-party developers prioritizing more difficult tasks.

However, if you’re a larger organization or multinational enterprise, offshoring tends to make more sense. It can dramatically reduce operational and development costs, even in the short term. Furthermore, it’s a fantastic option if you want to realize huge gains in productivity.

Final thoughts

Are you undecided about whether offshoring or outsourcing is right for you? Before you commit to one approach, take a step back and ask yourself a few questions.

What’s the labor situation like in your part of the world? Are you finding it hard to recruit for key roles? Are competitors making it hard for you to attract the best possible talent? You’ll also need to consider the skill level and resources of your existing in-house teams. Finally, determine the scope of your software development projects.

If you’re looking for a short-term solution and customized development, an outsourcing model is probably the best fit for you. However, if you anticipate ongoing support and know you’ll struggle to secure high-skilled professionals, offshoring is a far better option.


Greg Tuohy is the Managing Director of Docutec, a business printer and office automation provider. Greg was appointed Managing Director in June 2011 and is the driving force behind the team at the Cantec Group. Immediately after completing a Science degree at UCC in 1995, Greg joined the family copier/printer business.

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