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IT Product Development Outsourcing: Effective Models

IT Product Development Outsourcing: Effective Models

Published on: 30 Apr 2022 9 min read

(Updated November 2022)

IT outsourcing has been the way forward for numerous businesses of all industries and sizes for decades now, and the post-pandemic trends imply its market share is only going to increase over time. So, what do we need to know about software development companies, their products and services, and how to take advantage of the apparent benefits of having an IT services partner company?

Top 7 Postpandemic Outsourcing Trends for CEOs

Before we focus on the different models of product development outsourcing, let’s start with the reasons to outsource, the types of outsourcing, and the stages of outsourcing. 

Can Software Development Be Outsourced?  

Outsourced software development services have become the norm in the past few years, and it is easy to see why. Businesses are looking for more flexibility, scalability, and a broader tech talent pool to tap into. And you cannot look past substantial cost reduction, which is among the top reasons for small startups and sizeable corporations alike. Experienced vendors have access to cutting-edge technology and the know-how to provide better quality on time while their partners focus on their core business.  

What Are the 7 Types of Outsourcing?  

It comes as no surprise that IT outsourcing is among the world’s top outsourced services. Other prominent categories are professional outsourcing (accounting, legal, administrative support), business process outsourcing (virtual assistants, customer service, lead generation), and manufacturer outsourcing (mass production and factories). Multisourcing, process-specific, and project outsourcing are also among the popular types of outsourcing.   

What Are the 7 Stages of Outsourcing?  

The IT outsourcing process has seven stages, starting with assessment (and development of strategy) and proposal (that includes requests for information, proposal, and quotes that are critical for the service provider selection). Then it is onto due diligence and contract procurement (including master services, service level, and non-disclosure agreements). And finally, there are the implementation, delivery, and end of contract stages.  

And now, onto the outsourcing models!

IT Outsourcing Models

1. Project-Based Model

The most common IT outsourcing model offers full lifecycle software delivery. The entire process is the remote vendor’s responsibility – from tech specifications, features, and operations, through development and integration, all the way to testing and maintenance. It is their experts who analyze your business model and determine what system design is necessary to accomplish its objectives.

The service provider’s software engineers and project managers are the ones in charge of delivering a viable solution as per agreed timeframes and customer expectations. After integration, QA verification, and data transfer from the old platforms to the new one(s), the system can be deployed.

Finally, even after the software solution has been built and the product has gone live, it needs perpetual maintenance and updates throughout its SDLC. However, the outsourcing enterprise’s involvement is reduced to following the project progress without any active contribution.

Project-based Model

2. Dedicated/Managed Teams Model

The Managed Teams model is usually long-term and more flexible as it is up to the outsourcing company to define its involvement in the project management and what set of specialists they recruit. Dedicated offshore teams are autonomous and typically hired to help your in-house software engineers overcome challenges in areas where they lack expertise. Another reason can be its reluctance to dedicate its resources to activities outside its core competencies.

The Managed Teams model typically gives the outsourcing enterprise considerable control over the business processes, as their collaboration with the service provider is much closer. The dedicated team operates under the outside supervision of technical team leads and project managers and often creates and manages complete solutions from scratch. Despite the product owners’ flexibility to only recruit particular tech talent – such as QA and software engineers who are the mainstays, hiring a full-blown working unit is not uncommon if the specific project dictates so.

Despite the product owners’ flexibility to only recruit particular tech talent – such as QA and software engineers who are the mainstays, hiring a full-blown working unit is not uncommon if the specific project dictates so.

Dedicated Team

3. Staff Augmentation Model

Staff Augmentation is a short-term solution to rapidly scale up an in-house team by temporarily recruiting specialists to complete specific tasks. The Staff Augmentation model is quite flexible, and the hired engineers would join the local team full time and leave after the project completion. It is more cost-efficient and hassle-free than in-house scaling, but Dedicated Teams and Project-Based models are recommended in case of long-term cooperation.

Staff Augmentation

4. Offshore and Nearshore Delivery Center Model

In addition to choosing the most effective outsourcing model for product development, companies should also consider where to outsource their development. Outsourced offshore and nearshore delivery centers provide the benefits of flexibility and skill access with a focus on value creation and delivery of the desired outcomes.

The offshore development center is responsible for the project management, solution development, and test design and commits to scope, terms, and service delivery. The offshore development partner assumes delivery risks while providing predictable cost services tied to outcomes.

IT Outsourcing Benefits

IT Outsourcing Benefits

1. Cost Reduction

The COVID 19 pandemic reordered businesses’ priorities, and for the past couple of years, one of the main objectives of IT outsourcing has been to reduce costs. Remote work has accelerated digitalization in all aspects of life, and digital transformation has become paramount for all enterprises. The bottom line is remote software development centers are more than capable of providing world-class digital solutions at reasonable prices, which is critical in times of economic recession.

2. Vast Talent Pool

Access to top talent is another reason US and Western European companies are exceedingly outsourcing overseas. The level of tech education in Eastern Europe and Asia is excellent, and the sheer volume of annually graduating developers gives virtually unlimited choice to cherry-pick the very elite. Combined with access to high-end technology, this is a recipe for accelerated time to market and flawless products and services.

3. Flexibility and Scalability

An in-house team will always struggle to provide the flexibility that is a given for offshore software centers. IT outsourcing facilitates companies to easily scale up and down in accordance with their projects’ features and volumes and allows them to react adequately to any unexpected challenges posed by the economic dynamics. A flexible and reliable partner not only shares the responsibility for achieving deliverables and KPIs but also reduces operational costs for technology and infrastructure, as they should be precalculated and included in the contract agreement.

A flexible and reliable partner not only shares the responsibility for achieving deliverables and KPIs but also reduces operational costs for technology and infrastructure, as they should be precalculated and included in the contract agreement.

Service Provider Selection

Define your objectives and prerogatives, then build a comprehensive strategy and include budget, schedule, milestones, and deliverables in a detailed project specification.

Research the major outsourcing regions, their time zones, rates, and product quality. Then look up your potential partners’ portfolios, ratings, and reviews.

Make sure you are always in the loop and monitor the progress by leveraging project management tools such as Jira, Slack, e.g. Clarity and efficient communication will benefit all sides involved.

Software Outsourcing Services

Selecting the most efficient outsourcing model requires some research. You can assess what capabilities you need to outsource and what model will offer the best outcomes by considering the exact specifications of your project and then dive in the specific services you are looking for.

Software Outsourcing Services

1. Strategy and Advisory

Cooperation with an experienced and trusted remote development center helps companies build business-relevant strategies and find the tech solutions to become industry leaders. State-of-the-art products are impossible without custom integrations, software architecture updates, and legacy systems modernization. The Scalefocus team of analysts, consultants, and project managers will guide you through each step of the project and provide expert advice on all aspects, including preliminary analysis and planning, security consulting, solution evaluation, etc.

The Scalefocus team of analysts, consultants, and project managers will guide you through each step of the project and provide expert advice on all aspects, including preliminary analysis and planning, security consulting, solution evaluation, etc.

2. Digital Engineering

Digital engineering is what transforms innovative ideas into trademark solutions. Offshore development centers offer well-oiled units of professionals that have taken years to assemble in order to develop cutting-edge technology in a timely and cost-effective manner that any in-house team would struggle to achieve. Software engineers, UI/UX designers and analysts, data specialists, mobile developers, and QA testers – you name it, they have it.

3. Intelligent Automation

Digital transformation equals survival in this day and age, and intelligent automation is instrumental for evolving businesses. Machine Learning and Artificial Intelligence are already considered indispensable, rather than trailblazing for digitalization processes, and the Internet of Things is rapidly becoming ubiquitous. Scalefocus has a proven track record in helping organizations optimize and scale their business by delivering end-to-end services and providing high data accuracy, speed, and workforce agility.

Scalefocus has a proven track record in helping organizations optimize and scale their business by delivering end-to-end services and providing high data accuracy, speed, and workforce agility.

4. Infrastructure and Operations

Sustainable IT infrastructure and operational excellence are two of the most significant factors for digital transformation. Cloud Computing and DevOps provide the platform for agile development and cost-efficient solutions by production upscaling and computational resources downscaling. .Last but not least, companies need to work in close collaboration with providers of security consulting services to reduce risk and vulnerabilities in operating and managing IT infrastructure network and servers.

Last but not least, companies need to work in close collaboration with providers of security consulting services to reduce risk and vulnerabilities in operating and managing IT infrastructure network and servers.

Do not hesitate to contact Scalefocus and discuss your projects with us, we will be more than happy to assist!

Key Takeaways

Outsourcing product development services is far from complicated, and no wonder enterprises from the US and Western Europe choose to collaborate with offshore or nearshore partners. When businesses have the option to deliver outstanding solutions at reasonable costs while keeping time and resources for their core competencies, the choice is obvious.

About the Author:

Krasimir Kunchev

Krasimir Kunchev

Senior Content Writer

Kras is a true musical force-turned-copywriter. What can we say? Multitalented people do exist, and we got them! He’s been on stage since the mid-nineties when punk rock was alive and kicking. Fittingly, he started his writing career as a rock journalist and later learned his chops in advertising.

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