Outsourcing refers to contracting work to another company that might otherwise be performed by in-house employees. Many big companies outsource certain specialized jobs such as call center services, software maintenance services, etc. These contracts are taken up by companies that specialize in these services.
Customer satisfaction is an important aspect of outsourcing. It is about building relationships based on trust and mutual respect.
Software outsourcing has become an important factor for companies that present a cost and quality advantage in a competitive market. More often than not software outsourcing is done to a company which is situated offshore in another country or continent. India has become an important centre for IT or software outsourcing with its large pool of technical experts and low wage rates. It has attracted a lot of investments from domestic as well as international players who have setup their centers here and have seen them grow into multi billion dollar businesses.
Developing software in-house requires huge infrastructure to be setup, lengthy recruitment procedures to be carried out, maintaining standards and codes in the facility and lots of other compliance issues to be met and complications to be handled. When compared to all the hassle, outsourcing emerges as a very easy and convenient option. It takes away the entire headache and also lets the company concentrates on the core business activities rather than fussing about supporting tasks.
Other reasons why companies outsource software development are:
Cost savings: Mostly the countries where the outsourcing centers are setup offers lower wage rate than the company’s primary country.
Cost restructuring: Outsourcing allows increase in the ratio of fixed cost to variable cost. Most often the project outsourced has a fixed payout amount and even in projects where the client is billed by hour the variable expense estimation becomes easy to estimate.
Better quality service: The company to which the job is outsourced are experts in providing the services and often has world class facilities and capabilities with access to better technology.
Staffing convenience: The service providers have access to a better and large talent pool well suited to provide quality service to the company’s clients.
Reduce delivery time: The development of the product becomes faster as the company is now able to focus on improving its core activities.
Risk management: Some companies are better positioned to mitigate certain types of risks owing to their nature of business or location. By not keeping the entire chain of work with itself the company has transferred some of its risks on the other company now contracted to provide certain services.
Some disadvantages of software outsourcing are:
Company client link: It removes any direct communication between a company and its clients. This hampers the relationship building activities of the company.
Information confidentiality issue: Sensitive client and company information in the hands of the outsourced company may be vulnerable to leakage thereby posing problems for the main company on confidentiality terms and conditions. Strict, written and signed contract documents have to be kept in place with relevant clauses to tackle this problem.
Software development has changed the way people look towards IT. The information technology field is experiencing an all new area of expertise - Software Development, and the same has motivated most business houses to get automated through custom made software for their organization.
Outsourcing software development has been recognized as another great way of getting the same software built at cheaper prices and through experienced and expert manpower. Most software development companies have started outsourcing their software solutions project to small companies overseas and this is usually referred to as offshore software development. The outsourcing of software development is done mainly to save money and utilize the expertise of trained and experienced manpower. Outsourcing software development has enabled large corporate software development houses to save on costs incurred on developing portals, e-commerce applications and custom software which is done by freelancers or small companies who charge much less. By doing this, the margins have increased to a larger extent and companies have started making the most of this offshore development business.
The large software solution companies are working on a pattern where they procure orders from the foreign clients at much higher rates and then outsource the same to their local counterparts and in other cases the companies take orders for developing a custom or a basic software and the same is passed on to the other developer for making at a much lower cost. This process enables the so-called middlemen to earn maximum and they save on the other costs such as costs of hiring of manpower and maintaining a proper office for software development.
With the internet as the technological base, companies have created a virtual office space where through video conferencing, the client is able to speak to the vendor and the same can be done even if the vendor is sitting in some other country. This enables the company to build the software without hiring professionals for which they would have had to pay much higher salaries. Close co-ordination is done through video chat which enables the vendor to understand the complete requirements of the client and develop such software which shall help the client in achieving his goals.
Most talented people come for a price and the same is calculated when outsourcing is done. The business houses hire offshore teams to get their high-end back office or front-office applications made which can be used sitting anywhere in the world. Good talented people from other countries are hired as freelancers for outsourcing and this is the base of the development in most companies. Software development is the key to growth in any business and the same should be done by efficient personnel. Be it a small documentation process which needs to be automated or a high end software development project, outsourcing is the key to get quality software development done. With high-end software development, most processes can be automated and these can result in saving of costs and time spent on manpower and talented and skilled labor.
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