Outsourcing of development

When many think about outsourcing, they imagine huge buildings in India full of hard-working people. While this is definitely¬†one version of outsourcing, it’s absolutely not the only one. The simple definition of outsourcing is “obtain (goods or a service) by contract from an outside supplier.”. In regards to software development, this can work in many ways.

When we talk about outsourcing we usually put it into 3 different areas:

  • Classic outsourcing
  • Nearshoring
  • Managed outsourcing

Classic outsourcing is where you have a team somewhere in the world, typically far away in cheaper regions of the world, that work for your team. A typical example is a bank from the western part of the world, that has a team somewhere in Asia.

Nearshoring¬†is the combination of “near” and “outsourcing”. The typical example here would be you have a team close to your original team – if you’re in the US it could be Mexico, and if you’re in Europe, the nearshoring area would be for instance Ukraine or Romania. Nearshoring is usually more expensive than classic outsourcing, but you have the benefit of less timezone difference and a better culture match.

Managed outsourcing is the setup where you have a project manager either from your own country or someone that has so much experience with your culture, it’s close to being the same. Here the outsourced team (which in practice can be both an outsourcing team far away from a nearshoring team that is located closer) has a project manager, that makes sure the team manages the team correctly.

Do I need a TEAM when I outsource?

Whenever you read about outsourcing, it common to talk about teams. Teams are a huge commitment because you don’t deal with a small test or budgets that is below 5 digits in dollars – and it easily goes into 6 digits (100.000+ USD) for a short while.

Classic outsourcing (or nearshoring) is obviously the right way to go for many companies – especially bigger ones. If you already have ten employees and make the strategic decision to start a nearshoring team, it makes sense to start with 3 FTE’s (full-time employees).

Outsourcing can easily be done on much smaller scales. This can either be done as freelancers (which, however, has many other disadvantages), but especially managed outsourcing is popular with smaller commitments. Here you can easily test projects down to a few couple thousands of dollars.