Outsourcing software development - hiring an external team or individual to handle its software development tasks - has long skyrocketed in popularity thanks to the increasing need for technical skills among shrinking IT talent pools and the major cost-effectiveness it offers. However, while the potential financial benefits of cheap outsourcing can be more than a little alluring, it's essential to understand that cheaper isn't always better. This article will go through the reasons why cheaper isn’t always better when working with a software outsourcing company and what you should look out for when aiming for the lowest costs.

A Quick Overview of Software Outsourcing

Software outsourcing involves delegating software development tasks to third-party experts. It allows companies to leverage the skills and expertise of specialized software developers without having them on their payroll. Outsourcing software development can provide several benefits including cost savings, access to global talent, increased efficiency, and allowing companies to focus on their core business. 

Picking the type of software outsourcing model you need is a key step There are three types of software outsourcing models:

• Offshoring: Involves outsourcing work to a different country with lower development rates - think Pakistan or India.

• Nearshoring: The work is outsourced to a nearby country. For most North American companies, this means hiring developers in Latin America,

• Onshoring: Also known as domestic outsourcing, involves outsourcing work within the same country.

The Attractive Factors of Cheap Outsourcing Solutions

Why companies are drawn to cheap outsourcing 

The primary appeal of cheap outsourcing is cost reduction. Companies believe they can maximize profits by hiring developers at lower rates if they hire them as contractors, which is true. However, an outsourcing company that offers rates extremely below average industry rates and lacks a proven track record is most likely cutting corners one way or the other. 

Long-term financial benefits for all kinds of businesses

Cheap outsourcing can offer immediate financial benefits like reduced labor costs and overhead expenses. In the large majority of cases, it has been successful in reducing costs and ensuring staff flexibility. In fact, the estimated success rate of outsourcing software development is 78%. 

Successful and affordable software outsourcing exists

Several companies have successfully leveraged cheap outsourcing, as some of the world's most successful internet companies were built using outsourced technology. When everyone knows outsourcing software development brings several cost-saving benefits, it’s easy to ignore the red flags and get blinded by the low prices. 

The Hidden Costs of Cheap Software Outsourcing

Quality issues and rework costs

However attractive the price, cheap outsourcing software development solutions can compromise the quality of work. Sometimes lower prices mean lower quality if you aren’t careful enough when selecting your outsourcing partner. When you opt for the cheapest service without thinking twice, you risk ending up with an inexperienced team that delivers subpar work and doesn't meet your business's goals for the development project, leading to increased rework costs.

An outsourced development team that is not the right fit for your company

With low rates can also come poor results, and these start from the earliest stage: the recruitment process. If the software outsourcing company you’ve partnered with doesn’t have the right experience or enough seasoned staff members to vet, interview, and hire developers who fit all of your company's requirements, your entire project will be at risk. 

Security risks in software outsourcing

Outsourcing software development with a vendor that doesn’t shy away from cutting corners everywhere can expose your company to security risks if they lack proper security measures. Some of the measures to always look for include double-step verification for all developers and core team members’ accounts, anti-virus and hack-protection measures in place, and liability insurance in case anything goes wrong. 

Lack of support from the software outsourcing company you’ve partnered with

When you get extremely low prices, they can come with extremely low support on your outsourcing project. It’s not rare for companies to save money on client support to secure those extra cheap rates. Here, you might get a good team to work with, but absolutely no support or guidance from the company that hired them for you. 

Unhappy employees due to extremely low salaries

Sometimes, the reason why certain outsourcing - whether it is offshoring or nearshoring - companies offer such low prices compared to their competitors can be because they’re paying the developers a salary way above their market rate. Truth is, those extraordinarily low costs tend to come from one or another corner being cut somewhere along the outsourcing software development journey. Sadly, it’s more often than not thanks to the company taking on bigger margins than what they claim, underpaying the developers, and risking bringing a very unhappy outsourced development team into your company. 

The Long-Term Implications of Outsourcing Software Development The Cheap Way

Poor-quality software outsourcing can easily damage a company in both the short and long term, as it would lead to faulty applications and a declining online presence, resulting in unsatisfied customers and revenue loss. 

There’s also a big risk of generating a long-term dependency on the outsourcing provider, even though their results are not the best, just because it’s harder to start from scratch or due to a lack of documentation with your development projects. This makes it really difficult to change providers or bring the outsourced development team in-house if you ever want to get a better bang for your buck and not just quick cost savings. 

Making the Right Choice in Outsourcing Software Development

Considering the total cost of engagement

Companies should consider not just the upfront costs but the total cost of engagement, including rework costs, management time, and potential damage to reputation.

Identifying the right partner for software outsourcing

Choosing the right partner involves assessing their technical expertise, understanding their process, checking their track record, and ensuring they have robust security measures in place.

Best practices for outsourcing software development

Some of the must-do steps before hiring an offshore or nearshore development company include setting clear expectations, maintaining regular communication, implementing a robust contract, and having a contingency plan in place.

Start Outsourcing Software Development and Hire LATAM Developers With Blue Coding

While cheap outsourcing can be tempting due to its upfront cost savings, it's crucial to consider its potential hidden costs and long-term implications. You and your team should carefully evaluate different potential outsourcing partners and follow the steps featured in this article to ensure a successful software outsourcing journey. Ultimately, the goal should be to achieve the best value for money, not just to snatch the lowest-priced offer and run with it without giving it any second thoughts.

At Blue Coding, we have years of experience outsourcing software development and helping North American companies hire LATAM developers at an affordable price. Our technical recruitment team ensures that every candidate is a good fit for your project and we handle the entirety of the hiring, vetting, and onboarding processes - while offering you support for the duration of your nearshoring contract. We have built relationships with many clients over the years and they trust us because of our proven results, and we can offer you the same positive nearshore development experience. Contact us today to schedule a free discovery call and learn more about our nearshoring services!