Enterprises start with ideas but are forged in fire by teams. Nowhere is this more true than in the competitive environment of the IT industry. The ability to create software is a craft, if not actually an art in itself. I personally believe it is a bit of both - a feat of engineering and a creative outlet for our skills.

Businesses live and die by their ability to deliver an initial Minimum Viable Product (MVP), which depends highly on whom you choose to develop it. The reality of software development is increasingly tilting the balance in favour of one out of the three available options – outsourcing.

Who Can Build Your Product

The first and most obvious option is to develop a product in-house. This is becoming increasingly rare, but it is still viable. All the low hanging fruit concepts have been already picked and there are tens of thousands of people whose job is solely to scout for new ideas for products. Even if you achieve some headway with your product, it is quite likely a major company will develop an identical MVP first and start cornering the market.

The second path calls for outside assistance. Hiring freelancers often seems as the most logical option but it is actually the most common mistake for new companies. The ability to effectively include new team members or outsource specific tasks is highly dependent on managerial skills, planning and clear goals which in turn are affected by characteristics of the people you hire. Freelancers are also paid by the hour and hold no particular loyalty to your product or enterprise. Their only incentive is getting paid after which they move on to the next task.

It is software development agencies that are motivated by successfully accomplishing a project.

Team loyalty and communication skills are two resources that are often undervalued. Hiring a team of software developers can relieve you of the burden of micromanaging and free your resources for other aspects of your business. Money invested in outsourcing software development presents major long-term savings and greater production increases.

Ultimately, outsourcing MVP development is the most advantageous choice and there are multiple reasons why.

1. The New Normal, Not the Next Big Thing

In-house development is increasingly becoming a hallmark of the past. Outsourcing is among the fastest growing sectors in global software industry. Although outsourcing market was worth around $24.6 billion two years ago (2017), it now exceeds $200 billion ac according to a report from February. Analysts are calling it the new normal.

The outsourcing market is driven by the rapidly rising service of business process outsourcing, but also by the rise of new outsourcing services. The new focus of outsourcing are specific value-added services and many new companies are rising to the challenge, competing for dedicated service to their clients.

The major new player in the outsourcing market are Central and Eastern Europe. Their industries have experienced a major rise in the number of software developers, ready to join the growing outsourcing market. They are driving a new dynamic to the already large outsourcing markets in Asia.

The homegrown IT industries in Central, Eastern and Northern Europe are already a staple industry.

The premier telecommunications software, Skype, was built by Estonians. The most recognizable Polish property is the Witcher game series made by CD Projekt, world’s most reputable game developer studio. In Croatia, Photomath grew into the world’s most successful education tool and reached around 100 million downloads before integrating with Snapchat.

2. Reduced Costs are Out, Loyalty and Trust are In

Outsourcing as a method was developed to reduce costs. It is prudent to notice that this is no longer the case. The traditional outsourcing market (especially in Asia) was driven by cutting labor costs by underbidding other options. That strategy was based solely on quantity multiplied by low price. A massive team of highly skilled workers provided by software factory farms will never be loyal to a project, knowing they can always easily be replaced.

The driver behind this new outsourcing trend is the reorientation of the industry from price-oriented to project- oriented. Quality and reputation foster mutual trust, while money based incentives are increasingly losing their effect. Positive outcomes are more important as is the interpersonal relationship between developers and clients.

A rapport between the client and developers enables a friendly environment where the developers can even help you to market or pivot your product. Honesty and trust are the currency of the future – although we are still keeping an eye on what will become of cryptocurrencies.

3. Not Contractors, but Co-Founders

Conventional thinking implies that outside development team members are nothing more than contractors. Actually, nothing could be further from the truth. They are partners, but, especially for start-ups, they are effective co-founders all but in name.

First of all, development agencies have a vested interest in working side-by-side with clients. The client also has an interest for having a dedicated team of service experts at call.

Second, project risks are shared between both the client and the contractor. Since the focus has moved on to completing and delivering a viable quality product, the interest in the success of the project is common to both, making them the same team all but in name.

Developers can manage themselves, freeing your time and resources to focus on financing, marketing and promotion while the technical partner estimates and fulfills the timetable.

Developers can also give you a viable estimate of the future problems or future upgrades needed for your product. This eliminates the unforeseen problems in functionality. This is especially important with MVPs, since it is just the first iteration.

Finally, if the client plans to transition to an in-house team, the outside developers will be of crucial importance to explain them how the product has been coded and why. It is more than likely that both teams will have to consult each other in the future.

4. The Future is Now

There are multiple technology trends that require dedicated support, especially in the venue of added price values. Intelligent automation is driving the demand for integration of intelligent automation and data analysis. Cloud computing will impact a full $ trillion in IT by the end of the year (2019). It will require both dedicated support and integration of data storage but also continued security of such centres.

All this trends are part of the new Business Process as a Service (BPaaS) model that reduces labor costs not through cutting wages, but by cutting labor count through increased reliance on cloud computing and automation. The consensus within the industry is that Robotic Process Automation will receive huge investments from businesses as they follow the leading trend of the 2020’s.

Service sectors like banking, healthcare and commerce are adopting progressive web apps (applications that combine feature of mobile applications and desktop websites). Within a few years they will be ubiquitous. It is quite likely that the products that rely on traditional distinctions will be left behind by new services.

5. Expertise, Expertise, Expertise

It comes without saying established development teams bring experience to the table. The actual advantages of this are actually quite multiple and it is important to enumerate them.

First of all, software developers can understand your pitch exactly and translate it into a MVP. Their experience will help identify practical implementation problems ahead of time.

Second, software development teams can specialize for specific areas which is not logistically feasible for an in-house development team.

Third, developers have experience when it comes to integrating products with the global network and can optimize your planned product, skipping the time and money wasted on learning on mistakes.

Fourth, they will build a structured, clearly and cleanly coded base for the product. This will not only make the product work better, but enable your in-house employees to easily understand the internal logic of the product.

6. No Time is Wasted

In software industry, reduced time cycles are the king. Hiring a dedicated developer agency will reduce the time needed to develop a MVP to a minimum for several reasons.

Expertise and knowledge has already been mentioned, as the developers will be able to avoid blind alleys in project. However there is a management aspect that also shortens the required time. Even an in-house team will likely need to consult specialists for specific tasks or divide tasks between other duties.

There is also resource integration, training for specific skills and potential need for recruitment of new members. A software development team can start working as soon as the contract is negotiated, starting the project with a full team.

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Source: Ameri Research Institute, Feb 2019

In Lieu Of Summary

I hope you found this article somewhat enlightening. I should note just one thing: the outsourcing market is growing faster than analysts initially estimated.

The April 2019 Microsoft market capitalisation passed $ 1 trillion dollars particularly because of the robust rise in business driven applications. Even the earlier estimates for the growth of the global outsourcing industry have to be constantly revised.

About little more than a year ago (January 2018) it was initially estimated that the global market will be worth $262.2. billion by 2022. However, report from February 2019 estimates the market was already valued at $ 203.8 billion in 2018. and will reach $360.76 billion in 2026. The numbers are certainly in favor of outsourcing, the only “difficulty” is that the market is growing faster than expected.

References

  1. RPA will reach $2.3bn next year and $4.3bn by 2022… as we revise our forecast upwards

  2. Adoption of Big Data, Cloud and BPaaS drive the Global Business Process Outsourcing Market

  3. Global Business Process Outsourcing (BPO) Market Outlook To 2026: In-Depth Market Overview, Service Categories (Finance & Accounting, Human Resources, Knowledge Process Outsourcing, Procurement & Supply Chain, Customer Services, And Others) End-Use (Banking, Financial Services, Insurance (BFSI), Healthcare, Manufacturing, IT & Telecommunications, Retail, Others)Regional Segmentation, Pricing Analysis, Pipeline Analysis, Competitive Dynamics, M&A Insights, Segment Forecast And Conclusion

  4. Business process outsourcing industry worldwide - Statistics & Facts

  5. Global Software Outsourcing Market - Growth Prospects, Competitor Analysis, Regional Insights, Market Trend Analysis, Forecast to 2025

  6. Global Software Outsourcing Market Size, Status and Forecast 2019-2025

  7. Top IT Outsourcing Trends for 2019

  8. Software developers in Europe & the world: a study on the attractiveness of top tech cities for software developers

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