Anti-Crisis Guide For Software Development Outsourcing In 2022

Let’s face it: the world of website development and marketing has become quite complex. Among the many disciplines that serve as the basis for vertical and horizontal business units, one person or even an agency can’t manage to become a super master of all.

That is why, back in the 1970s, manufacturing companies began to turn to outsourcing, that is, to transfer some processes to other performers.

Today, in most cases, it takes the entire back ofﬁce operations, including human resources, payroll, and accounting, which helps to reduce costs, improve response time and develop new products faster than ever.

As globalization has picked up steam, so has the race to get the best software developers locally and globally.

Indeed, McKinsey reports that labor costs in different parts of the United States can vary by as much as 30%. The same situation is observed in Eastern and Western Europe.

Hiring locals surely helps “to appease public judgment,” but the main argument for it is even more critical.

Since most routine goals have already been offshored, low-cost suppliers are now trying to win highly qualified work, such as managing human resources and sophisticated multi-faceted tasks.

Nevertheless, when outsourcing software, you can’t overlook innovations, flexibility, and execution speed as these are the major advantages of any brand on the market, regardless of the niche. Most of the resources devoted to IT shouldn’t be spent on maintaining the status quo but on inventing new ways of doing things.

What and how much of its production should be offshore is one of the most significant choices a vendor can make. So below, we will try to lift the curtain in the face of outsourcing, which has undergone global changes due to Covid-19, the decline of social policy, and the economic crisis.

Types Of software Outsourcing

When it comes to types of outsourcing, a majority determines them rather narrowly depending on location.

Offshore, onsite, and onshore are quite familiar terms, but there are many other forms of interaction between entrepreneur and employee. They are not mutually exclusive but frame perspectives of business management strategies.

Location-Based

Any attempt to systematize the various types of outsourcing would be partial without consideration of location-based models.

Onsite form involves implementing tasks locally and in a certain amount of time. For example, cybersecurity processes may require sending specialists onsite for several weeks to learn any systems’ operations.
Onshore projects are limited to execution outside the company office but in one country. However, finding staff with specific skills can sometimes be difficult, much less saving money on hiring.
Nearshore is the interaction with service providers from nearby countries within the same time zone. Thus, you can communicate effectively with people from a close cultural background.
Offshore partners are located in distant states and can sometimes be the most profitable solution because of the difference in labor costs.
Multisource is a harmonious form of applying external and internal resources to manage multiple projects in possibly various locations and with different performers simultaneously.

Relationship-Based

There are three kinds of outsourcing applied to characterize the combination of ownership and liability between customer and contractor:

Staff augmentation;
Dedicated team;
Project work.

Increasing external hire on the buyer’s premises for a certain time allows for minimizing formalities with hiring and payroll services, varying FTEs if needed, and quickly ending a partnership compared to terminating an employment agreement.

The principle of a dedicated team includes long-term staff employment with a certain skill level. This approach is convenient when the scope of work cannot be strictly identified, and requirements may be modified during the sprints.

Project work involves placing the liability for the result on the implementing partner. Thus, the latter must achieve the goals according to specifications and in a certain time.

So, relationship-based interaction can be determined independently of location. However, location-based engagements cannot be considered without relationship understanding.

How To Choose The Right Type Of Outsourcing?

To choose the most suitable option, you should consider the resources you have (e.g., proficiency, time, labor, and scalability.) So when taking the first step toward outsourcing, answer to the statements:

How Flexible Will Your Interaction With The Outsourcer Be?

Budgeting, expertise, turnaround time, and the ability to implement changes to processes – all of them will also be deciding factors in choosing an option.

Do You Have In-House Experience In The Area Covered By The Project?

If you have good field knowledge and need more hands-free to delegate tasks, a dedicated team might suit you.

How Much Time Are You Willing To Devote To The Project?

Various models require a certain amount of time to manage – for instance, staff growth takes more attention than a dedicated team or project work.

What Level Of Management Suits You Best?

When considering an increase in the number of team members, it is worth determining the degree of responsibility for the result. Accordingly, relationship-based interaction can have different levels of quality control.

It is worth thinking about the priority of tasks – if they require a lot of involvement and quick execution, then you should consider expanding the team. In contrast, project work is suitable for those looking for a long-term partnership with possible flexible processes. But how to choose the location-based option? Does everything depend on one’s wishes or geographical affiliation? We will try to find out in the next section.

Where And How To Find Reliable Staff?

Two years after the pandemic of Corvid-19, with a deeply stagnant economy and social politics, the survival strategy that many organizations had to resort to shifted to prosperity.

Of course, technology became an integral part of the crisis response, allowing it to stay afloat for quite a long time. But the devs pool shortage in the IT industry has become tangible and caused a break in patterns concerning outsourcing.

Worse still is the detrimental impact of specialists shortage on companies’ technological progress and, by extension, their competitiveness and profitability.

The optimal cost of labor hours is built depending on the standard of living, average income, political situation, and many other factors. In this case, the required expertise of specialists is a decisive factor in the choice, especially considering that most of the low-skilled operations have been automated during the pandemic.

From this, we can conclude that the labor market has changed dramatically over these two years, creating a more competitive environment to meet customer demand for highly skilled labor.

According to Deloitte, 65% of successful shared services organizations already include outsourcers in their delivery model. Changing business process chains entailed the movement of outsourcing resources closer to home, that is, to nearby countries.

As a result, many companies have focused on nearshoring to afford greater control over their contracts while filling open IT jobs. Nevertheless, the cost of specialists strategically increased, which caused dissonance in the understanding of outsourcing arrangements.

And if you think that the price has become an indicator of high-quality completed projects, it’s a misconception.

Outsourcing with Canada or Mexico may not produce the expected balance of price and quality. In contrast, the holy grail of IT talent for America has recently been Central and Eastern Europe. And here’s why.

Today, many foreign clients have begun to form effective collaborations with Ukrainians and Poles.

The fact is that these two countries have already proven themselves in the international arena – hence the high score on the Global Services Location Index. However, a vast tech talent pool combined with low labor costs are the dominant factors attracting foreign investment to Ukraine.

Here ICT share industry accounts for about 4% of GDP, slightly less than Poland with its 8%. Even though India and the Philippines are at the same level of market value, their export service quality is inferior – the difference in cultures, lack of skills, and lower intermediate English have caused such hard-working and dedicated people to fail. Thus, there is now a profound rethinking of work strategies, which has led to a gradual improvement in the education sector.

European standards originally focused on highly qualified tasks, which could sometimes take longer. Therefore, traditionally the most common form of cooperation here is offshore project work, which allows for the use of highly specialized skilled labor.

Multisourcing is also a widespread phenomenon because it allows the use of other countries’ domestic and competitive resources.

The dynamic growth of the Polish startup ecosystem has also shown promising results over the past few years – it, like Ukraine, takes the place of the third top ten countries of the Global Startup Ecosystem Index 2021. Many accelerators and incubators are working in the fields of fintech, food tech, AI and RPA, data analytics, and SaaS.

Over 100 R&D centers of such giants as Microsoft, Ericsson, Siemens, and Oracle have partially decided to transfer their assets to Ukraine. It’s also home to fantastic opportunities for internal capital in SaaS, eCommerce, security, and ML / AI. Great companies like GitLab, Grammarly, and Template Monster have reached unprecedented heights on the world stage here.

Until 2022, Kyiv was consistently climbing up the Global Startup Ecosystem Ranking. At the end of February, the conflict with russia escalated, and all hopes for rapid progress collapsed. Ukraine remained in a de facto state of war over the status of Crimea and Donbas for many years; thus, 8 out of 10 foreigners who have decided to pursue business opportunities admitted that Ukraine was difficult to do business.

Today it has become even harder – the daily shelling of Ukrainian cities by the russian federation has forced many women and children to leave their homes and move to neighboring countries. Men from various professions joined the ranks of soldiers and volunteers.

But thanks to the help of the U.S., U.K., and Europe, this small hero country almost in the center of the continent continues to fight a desperate battle for the right to be a united nation and to live on its land.

Its economy has suffered, but the new regulations allow businesses to keep afloat by establishing a more transparent legal system and effective management.

To stay in the market, many Ukrainian companies moved their facilities to Poland, allowing them to inject significant investments into the domestic GDP.

Polish corporate law is very friendly to foreign investors; therefore, relocating employees to this country is quick and without bureaucratic costs. As a result, many Ukrainians work as outsourced workers, being guests of their neighbor country.

The post-Covid period marked the beginning of a new stage in outsourcing – its principles, locations, and prices have changed.

As a result, countries that previously were considered a mecca of talents just two years ago have to rethink their strategies for dealing with foreign investors.

In contrast, Europe has managed to create a more favorable ecosystem of remote labor, which adheres to high standards of project execution.

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