CEO Perspective: Q&A on Outsourcing Software Development
More organizations than ever before are exploring outsourcing as an option to manage the challenges of software development.
In this Q&A, KMS CEO Leo Tucker talks through the current state of the outsourcing and development landscape, and where we’re headed in the future. Keep reading to dive in!
Q: What are the biggest challenges in software development in 2024?
A: It’s certainly not the great resignation anymore. That said, there’s so much pressure that’s put on so many software companies, in particular, by the PE owners, or by their boards, to keep accelerating and keep putting out more and more feature functionality.
But acquiring affordable talent to meet that demand is still a challenge. Companies are competing with Silicon Valley salaries, and tech layoffs have led to highly-paid candidates flooding the market. Hiring is expensive. Retaining talent is expensive.
Since many tech employees have low retention, companies are paying a premium and ending up with gaps in internal knowledge and delays in releases. Meanwhile investors’ expectations don’t change.
Q: Which tech skills and roles are the toughest to staff?
A: While finding talent for common technologies like Java or Python might be easier due to their widespread use, securing experts in older or legacy technologies like Ruby on Rails can be particularly challenging. Many companies are still working off of these technologies, but newly graduated developers aren’t trained in them. There’s a shortage of these specialized skills.
Generative AI has also led to an increased need for data architects and engineers, as well as AI and ML talent. The demand for these roles surpasses the supply. As more companies adopt generative AI, they’ll come up against challenges in getting these emerging models to work according to their expectations, or their investors’ expectations, and they’ll be scrambling to pull in people who are, again, very expensive and often hard to retain.
Q: How have these challenges impacted demand for outsourcing?
A: More companies are exploring offshore and nearshore development to access global talent pools at a lower cost, while maintaining high-quality products. It’s increasingly common, an increasingly competitive solution.
In that same vein, many companies are looking for guidance to successfully leverage outsourcing. How do they ensure product quality, timezone alignment, and upkeep with emerging tech like GenAI?
Outsourcing firms must streamline their models to address these concerns as demand for their services increases.
Q: What should companies consider in their approach to outsourcing?
A: Partnerships are important. You need someone who understands the business value of what you’re trying to do. A partner can help achieve big picture outcomes, recommend innovations, work with investors, and grow with your company. Organizations with hardened processes, good references, and low team attrition are the best fit to become an extension of your development team.
When you look at things like managing different timezones, you want to work with someone who has deep experience in serving US-based clients and a system in place to ensure that the process is smooth, that common concerns are addressed proactively.
You also want to ensure you’re finding an outsourcing partner with a sustainable model. Many outsourcing companies are based on a staff augmentation model, where one or two developers tack on to a team. These developers require training and resources from your company. Another approach, which we’ve found over many years to work better, is a fully dedicated outsourced team. These teams are fully functional and self-managed, which removes the burden from a software company while still giving them enough oversight and transparency.
Q: What trends do you anticipate in outsourcing in the next 5-10 years?
A: There will be greater adoption of offshore teams, especially in Southeast Asia and Vietnam. As communication tools continue to improve it gets easier to deal with people in different areas. Beyond just offshore, there will be a growing use of nearshore as well. Wherever people can find talent, the need for more software development will continue to grow.
There will also be an increasing use of new technologies. For example, as software like Salesforce becomes more prolific, more organizations will seek dedicated support for these tech stacks. Similarly, more emphasis on data engineering as GenAI becomes more prominent. Internally, outsourcing teams will use new technologies to further increase velocity, efficiency and effectiveness. Those who become most proficient with these tools will win in the market.
Q: What are the benefits of working with an outsourcing partner?
You see benefits like increased team capacity and faster development cycles. Faster speed to market and better product quality, more features, less technical debt, more return for your investment.
You’re able to staff those hard-to-find roles and skills at a lower cost. Your internal development teams get the support they need, which can help with your own retention and reducing burnout.
Ultimately you’re enhancing the software development arm of your business, which is core to your success and winning over competitors.
