The benefits of a reliable development partner are significant, but they do come at a price. Software development is expensive, especially when you don’t get it right the first time around.

1. Internal IT team

Building an in-house development team requires an up-front investment and is unlikely to generate any immediate revenue or value. It takes time to build this capability, especially if building software is not your primary objective. This approach is perhaps better for satisfying mid to long-term objectives rather than short-term goals.

Internal IT team - Matthew Weaver
Internal IT team

Start by finding someone that understands technology and development – enough to help you attract and recruit the right people. Employing a development team means that you take responsibility for keeping them busy and helping them to deliver value back to your business. You will need to create a comfortable working environment that requires office space and appropriate hardware. There is also software licensing to consider; the extent varies depending on your objectives and chosen technology. An in-house team may distract you from your core business objectives so carefully examine the alternatives before making a commitment.

2. Contract resources

Contract resources are local, self-employed individuals typically working on a short-term basis. Day rates for contractors tend to be higher, on average, than other options. This may be a good choice for short-term engagements and smaller projects. Contract resources can be a way to quickly add capacity to an existing team.

Contract staff - Matthew Weaver
Contract staff

Contractors generally work onsite and will require office space, equipment and development tools. Be sure to factor these costs into your calculations. You typically employ contract staff on a short-term basis, and their attrition rate is likely to be very high.

When people leave you have the task of finding a suitable replacement. New team members will take time to fit in and acquire domain knowledge. This can create a considerable distraction and will almost certainly reduce your team’s efficiency. The associated costs can be much higher than you think. The true cost of staff turnover The true cost of staff turnoverdiscusses the negative impact of attrition.

3. Local supplier

A local (or onshore) supplier resides in the same country as your business and often in a nearby location. Local suppliers, including contract resources, often charge higher day rates than offshore suppliers. Finding someone relatively close to your offices makes it easier to travel between sites.

Local supplier - Matthew Weaver
Local supplier

Depending on your location, it may be difficult to find a local supplier that satisfies your needs. If your supplier is not nearby, travel and accommodation expenses will still apply when people spend time on site with you. Software companies will be more abundant in major cities; they are equally likely to charge more for their services. In a similar way, there may be competition from other businesses that are also looking for good quality development services.

4. Nearshore supplier

From an IT perspective, nearshore suppliers provide you with software related services from a neighbouring or nearby country. For example, a German company may choose to work with a software supplier in Poland or the Czech Republic. Client and supplier usually share similar cultures and can speak a common language.

Nearshore outsourcing - Matthew Weaver
Nearshore outsourcing

It is also likely that the client and the supplier both exist in a time zone that is either the same or very similar. Being able to speak to your supplier in real-time reduces the overhead that email and instant messaging can introduce. The nearshore supplier may have an onshore office located in your locality, or at least the same country, to supply local support. Nearshore suppliers are likely to charge less than local suppliers and contractors. There is also likely to be an abundance of skilled and well-qualified resources at your disposal. A nearshore development partner can be a happy medium between onshore and farshore options.

4. Farshore supplier

A farshore supplier provides services from a distant country. This option tends to attract a lower day rate than the alternative options. Of course, it is important to realise that a lower day rate does not necessarily mean a lower total cost.

Farshore supplier - Matthew Weaver
Farshore supplier

Farshore suppliers typically have access to a large pool of resources. This means that work can start almost immediately; flexibility exists to add more capacity at short notice where necessary. These benefits do not come without constraints. Farshore suppliers exist in a time zone that is likely to be substantially different to your own. This means that the window of opportunity to communicate in real time is slim. There may also be significant cultural differences which can present problems. As with the nearshore option, farshore suppliers may have an office in your country to provide local support.

4. Multishore supplier

A multishore organisation provides a combination of nearshore and farshore services. In this way, it is possible to allocate work to the most appropriate location. The theory is that this overcomes the constraints that exist when engaging only with a nearshore or a farshore supplier. For example, the farshore element may have lower day rates and be able to ramp up more quickly. The nearshore element may be more responsive and able to communicate in real-time with your business.

Multishore outsourcing - Matthew Weaver
Multishore outsourcing

While this may provide more flexibility, there is an overhead in managing multiple locations. People working for you may be located in a number of different countries.

4. Captive outsourcing

Captive outsourcing is essentially a variant of nearshore, farshore and multishore outsourcing where you own the development facilities. You may acquire an outsourced capability by acquisition, by building it from scratch or as part of a build, operate and transfer process.

Captive outsourcing - Matthew Weaver
Captive outsourcing

As with an in-house development team, you manage the facility and the people in it. Although, in this case, a remote location may present you with additional management challenges.

4. Build, Operate, Transfer

For this option, a supplier creates a development facility on behalf of a client. The supplier takes care of everything – securing a building, plumbing in the necessary infrastructure and hiring the right people to do the job.

Building this capability takes time, and there may be no return for your investment in the early stages. Your supplier will want some form of contribution to cover start-up and ongoing costs. Once built, the operate phase ensures that the facility can deliver as expected. In the final Transfer phase, the supplier transfers ownership and you find yourselves with a fully owned development facility.

Build operate transfer - Matthew Weaver
Build operate transfer

From this point onwards, you manage the facility. The Build, Operate, Transfer model is only suitable for long-term objectives. It is possible that, at some point during this process, both parties agree not to transfer ownership. In this case, the supplier retains ownership of the facility whilst continuing to deliver services on the client’s behalf.