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The 21st century executive

Pros and Cons of Outsourcing to a Software Development Agency

Digital transformation has become a major differentiator for business success. The need for digital solutions in business has been buoyed by the massive shift to online work, the growth of e-commerce markets, and other trending technologies. However, many companies don’t have the native capacity for software development to keep pace with their digital needs. That’s where having the right software development agency can help. 

What is a software development agency? 

 Software development agencies are essentially software developers for hire. Much like advertising or other external agencies, they provide a specific range of services to contracting organizations. Most software development agencies are capable of a variety of software development services, from mobile app development to enterprise-level software solutions. These agencies are also a popular choice for building websites and web applications to enhance organizations’ customer interaction and experience. 

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When organizations aren’t capable of developing mission-critical software themselves, software development agencies can provide custom solutions to suit their needs. From internal operations to robust software interfaces that delight customers, such agencies can help organizations improve their performance. 

Should you hire a Software Development Agency? 

While software development agencies can certainly help start-ups and larger-scale businesses generate value with better digital products, they’re not a magic solution. Like any other solution, they come with their own advantages and disadvantages. It’s important to weigh your options when deciding whether to partner with an agency or to develop a native software development team.  


Focus on your business 

Perhaps the most obvious benefit of outsourcing software development projects is that you don’t have to do it yourself. This frees up your time and resources to focus on your core business strategy. By engaging a software development agency as a partner, you can leave development in the hands of experts in the field and turn your efforts towards what generates value for you. 

Specialization to your needs 

Software development agencies can vary in their areas of expertise. Large agencies tend to have a lot more talented and experienced software professionals on deck. This means they can provide a more varied range of services and tech stacks. On the other hand, smaller more boutique-style software houses tend to specialize in a specific area of software development. This allows them to provide expert service and highly effective bespoke software to suit very specific needs. 

If you’re building your software internally, you may have to source the right candidates with knowledge of the appropriate development tools and tech necessary to build the product you want. This can be time-consuming and may not always work out well in the long term. With software agencies, you only need to find and vet the right one to suit your project’s needs. 

Faster Time to Value

As mentioned above, putting together a software team can be a time-consuming process. From recruitment to onboarding, simply getting your team ready can take months, to say nothing of the costs involved. Furthermore, even with conservative estimates for time, there’s no real guarantee that in-house teams will be able to deliver a minimum viable product by a given deadline. 

On the other hand, software development agencies can start working immediately with their own teams. The faster work can begin, the faster you have a working product to take to market. This means a shorter time to value for your organization. 

Cost to Value Balance 

One of the big benefits of hiring a software development agency is having a skilled software team almost immediately. Instead of spending the time, money, and effort on recruiting, onboarding, developing IT infrastructure, and investing in costly resources to support a native software team, simply find an agency that has them all.  

In this way, you won’t have to foot the bill for the overhead, or ongoing costs of salaries, taxes, bonuses, and benefits. Additionally, working with an agency, you can establish a budget together, and find an agreeable balance between what you’re willing to pay and what they can offer 

Internal software teams may not always forecast or estimate their timelines or budgets accurately. This can lead to cost overruns and unforeseen project delays. While having the right KPIs and performance metrics can help, sometimes it’s easier to let someone else deal with it. With a software development agency, once you set a timeline and agree on a budget, it’s up to them to get the work done within those constraints.  

Reduced need for administration

When it comes to native software teams, management and administration can be difficult, especially if you don’t already have highly skilled and experienced tech leadership in place. Running a development team requires skilled talent to do the development and design, as well as experienced product management teams to provide oversight, guidance, and accountability.  

While it’s tempting to think building a software team is a “one and done” process, ensuring alignment with overall business strategy often goes beyond just the development team. Conversely, software development agencies are responsible for the administration of their teams. With the administration aspect of development handled by your agency, you have more time and resources to devote to other aspects of your business. 

Better scalability for your business

When it comes to software and businesses, scalability can mean two different things. For software, scalability measures how well the software architecture can scale cost and performance in relation to changes in application and processing demands.  

For your business, however, scalability is the ability of your organization to expand its services and value-generating endeavors without being held back by infrastructure or resource limitations. Partnering with software agencies allows your organization to scale its services and product offerings up, without much change to your internal structure or resources.  

Better scalability allows you to continue offering the best value possible to customers without having to spend too heavily on restructuring, hiring, or investing in costly IT resources.   

Quality and Reliability

When outsourcing your software development needs, one of the major benefits can be the guarantee of quality and reliability. Before entering a contract of any kind, you must determine what your Service Level Agreement (SLA) is with the agency. This sets out the guidelines for the functionality and reliability of the product. 

Once that contract is signed and work begins, the vendor is responsible for ensuring that whatever they produce holds to the SLA. Your contract with the agency should allow a measure of assurance over important aspect of the partnership like: 

  • deadlines 
  • payments 
  • intellectual property rights 
  • quality of finished products

The contract should also set out penalties for both parties failing to adhere to established agreements. 


Reduced Transparency 

Organizations sometimes struggle with ensuring sufficient transparency in the software development lifecycle, especially when partnering with software development agencies. As the teams working on the project are typically administrated by project or product managers on the agency side, you can only rely on the information they provide. Left unchecked, this can turn development on the project into a black box. 

While you don’t always need to know every detail of what’s happening in development, it’s often a good idea to maintain transparency when it comes to tech projects.  

Communication Issues

Like any other partnership, communication is key to getting the best quality outcomes from your software agency. However, communication can sometimes be challenging, especially when dealing with offshore agencies. The difference in time zones, languages, and cultural backgrounds can sometimes cause friction when it comes to communication. This can become an issue when discussing needs, requirements, and ongoing projects. 

While this is not always the case, communication can still be a challenge between separate corporate entities. Partnership or not, it’s important to overcome communication challenges by setting regular status meetings and working to create open channels between relevant stakeholders. Rethinking your communication strategies during key meetings can also help. 

Potential for Higher Technical Debt

Technical debt is a common feature of software development projects. It typically occurs when development teams are forced to balance software quality and best practices against time constraints. While technical debt isn’t always a bad thing, it does need to be managed to make sure it doesn’t get out of control. 

With in-house teams, technical debt is an ongoing problem. It’s, therefore, in developers’ best interests to carry out ongoing maintenance efforts to reduce technical debt. However, this may not always be the case with an external software developer. Their primary responsibility is delivering a working product by a set deadline. As a result, there is little incentive to worry about the technical debt incurred in the process. This can become a big problem down the line, especially when it comes to scalability. 

Types of Software Development Agencies 

While software development is a huge market, it’s important to note that software development agencies don’t all offer the same services. In fact, there are three main types of software agencies available. Understanding the difference between them can save you some headaches when it comes to getting the right software solutions for your business. 

1. Large Software Houses

Large corporate software houses tend to have bigger teams and are capable of working on several projects at once. Owing to their larger size and available resources, they’re often able to take on any project regardless of size or technical specialization. 

Usually, these agencies work closely with internal business and IT stakeholders to understand the challenges, requirements, and other use-case-specific details. With this information, their development teams then work to develop solutions in line with client requirements.

2. Bespoke Software Boutiques

These software agencies tend to be much smaller and specialize in very particular areas of software development. They are usually led by skilled and experienced developers who train and develop talent internally. These types of software developers usually provide clients with highly customized software solutions but are often limited to their area of expertise. 

Their primary business comes from developing and supporting software for business optimization or industry specific software. These agencies tend to take on few clients and focus on delivering the best product possible to suit their clients’ needs. They’re one of the better choices to go to for highly customized bespoke software solutions. 

3. Software Service Agencies

These teams tend to be less specialized but focus their development offerings on a specific technology stack or area of development. For example, third-party mobile app developers, website and web application development agencies, and so on.  

While they aren’t usually able to take on more extensive software projects, they can still be helpful partners to businesses. 

Support your organization’s growth 

If you’re considering contracting a development agency to aid your organization, it’s a good idea to start by assessing what your key challenges and pains are. From there, you need to determine if partnering with an agency or building an in-house team is the right decision for you. This means weighing the pros and cons of both. 

If you do decide to build your own software team internally, you might find our article on putting together a stellar software team helpful. 

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About the author
Elena Leralta

Working as Foreworth’s Chief Financial Officer, Elena possesses a wealth of knowledge on business management and finance owing to her over 20 years of experience working in the financial sector.

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