According to a research report published by IDC, the global information technology industry is on track to reach $5.2 trillion in 2020. One third of the market, 32% to be exact, represents the USA. More than 60% of the spending on software development is done outside of the US, with commercial and government companies hiring software development service providers overseas.
How do customers decide which companies to work with? There are a variety of things they consider, from a company’s past experience to understanding your own budget and how that aligns with services that offer development work. Also, depending on your field, there may be compliance issues to consider when deciding who to work with.
On the other hand, being a software services provider could be an extreme challenge. For example, hiring engineers, establishing efficient remote work flow, and last but not the least, fully understanding the business requirements from the customer.
If you want some real-world expertise on this, we’ve asked ten experts who run successful software development companies to discuss their thoughts on the current industry trends and challenges and what it entails in 2020. You can find those below.
- Denis Novikov, Deputy Director of Business Development at Qulix Systems
The biggest challenges in outsourced software development for 2020 include challenges for both the customers and software vendors. As we see it, due to intense competition, it may seem tricky for customers to estimate the vendor’s real experience, to plan budgets, and to compare bids. It happens because the comparison parameters become more sophisticated, as the tasks grow more difficult. This is especially true for startups.
As far as the vendor’s perspective is concerned, the major challenges for outsourced development this year include building “the dream-team” due to the deficit of skilled engineers on the market. Software developers and QA engineers with vast experience charge a lot, so the budgeting issue appears as well. And the third most influential challenge is working with startups: the technologies are so versatile and the implementation methods can drastically vary. All that makes it extremely difficult for vendors to provide reliable software development estimates at the initial stage of discussing the project.
- Boris Shiklo, CTO at ScienceSoft
From what I see, areas such as healthcare, banking, and financial services are going to turn to outsourced development more actively in 2020. Security is critical to them and finding a vendor who can guarantee it is a challenge, indeed. Moreover, the popularity of cloud-based solutions and the implementation of complex technologies (AI, IoT, blockchain) makes security even a more pressing issue. To tackle it in our outsourcing services, we ensure compliance with industry-specific regulations, provide risk management and application support throughout the whole software development life cycle, as well as apply principles of test-driven development to avoid security breaches.
- Marcin Mazurek, Co-owner of The Software House
It may seem that nowadays, in the digital age, looking for an outsourcing vendor is easier than before. There are lots of independent review portals where you can quickly research and compare software companies from around the world. However, it’s kind of an illusion – the truth is that many vendors tend to over-market themselves online. This is why I always advise people to conduct only the most basic research online and quickly move to the real world: try to arrange a call with the vendor’s former and existing clients, visit the vendor at their HQ (or invite them to your office), and meet the people that you’re planning to work with. Also, whenever you can, try to rely on the referrals of your friends and business partners who have outsourced software development before. Digital tools are great, but when it comes to business, nothing is more important than personal, real-life relations.
- Paul Granger, Content Marketer at Website Promoter
I think one of the biggest challenges for 2020 when it comes to outsourcing software development is communication. I think it is worthwhile to have someone technical on your team when negotiating your project with developers. That way, both sides have a clear understanding of the end goal and what the project may entail.
- Timur Komarov, Elinext
One of the challenges we are facing at Elinext is associated with a growing demand for knowledge-intensive technologies such as machine learning and artificial intelligence. In conjunction with another outsourcing challenge of 2020 – a lack of IT resources – the evolving requirements for the implementation of ML and AI in our clients’ applications push us to extend our boundaries. One of the steps we take to address the problem is our investments in the training of our employees. We encourage our developers to attend courses, lectures, seminars, conferences, and more to bolster their knowledge. In this way, we also ensure the continuous adaptation of new tools and technologies. What is more, we are always in search of young talents. Hiring young professionals is a common practice at Elinext, and we are proud of it because it allows us to develop and prosper.
- Sergey Korolev, Railsware
The growing trend of remote work can be a real danger for outsourcing business. More and more product companies are hiring engineers from all over the world, instead of using resources and teams from outsourcing or outstaffing providers. That said, outsourcing companies should understand that just reselling people’s hours takes them directly into the danger zone. What we offer at Railsware is a service with additional value – we focus on building products, not just delivering code.
- Maksym Babych, Founder of Spdload
Lack of involvement in the end product success is a major challenge for software development companies: you are not aware of the whole picture and you have no influence on the decisions the US product owners make. You are just one of the 5-10-100 developers who write some of the code involved. In addition, there’s often a lack of transparency: sometimes you don’t even know why you are doing what you are doing. Occasionally, nobody listens to you. That lack of connection with the end product is a challenge within itself. Outsourcing does not give you the feeling that the end product was made by you, that you had a hand in the latest design of the new Facebook. In outsourcing, no one will ever know about you.
As a marketplace for hiring remote developers, we at YouTeam are well aware of challenges that both sides, our clients and engineers, have to overcome when it comes to outsourcing. Problems with miscommunication is one of them and is still relevant in 2020, even though the instruments for remote communication have grown to be significantly better over the past few years. How do our clients overcome the issue? By using the newest project management tools, over-communicating, engaging in video catch-ups and daily talks, and providing a knowledge base to help keep everyone on track. Sometimes, we even provide an external project/account manager from YouTeam to ensure that both client and development teams are on the same page.
- Reuben Hall, CEO of MindSea
When outsourcing software development in 2020, you’ll want to find an agency or developer who is up-to-date on growing trends in your industry. The healthcare industry, for example, is an industry that is growing by the day and increasingly influenced by advanced technology, such as AI and Machine Learning. More and more startups and institutions in the healthcare industry are looking to create solutions to society’s growing healthcare needs. To do this right, you need a development company that is experienced in incorporating such technology into their builds and understands the security measurements required to keep products safe and compliant.
- Andrii Bulavinov, Founder of Aoza Technologies
The biggest challenge for us this year is to get new customers on the European market. At this point, we are a boutique IT-company with primarily local clients. We’ve created a detailed strategy using a more personal approach. We are now focusing on Germany and Scandinavian countries and it requires new methods for reaching out. In Germany, people prefer to communicate in the local tongue. It’s better to reach out to leads via XING, a popular social media website in the region. We have found that the response rate is about 25%. The Scandinavian market has its own peculiarity: they are very reserved, and prefer intros from trustworthy connections.
- Tomaž Srpčič, Head of SEO at Optiweb
At Optiweb, we see the greatest challenge in helping the subcontractors to align with the operational and conduct guidelines of the company as well as adopting the same high standards that the core forces of our team share. This includes the specific policies regarding communication and responsiveness (with colleagues as well as with customers), deadlines, procedures etc. On the one hand, this is about increasing operational capabilities and achieving more with less resources while, on the other hand, it’s as much about immersing yourself in the company philosophy and understanding the true identity the company would like to project. We strongly believe that the company identity is the sum of identities that the individual team members project, in this case account and project managers, developers and the supporting teams. If there is no cohesive elements to build upon, you have no real identity and can struggle with building a strong brand. And today, branding is the only thing setting you apart from the rest of the bunch.
- Vladimir Belyi, Head of Business Development of The App Solutions
Among the biggest challenges in outsourced software development, I can mention business data vulnerability, working in different time zones, neglecting of documentation, underestimation of a need for in-depth analysis on every solution to implement, and the outdated methods for running a business.
Also, it’s vital to realize that a huge impact of the spread of COVID-19 not only on our health but on the global economy, in general. The business activity is frozen: all business events, conferences, meetings are canceled due to the quarantine. That means it’s getting harder for businesses to follow the business plan set at the end of 2019.
Yes, 2020 will be a challenging year for each of us but it also can become a year of support, joint efforts and new horizons for business development.
There you have it, real advice from ten industry professionals on the world of outsourcing and software service providers. Shift from providing your customer with raw code to building a product, manage your costs, equip your employees with the knowledge they need to make an educated decision, and establish transparency in the customer relationship workflow. In order to grow your business in 2020, experiment with new customer onboarding and building better, more transparent relationships.