One of the biggest challenges while building a product is finding the right team to support its growth. And the choice comes down to basically two options: build in-house or go outsource. The pros and cons of both are tightly tailored to business type and goals. In this post, we will explore the benefits of outsourcing for IT start-ups and niche products, compare it to building in-house teams, and discuss why outsourcing in Ukraine is still a great idea.
Outsourcing refers to the practice of hiring a third-party vendor to perform specific business functions or services that would typically be done by an in-house team. The third party can be located locally or overseas, and they are responsible for delivering the services or products to the client. Outsourcing can be an effective way for IT product owners and tech startups to get specialized expertise, save costs, and increase productivity.
Outsourcing can encompass a wide range of services, including software development, managed IT services, cloud computing, and many others. In general, if it is not in-house, it is outsourcing.
There are different types of outsourcing models that companies can use, depending on their specific needs and goals. Here's a breakdown of the most popular outsourcing models and some examples of how they can be used.
This model involves hiring contract employees for a specific project or time frame. For instance, if you need a team of developers to complete a project quickly, you can hire contract software engineers through staffing agencies or consulting firms. This model is ideal for businesses that need to scale up or down quickly.
This model involves hiring an offshore team of software engineers to work exclusively on a project for a defined period. Usually, on a long-term basis though. This model provides you with a dedicated team that fully answers your development needs or teams up and works closely with your in-house team, ensuring consistency and quality.
This model involves hiring a third-party vendor to complete a specific project or set of projects. For instance, if you need to develop a mobile app, you can outsource the project to a vendor that specializes in mobile app development. This model is ideal for businesses that want to complete a project within a specific timeline and budget.
This model involves outsourcing specific functions or processes to a third-party vendor who manages those services on behalf of the client. For example, you can outsource your IT infrastructure management to a vendor that specializes in managed services. This model provides you with a cost-effective way to manage your IT infrastructure without hiring a full-time team.
A good example of this approach is Cloud Computing which involves using cloud-based services to provide IT infrastructure, software applications, and storage to the client. In general, you can use cloud services to store and manage your data, without having to invest in expensive hardware and software and staff to maintain all of that. This model provides you with flexibility, scalability, and cost-effectiveness.
When it is better to build an in-house team rather than outsource?
Before diving into the reasons why outsourcing may be a better choice for your business, it's important to highlight a few situations where building an in-house team might be a better choice:
Core Competencies: If the task at hand is part of your company's core competencies, it's often better to keep it in-house. This can include things like software development for a tech company or product design for a manufacturing company. In these cases, having a dedicated team of employees who are deeply familiar with your company's operations and values can be invaluable.
Confidentiality: If you're working on something that requires a high level of confidentiality, it's often better to keep it in-house. Outsourcing can expose your company to a certain level of risk, particularly if you're working with a third-party vendor that's located in a different country with different legal and regulatory frameworks.
Long-Term Needs: If you have a long-term need for a particular skill set, it may make more sense to build an in-house team rather than relying on outsourcing. This can help ensure that your team has the skills and knowledge to meet your company's needs in the long term, without having to constantly retrain or switch vendors.
Ultimately, in-house teams can provide greater control and flexibility, but they also require a significant investment in time, resources, and management. Outsourcing, on the other hand, can provide a cost-effective and efficient solution for businesses that don't have the time, resources, or expertise to manage an in-house team.
There are numerous terms for outsourcing, and different teams may adopt various approaches. We prefer the term 'dedicated team' because it highlights the most essential element – a team committed solely to your project. In essence, your product becomes your team's product. Ultimately, the name of the approach becomes inconsequential when you establish a strong rapport, right?
Anton Trakht, CEO at Kultprosvet
A Few Compelling Reasons to Go Outsourcing
Now that we've covered the basics of IT outsourcing and building an in-house team, let's take a look at five compelling reasons why outsourcing may be the right choice for your business.
One of the most compelling reasons to go outsourcing instead of building an in-house team is cost savings. By outsourcing, businesses can avoid the costs associated with hiring, training, and managing employees. Outsourcing can also provide cost savings in terms of equipment and infrastructure, as service providers are often responsible for their own tools and technology.
Access to a Larger Talent Pool
Another compelling reason to go outsourcing is access to expertise. IT service providers specialize in a wide range of technologies and can provide businesses with access to expert knowledge and skills that may be difficult or expensive to acquire in-house. By outsourcing, one can access a wider range of talent and expertise, which can lead to more innovative solutions and better results.
Outsourcing can also provide scalability, which is important for businesses that experience fluctuations in demand or have a need for seasonal or project-based work. With outsourcing, you can quickly and easily scale operations up or down as needed, without the need to hire or lay off employees. This provides greater flexibility and can help businesses to stay agile in a rapidly changing market.
Focus on Core Competencies
Outsourcing can also allow businesses to focus on their core competencies, which is important for staying competitive in a crowded market. By outsourcing IT and software development, businesses can free up time and resources to focus on their core business activities, such as sales, marketing, and customer service. This can help businesses to maintain a competitive edge and achieve their strategic goals.
Finally, outsourcing can provide risk mitigation for businesses. By outsourcing to a third-party service provider, businesses can transfer some of the risks associated with IT and software development to the service provider. Service providers are responsible for their own operations and policies, and can provide businesses with a level of protection against issues such as security breaches.
Why Outsource to Ukraine?
There are many reasons why Ukraine has become a popular destination for outsourcing. Here are a few key factors:
One of the main advantages of outsourcing to Ukraine is the cost savings. Ukrainian IT professionals are highly skilled, but the cost of living in Ukraine is lower than many Western countries. As a result, outsourcing to Ukraine can be a cost-effective way to access top-quality talent.
Strong IT Education System
Ukraine has a strong education system, with a focus on technical and scientific fields. Many Ukrainian universities offer degrees in computer science, engineering, and other IT-related fields, producing a steady stream of highly skilled IT professionals.
Skilled IT Workforce
Ukraine has a large and highly skilled IT workforce, with over 200,000 IT professionals working in the country. Many of these professionals have experience working for Western companies and are familiar with the latest technologies and development methodologies.
Similar Time Zones
Ukraine is located in a similar time zone to many European countries, making communication and collaboration easier. This is a major advantage over outsourcing to countries with larger time zone differences, such as India or China.
(Almost) Favourable Business Environment
In recent years, Ukraine has made significant strides in improving its business environment, with a focus on reducing corruption and improving transparency. This has made it a more attractive destination for outsourcing, with many Western companies establishing a presence in the country.
Overall, despite russia’s full-scale war, outsourcing to Ukraine can be a highly effective way to access top-quality IT talent in a cost-effective manner. Recently, we had a deep dive into the Ukrainian IT workforce market and its developments in 2022-2023 – you may find it interesting.
In conclusion, outsourcing can be a highly effective way to access top-quality IT talent while controlling costs and reducing risk. By outsourcing, companies can take advantage of the expertise of specialized teams, reduce the burden of HR and administrative tasks, and enjoy more flexible staffing arrangements. When combined with the advantages of outsourcing to Ukraine, such as a large and highly skilled IT workforce, strong education system, and favorable business environment, it's clear why outsourcing is becoming an increasingly popular choice for businesses around the world.
We run 15 product teams for our partners in Europe, North America, the Middle East and Canada. Drop us a line in case you want to discuss an outsourcing model that could bring your business more value and deliver a great product!