Over the last couple of decades, a very profound, yet often unnoticed trend, has been slowly taking root across pretty much every area of business…

Operations that were once very individual to each business have become simpler, faster and often, commoditized. Logistics, admin, tax services and communications are provided by small groups of vendors, with huge reach and influence.

Where once you’d need a big finance department, most businesses can now survive quite happily with one or two accountants and a license to Quicken.

When you used to need complicated internal phone systems, you can now use Skype, instant messaging and mobile phones.

In some cases, Google Calendar and automatic alerts on an executive’s iPhone can replace a PA.

The biggest drive behind all of this is automation: automation provided by software. This trend extends beyond business operations, though.

Competitive advantage, differentiation and customer service are increasingly being driven by software, as everybody rushes to provide the next big thing in automation, communication and user experience. You’re probably wondering what on Earth this has to do with outsourcing, well…

  • The dual forces of innovation and commoditization mean that increasingly, in-house teams are too inefficient to be justifiable.
  • The world of software changes so fast, that talent is becoming both abundant and scarce.

Unless you are prepared to spend mega-bucks hiring the best talent from Silicon Valley, and/or your project is entirely innovation driven, hiring your own development team is simply NOT prudent.

Prices are so high for the top-third of talent (think Google, Facebook, Twitter etc.), that unless their skills are necessary for gaining competitive advantage, they are a waste of money.

Conversely, prices for anything below the top-third of talent are low enough that, thanks to communication technology and lower labor costs outside the US, you can get a leaner, cheaper and often more talented team by outsourcing.

What’s more, the ‘professionalization’ of outsourcing in emerging economies is beginning to create an almost no-brainer situation, where you can get quality software development (and other services), superior service, and scalable pricing, for far less than an in-house team.

To be honest, this kind of situation is still the exception rather than the rule. Most attempts at outsourcing are met with frustration and failure, but this is mostly due to lack of strategy or bad hiring decisions, and is changing fast.

One thing you can be absolutely sure of, is that there’s one ‘weird’ outsourcing niche that is steadily gaining traction and will, almost certainly, dominate the industry in short order.

Before we reveal a bit more about this weird niche, let’s go over the biggest challenges you’re likely to have with outsourcing:

  • Language barriers – You need to be able to communicate effectively with your engineers in order for them to build your software properly. If one of you can’t understand the other, or you experience random misunderstanding due to language, you’re done.
  • Cultural differences – It’s hard enough building an organizational culture with people from your own country. Working with people from the other side of the globe, and finding ways to help them fit in, can be nearly impossible.
  • Lack of redundancy – Hiring a single freelancer you’ve never met, no matter how good or dedicated they are, is a recipe for disaster. If they get ill, go off the rails, or get a better offer from a new client, you’re dead in the water.
  • Unpredictable pricing – If you’re hiring a lone freelancer or small team, it’s common for projects to take longer than expected, for them to hit a problem they can’t overcome, or simply swindle you out of some cash.
  • Management nightmares – If you hire a guy and you’re responsible for managing him, despite him being halfway across the world in another time zone, from another culture with completely different values, good luck. I wouldn’t wish it on my worst enemy.
  • Measuring success, or the lack of it – Without rigorous testing practices, or some kind of ‘measuring stick’ to track progress, it’s very difficult to tell how successfully your project is progressing. Frankly, there’s no substitute for proper project management, and professional software development methods.
  • ‘Borrowing’ and theft – If you don’t have the time to go over every single detail you’re going to need, to make sure you have the right legal protection, in case your developer decides to ‘borrow’ your code for another project, or vice versa.

The niche we’re about to outline solves pretty much all of these challenges, when the vendor and customer both have the right attitude, and go about their business in the right way. In fact, it’s the niche Dedicated Developers is proud to be a part of, and we do our best to be an example of how to do it right.

There is no easy way to describe how this niche operates, because it is, to a large extent, whatever you want it to be.

In a future post, we’ll describe this niche, and explain how to find the best development team if your business is in this niche.