Many American businesses practice outsourcing their software development initiatives to nearshore IT providers in Canada. The benefits of nearshore outsourcing often outweigh the drawbacks, though there are some situations in which IT outsourcing could be more beneficial for a company. Consider what your organization might gain by outsourcing to Canada and what you might lose if it doesn't choose that approach.
In this article, we explore whether it is good or bad for US companies to outsource software development to Canada. We hope this article serves as a starting point for your discussion on whether or not it makes sense for your business to outsource software projects to nearshore Canadian providers.
What is Software Development Outsourcing?
In software development, the outsourcing activity involves delegating specific projects, functions, or tasks associated with software design, development, testing, and deployment to an external IT services company located in another country.
Software development outsourcing is not the same as offshoring, which involves sending all or part of a business's work to a foreign country. Software development offshoring is a term used for companies that outsource the entire project to a different location.
One more term to know is nearshore outsourcing. It is a business strategy involving partnering with an outsourcing company located close to your company (geographically). An example of nearshore outsourcing for US businesses would be choosing an IT provider in Canada over one in India to develop specific software.
A nearshore location is one that is convenient and affordable yet close enough to the customer for employee travel and communication to be a practical option. Canada fits this definition, as does Mexico.
Why might Companies Outsource to Canada?
Canadian software development outsourcing firms like Intersog have always been some of the best in the world. That being said, Canada is also home to many entrepreneurs who have launched their own local and global companies specializing in offshore and nearshore software development services. Other countries have had similar success, including Mexico, India, Poland, and Ukraine.
The following highlights why Canada should be your best choice for outsourcing for the years ahead:
- The Canadian government has an immigration system that is tailored to attracting and retaining highly skilled immigrants.
- Canada has a global reputation as a destination where business gets done and expertise excels.
- Canada is one of the top destinations for talent in the world. Tech talent shortage has never been a problem in this country.
- Canada's universities rank among the top in the world.
There are some good reasons why American businesses choose to outsource software development to Canada. Some companies believe their technical teams are too small to handle agile software projects on their own, while others refer to the high cost of labor in the United States.
Anyway, there are several very compelling reasons for outsourcing software development work to Canada.
1. Access to Canadian Talent
Canadian engineers are well-educated in the latest programming languages. Furthermore, they have an excellent knowledge of technology and information systems in different business sectors. Canadian IT professionals are also very experienced in designing, developing, testing, and deploying software systems.
For these reasons, Canada IT services outsourcing is the right choice for US companies that are looking for skilled technology professionals.
2. Potential Cost Savings
Outsourcing to Canada allows United States companies to work with skilled nearshore developers who are willing to work for lower wages.
For example, an American business can outsource software development work to a Canadian company for $52 per hour on average, while the same type of work done by American IT professionals typically costs $87 per hour on average, according to Indeed.
3. English is Their Native Language
Another good reason to outsource software projects to Canada is that most Canadians are fluent in English, which makes it easy for American clients to communicate with their outsourced developers. The language barrier is one of the most significant issues when outsourcing software development work overseas.
4. Small Time Differences
Canada is a close country to the US, which makes it easier for an American business to manage an outsourced software development project. The time difference between the US and Canada is only 2 hours, which means that it is possible for US companies to communicate with their nearshore software development teams throughout the workday.
5. Reliability and Security
Canada is considered one of the safest countries in the world with respect to IT outsourcing, especially for US companies. Canada offers businesses a stable economy, legal protections, and a fairly reliable cyber infrastructure. Canadian software developers have the ability to provide labor and services when needed.
The Drawbacks of Outsourcing to Canada
While there are many good reasons to outsource software development work to Canada, there are some drawbacks as well.
1. Lack Of Control
Outsourcing to Canada can be beneficial for US companies looking to find better software development services, but it might compromise the American business's ability to actually control the project.
In addition, some US customers may be disappointed by the lack of direct involvement from their company in developing software products or solutions.
2. Travel Costs
Outsourcing software projects to Canada can also create additional travel costs for a US company, depending on the project scope and its location.
For example, it is possible that your company will have to send a project manager or a business analyst to Vancouver or Toronto to work closely with the local software development team.
3. Infrastructure Issues
Outsourced software development services provided by Canada are usually delivered to the client's infrastructure facilities.
If you choose to outsource work to a company located in Canada, you should make sure that your facilities are compatible with the IT tools that are supported by your outsourced provider. Otherwise, you might end up paying for extra effort by your developer team.
Five Essentials of an Effective Outsourcing Strategy
When it comes to custom software development outsourcing in Canada, there are some common pitfalls that business owners who are new to the strategy often end up falling into.
It is essential to take the time and do thorough research before deciding on an outsourcing partner. To help you out, below are five essential elements of an effective software development outsourcing strategy that will help you find the right provider for your agile projects.
1. Quality of Work
This is one of the most important elements of a successful software outsourcing strategy. Unfortunately, businesses often make the mistake of choosing a provider based on its price. However, price should not be your primary concern when choosing a partner for outsourcing work.
After all, you get what you pay for! Make sure that your provider guarantees quality results and can provide references from happy customers. A good way to do this is by taking a look at the company's portfolio and checking out its specialized software development pages.
2. Contract Type
Outsourcing your project is not all about finding the best software development partner. There are some other important aspects of any transaction where you need to consider the contract type and scope of work, including:
- Fixed Price Agreement (FPA) - This type of contract is more common in certain types of software development engagements that can be clearly outlined beforehand, such as website or mobile app development projects.
- Time & Material (T&M) - This type of outsourcing contract is more appropriate for software development projects that require flexibility, such as software maintenance or application integrations.
- Mixed model - You can choose a contract model that combines both fixed price and time and material methodologies. However, the mixed model is not common in the nearshoring software development business.
3. Project Management
A company that does not have a strong project management team, no matter how much the outsourcing services partner promises to provide it, will end up having a frustrating experience.
It is important to retain the view that there are certain aspects of project management that you need to oversee alone. This includes the following:
- Requirements gathering - this process gathers all the information needed to define and develop your project, such as business requirements, software development scopes and technical specifications. It is an important stage in any software development strategy.
- Planning - this process focuses on defining all necessary tasks for your project to be completed on time and within the budget set by your company. It is also an essential step in any outsourcing project because it can help you decide if choosing an offshore provider is the best way forward for you.
- Communication channels - while it is true that you can outsource software development projects, there will still be a lot of communication between your outsourcing partner and your team, including formal and informal communication. This includes organizing and providing updates on the project's status and providing feedback on the project's components.
- Plan B - every good project manager knows that not everything goes according to plan, so always prepare for unforeseeable obstacles by planning alternative solutions during this step.
4. Security & Support
Security tools can be put in place to protect your organization from outside attacks as well as from internal threats, such as employees with access to sensitive data.
It is important to use a combination of software and hardware security systems, such as firewalls, anti-virus solutions and hardware security tokens, to ensure that sensitive information is protected from those who do not have a right or a need to access it.
Make sure to choose a provider that has the necessary experience and expertise in this aspect since not all software development outsourcing providers can offer effective modern security solutions.
5. Company Culture & Values
When you partner with a software development outsourcing company, you need to make sure they reflect your business values.
This is why it is important to take the time to interview, from the CEO down to the team members, a few of their most senior executives, and speak to them in-depth about their company's culture and shared values.
A good strategy here is to ask a few members of the executive leadership team whether they have ever experienced talent retention issues. If they say yes, then they need to clearly define what type of culture would resemble and identify famous examples of other companies who have had similar instances.
What Roles are Best to Outsource to Canada
Software outsourcing is not something that should be taken lightly. It requires thorough consideration and planning before you open up the process to any third party.
It is up to you to decide which roles are best to outsource in your company, but below are some of the common roles where Canada-based IT consulting agencies like Intersog excel.
The most in-demand front-end development skills are as follows:
- HTML and CSS
Back-end software development is the process of creating software intended to be used on servers, rather than directly by customers or end users.
It is common for front-end developers to be familiar with back-end development teams because a majority of application architectures today are split into two parts: a client and a server.
The most in-demand back-end skills for Canada nearshore outsourcing providers include:
- SQL, MySQL, Postgres, other databases
IT security specialist
IT security specialists are responsible for identifying and preventing network intrusions, data loss or theft. They also make sure that the systems in place are up to date and safe to use.
When choosing the best Canadian candidates for your IT security role, consider that they should have profound expertise in the following areas:
- Network vulnerability assessment
- Penetration testing
- Security audit
- Incident handling & response
- Malware analysis & protection services
Data scientists are IT specialists who possess advanced statistical skills and use them to analyze data in order to identify patterns, unknown correlations, anomalies, etc.
They are used by companies that specialize in data analysis and AI development because they are experts at identifying trends and accurate predictions.
When you are outsourcing your data science projects to an agency like Intersog Canada, the most important aspects of your hiring process should include:
- Machine learning algorithms - remember that this is an ever-evolving area of expertise. Companies should hire people who have previous work experience with both supervised and unsupervised models.
- Big data - the more data you have, the more valuable your insights are. Data scientists typically work with large sets of data in order to create valuable predictive models for business decision-making.
- Data visualization - when making decisions based on your analytics tools, you will need to be able to present your results in an impactful way so they can be easily understood by all your stakeholders.
- Technology skills - remember that software development is not just developing codes and algorithms, but also managing projects and finding efficient solutions.
Outsourcing in Canada: Good or Bad?
No two companies are the same, and this is why it is very important to make sure you take all the steps above when you decide to outsource your project to Canada-based nearshore software development agencies. The pros and cons of outsourcing to Canada have outlined above, so be sure to consider each one before you make a decision.
Making a decision like this can be a difficult process because it requires a high level of analytical thinking, but once you have all the information, you will be able to determine if outsourcing to Canada is a good or a bad idea for your company.
Intersog is a Canadian IT provider, located in Vancouver, providing nearshore software development services to companies from the United States and around the globe. We specialize in web, mobile, and hybrid application development, data science, and software security.
When it comes to choosing an outsourcing partner, the most important aspects of your decision-making process should be based on the five key considerations outlined in this article: culture, costs, time zone, project management competencies and security & support.