All You Need to Know About IT Subcontracting Share: CodeRiders Date Published 23 March 2023 Categories Blog Reading Time 9-Minute Read Here’s an outline of the key benefits of IT subcontracting, how IT subcontractors work, and the differences between IT subcontracting, outsourcing, and multi-sourcing. If you have been following CodeRiders for a while, you already know that we are an internationally recognized software outsourcing partner. Moreover, one of today’s most beneficial software outsourcing services, IT subcontracting, is included in our main services. In this article, we’ll explore at the following topics. What is IT subcontracting? The benefits of IT subcontracting: Why do companies, despite their size (enterprises, small and medium-sized companies, startups), prefer working with IT subcontractor companies? How and where to find and hire reliable IT subcontractor companies for tech projects. The difference between IT subcontracting, IT outsourcing, and multi-source outsourcing. What Is IT Subcontracting? IT subcontracting happens when businesses hire a third-party software vendor to implement certain tasks and obligations. The cooperation happens under a well-defined contract called an IT subcontractor agreement. In this case, the third-party software vendor is the IT subcontractor. IT subcontracting is very common in the case of large and complex projects. Let’s compare two examples from the construction and IT industries. Example 1 A construction company builds a school from scratch for a municipality. The company has all the necessary full-time employees for the project, except for plumbers. Therefore, the company hires individual plumbers or a plumbing company to work for them. These third-party vendors sign an agreement with the construction company and have no obligations toward the municipality. Example 2 A software development company has to build a CRM system from scratch. The system needs both web and mobile versions. However, because the company’s in-house technical team specializes only in website development, it decides to engage a third-party software vendor and enter into an agreement for mobile app development. The software development company and the mobile app development company sign a contract, with the latter having responsibilities towards the former, which is obligated to the client or customer who requested the CRM system. Why Do Businesses Prefer IT Subcontractors? IT subcontracting is advantageous for any business. IT subcontracting can be tailored to suit the unique characteristics of your business, whether you are a large enterprise or a small startup. Benefits of Working with IT Subcontractors Here are the main benefits you will get from hiring IT subcontractors. Significant Help for Large Projects Nowadays, the tech talent shortage is a serious issue. According to Statista’s 2022 report, in the past five years over half of the global organizations surveyed have experienced a skills shortage that has consistently held them back. The global IT talent shortage has taken its toll, especially in 2020 during the Covid-19 pandemic. Indeed, in 2022, 70 percent of organizations still experienced a skills shortage in tech. It is no surprise, then, that software development companies or businesses in need of software solutions have experienced high needs vs. low resource issues. Very often, in-house software development teams have not been able to handle all the software development proposals and have ended up missing business opportunities. Luckily, there is a solution for this issue, which is IT subcontracting. Hiring a third-party software vendor is a quick way to get help and avoid losing business deals. Working with software outsourcing companies from well-known tech hubs is an excellent strategy. Not only do tech companies from software outsourcing destinations offer low rates, but they also do not compromise on the quality of their service. Affordability with Minimum Risks If you sign an IT subcontracting agreement with a software vendor, you agree to a specific partnership. You do not hire tech employees directly. This automatically frees businesses from having to comply with the employer obligations that come with an in-house team. Some of the most important obligations include the provision of health and dental insurance, as well as equipment and software, and constant training. Zero Investment in the Software Talent Recruitment Process Hiring qualified in-house software developers is a long-term and tiring process. Businesses that need tech support either hire full-time in-house recruiters or a recruitment company. In both cases, we speaking about an expensive partnership. Contrary to that, working with IT subcontractors requires no investment in recruitment services. Now, you might think, “What is the difference? The client still needs to make sure that the software vendor they’re working with is qualified enough”. This is a valid argument, but we also have valid response, which is that in the software outsourcing industry, we have certain proven steps for finding qualified software outsourcing companies. Those steps are as follows. Step 1: Do research and write down the most reputable software outsourcing destinations. Consider the countries that are more convenient for you based on factors such as your time zone, familiarity, and working style. Step 2: As soon as you have the candidate tech hubs on your list, find software outsourcing companies on reputable tech directories such as Clutch. co, TopDevelopers, Top Digital Agency (TDA), TechBehemoths, GoodFirms, DesignRush, OnlineDegree.com, BestStartupAsia, and TechReviewer. Step 3: Go through the lists and set aside those IT subcontractors that best address your software development requirements and business goals. Step 4: Reach out for a consultation (at CodeRiders, technical consultations are free of charge) and ask for estimates. Step 5: If everything goes as planned, ask for an IT subcontracting agreement or send your own and start the IT subcontracting cooperation process. You can also contact the CodeRiders team for a free software development consultation. Knowledge of a Specific Service Hiring an IT subcontractor company provides you with a more diverse candidate pool. The IT subcontractor hiring process is significantly flexible as software companies provide multiple software developers and other IT specialists at the same time. Ask your IT subcontractor candidate for the CVs of the most relevant software developers and IT professionals. No Legal Obligations After the End of the Partnership Clients sign IT subcontractor agreements before starting the software outsourcing process. Agreements free up clients from any further obligations towards a software vendor once a project is over. Moreover, if an IT subcontractor is hired by your software vendor, you do not sign any agreement and have no involvement in the partnership. Your software vendor is responsible for the quality of their software services. The are also the one directly involved in the IT subcontractor management process. Fewer Resources in Staff/Work Management This benefit is the continuation of the above one. When you work with a software vendor, it is an already-established company with well-prepared management. Ultimately, you have the chance to choose the amount of involvement in the software development lifecycle (SDLC). If the IT subcontractor is hired by your software vendor, you are free of even minimal management efforts. The management of the IT subcontractor is your software vendor’s responsibility. A Practical Example of a Qualified IT Subcontractor Let’s review CodeRiders’ example as an IT subcontractor. Does CodeRiders relate to “qualified” IT subcontractor status? CodeRiders operates in Armenia, which is a software outsourcing destination with a good reputation (a tech hub). CodeRiders is well-known among IT subcontracting companies because of its rich experience in the field. CodeRiders’ conditions for software development services overlap with the top benefits of IT subcontracting mentioned above. To recap, these benefits are: – Affordable software solutions – Qualified software developers and related IT specialists – The opportunity for a client to choose their level of involvement and effort in the project – A well-established team that knows how to work together productively as a unit without additional training – The willingness to sign an IT subcontractor agreement, upon request – No obligations towards a software vendor after a project ends. What Is the Difference Between IT Subcontracting, IT Outsourcing, and Multisource Outsourcing? We use the term ‘software outsourcing’ when businesses permanently assign their entire software development needs to a third-party software development firm. These third-party software companies are usually located in tech hubs because the initial purpose of software outsourcing is to reduce financial expenditures and more carefully use in-house labor resources. An Example of Software Outsourcing An US-based e-commerce company hires a software outsourcing firm from a tech hub (e.g. Armenia) to build, implement, and maintain its e-commerce website and mobile application. This company has been working with its software vendor since the vendor’s establishment. It also carries on the partnership for technical maintenance and support purposes. The e-commerce company offers user-friendly tech solutions for its online shoppers at half the standard price because it works with a software vendor. IT multi-source outsourcing follows the same principles as software outsourcing or IT outsourcing. The only difference here is that clients hire multiple software vendors. In IT subcontracting, businesses hire third-party individual software developers or software outsourcing firms for specific tasks. These tasks are outside the scope of an in-house tech team. If your software vendor, in turn, hires a third-party software development company to fulfill some of your tasks that are outside their expertise, this process is also IT subcontracting. To sum up, hiring IT subcontractors or IT outsourcing companies benefits businesses both financially and technically. Therefore, these business cooperation models are widely used by organizations of various sizes. To gain the full advantages of IT subcontracting and IT outsourcing, it is necessary to be aware of all the ins and outs of these tech partnership models. CodeRiders has been operating both as a software outsourcing partner and an IT subcontractor for a decade. Our software development services have helped various companies with different backgrounds and perspectives. We have rich expertise in building software solutions for multiple industries. Contact our team to get a valid evaluation of your tech needs. You can read more articles like this one on CodeRiders’ blog .