Any business must be supplied with proper software powers and, oftentimes, custom internal solutions. To implement them, you can form your own team of specialists or resort to outsourcing to get guaranteed high-quality results.
Why are so many companies turning to third-party software developers, what are the benefits, and how many partners should there ideally be? The question of who wins in the confrontation between the “single vendor vs multiple vendor” model will be answered by DICEUS specialists.
Why outsource a vendor for software development?
Outsourcing has become a standard practice that is confidently changing the face of modern business. The global market share of outsourced services exceeds $92 billion and will only grow in the short term. The key reason for the trend is that, in addition to reducing costs, IT outsourcing provides additional benefits: companies have the opportunity to focus on their core business and productivity tasks, improving the quality of products and services and converting customers while proper technical capabilities are created for them “in the background.”
And when it comes to software development, enterprises usually choose between a single vendor vs a multi vendor strategy. Both models of cooperation are acceptable, but in each case, the decision must be made individually, taking into account the requirements for the project and the capabilities of the outsourcer. So, let’s get into a bit more detail.
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This model of cooperation implies working with a company that independently develops and markets products. In a nutshell, the single vendor meaning is about allowing clients to buy or order the software they need from one vendor (developer).
The model is popular among customers that want to work without intermediaries. Thus, the developer is solely responsible for the end product’s quality and how well it fits client requirements. He receives the full sale value. The client can only rely on the expertise of the company that created the product, especially if there are no analogues.
Pros and cons of single vendor outsourcing
Going for single-vendor capacities, you can get the following benefits:
- It’s simpler to establish and maintain professional relationships
- Administrative and other underlying expenses are reduced
- You can scale up development, thus, getting more attractive rates
- It’s easier to optimize and integrate systems as project knowledge is owned by a single team
In the long run, it is more convenient to delegate all processes to a single third party. Working with only one supplier grants a higher level of interoperability between project components. You need to establish communication with the supplier only once, and it will take less time and effort to coordinate and approve tasks and discuss problems. One team works faster because there is no communication and coordination fuss. Consequently, your product will hit the market faster.
On the other hand, in case something happens to the supplier, the project will stop. It can be different to maintain a competitive edge in a company tied to individual suppliers of different product categories. Any common problem can become critical. There is a risk that, over time, the dependencies will become one-sided, which creates a further risk of lowering service standards. Finding an agency with all the knowledge you need in your niche can be a daunting task. Lack of human resources or experience can be a major obstacle as well.
Here you can see how a communication plan between you and a vendor may look like.
What is multi-vendor outsourcing?
Multi-vendor outsourcing involves several suppliers of software and IT services. This approach is meant to improve the efficiency of the enterprise IT infrastructure, based on the fact that particular separate elements are supplied by the top suppliers.
Pros and cons of multi outsourcing
- Diversifying risks and decreasing the risk of dependency — you don’t need to rely on one single team in multiple essential aspects.
- A broader scope of expertise — segmented specialized companies can offer a higher level of quality in specific work niches.
- Multi-workflow performance — you can organize the development of several aspects at once, thus, significantly accelerating product creation.
This approach also gives an opportunity to take advantage of competition between suppliers, manage fluctuations in demand, regulate order volumes, and avoid supply disruptions.
- Coordinating multiple contractors at the same time requires more time and resources. You may experience issues at tasking, process management, and product quality assurance.
- Higher costs. Rates of contractors specializing in particular parts of the project may differ significantly, making negotiating discounts more difficult.
- Integrational differences. Multiple teams taking part in the same project may spawn issues during the integration of the developed components. The process will ultimately require more time and money.
Multi-vendor contracts are not well suited for building long-term relationships. Sharing information is less straightforward and can pose risks. In addition, when dealing with multiple vendors, there is a significant overhead associated with negotiating, managing, and executing processes.
Key differences to consider
Both models have their advantages and disadvantages. Below, we have listed a few key differences between multi-vendor vs single vendor to help you make the right choice:
- Risk factors. Working with multiple vendors can help accelerate processes and overall business growth, but, accordingly, you will get a weaker grip on controlling your products.
- Development expenses. Although both cooperation models require a particular share of investments, interacting with several vendors is usually more expensive for obvious reasons.
- Alternatives. Working with many vendors at once, clients get to pick from many services and development formats, reaching a broader scope of other options.
- Software purchasing. It is easier to purchase products from a single vendor that owns their products.
Conclusion: What strategy to choose?
Basing on our long experience and expertise in the niche, we at DICEUS believe the following factors should be considered when choosing between one or more suppliers:
- Highest-quality software. This is created by narrowly specialized organizations. On the other hand, you cannot be the best at everything, so it is worth looking for an integrated solution with the best components. With a careful approach, you can find one supplier that excels in several areas.
- Underlying difficulties. There are common problems with integrating different third-party solutions, despite the abundance of legacy systems built using common underlying architectures or software principles. There is no such problem for a single vendor as it develops and integrates similarly built products.
- Pricing. Typically, one supplier will offer lower rates because they can provide wholesale prices. You will have to buy separate modules from a multi-vendor, and it will be more expensive.
- Product updates. Solutions provided by a single vendor rarely call for global upgrades and updates.
- Education. Single vendor’s product will require less training. It will be easier for you to get the online manual. This is harder for a multi-vendor to do.
- Longevity of relationships. A single supplier, if it’s a large seller, is likely to stay in business for a long time.
You must carefully consider your choice with far-reaching implications in mind. Much depends on the nature of the market. In latest years, there have been strong trends in supplier consolidation and a shift from transactional to more strategic buyer-supplier relationships.
You should choose between strategies depending on the specific project, its features, and your capabilities. For example, it is more reasonable to work with single outsourcing for projects of low or medium complexity. Still, for complex projects requiring a high level of expertise in different areas, it is worth considering the option of cooperation with several suppliers.
What we offer
Our software development company offers custom solutions and staff augmentation among the extensive range of other services we specialize in. We adhere to proven standards and transparent SDLC processes. The entire software development outsourcing process we provide consists of four stages:
- Discussing cooperation conditions and sealing the underlying agreements.
- Thorough project planning, which involves collecting requirements and analyzing business gaps to determine how to develop the best software solution for you. In addition, we can run POC tests and create MVPs to analyze the viability of an idea and identify market demand. As a result of this stage, you get detailed roadmaps and a clear vision of the project.
- Project execution where we create fundamental software architecture and basic UI/UX design, polishing the product up with thorough testing and bug fixing.
- Support. We provide individual 24/7 product support and maintenance. All the tasks of this service can be discussed before and after the project kick-off.
Outsourcing to DICEUS is a great opportunity to get unique products, enjoy cost-cutting services, and gain market advantage. Unlike vendors who offer ready-made solutions, we will provide customized software that will be unique and competitive.