Pros and cons of outsourcing blockchain development

The blockchain revolution is gathering momentum. While many people’s only reference point when they hear the ‘B-word’ is cryptocurrency and specifically Bitcoin, the reality is multiple sectors are rushing to embrace the power that comes with the ground-breaking technology. Blockchain’s ability to increase transparency of transactions, reduce risks and fraud, and ensure higher resistance to outside attacks – all in a cost-effective manner - is proving transformative for industries as diverse as healthcare, real estate, insurance, global logistics and major power networks.

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Already recognized as one of the IT domain’s most highly promising technologies, the Blockchain boom is only set to get bigger. Valued at $3.67 billion in 2020, a Grandview Research study found the global blockchain technology market size is expected to expand at a compound annual growth rate of 82.4% from 2021 to 2028, with high-profile brands such as Pfizer and Walmart joining smaller companies in developing their own blockchain solutions.

However, technology booms can only continue if there are enough technical experts to deliver quality products and this is where enterprises exploring blockchain opportunities need to take stock. LinkedIn research has revealed job postings in the United States that include the words ‘blockchain’ and ‘cryptocurrency’ increased 615% from August 2020 to October 2021, while previous studies have shown there are 14 jobs available for every professional blockchain developer in the market. Needless to say, such competition for human resources is putting a strain on organizations wanting to step up their development programs.

While hiring a world-class internal team to develop leading blockchain products would be nice, countless companies are realizing there are significant challenges to doing so. From the talent shortage driving up salaries and associated incentivizing, to onboarding issues, infrastructure costs and negative hires, establishing a blockchain workforce can result in a ballooning budget before any development work is even done.

Fortunately, there is another option and it is one that an increasing number of savvy businesses are turning to in their blockchain development quest.

What is outsourced blockchain development?

Outsourcing specific tasks to countries such as the Philippines has been helping companies reduce costs and increase efficiencies for years and it is no surprise blockchain development has joined the list of services on offer. By using external providers to deliver IT-enabled business processes, in-country firms are better placed to avoid mistakes during the development process and realize the best blockchain technology for their individual circumstances. At a time when local developer talent is in short supply, the advantages of looking abroad are numerous.

Pros for outsourcing blockchain development

  • Reduced costs: labor costs are one of the biggest expenses for any business and that is particularly so when the number of jobs available far outweigh the available supply of talent. One analysis has shown the median salary of blockchain developers in the U.S. is 61.8% higher than that of other jobs so minimizing such costs is an obvious way to positively impact one’s bottom line. Employing an offshore strategy for blockchain app development allows companies to tap into a pool of expert developers residing in countries such as the Philippines where the cost of living is significantly lower than Western countries. That means hiring talent can result in saving up to 70% on employment costs for the same talent and output quality.
  • Faster results: hiring a new in-house developer can be a lengthy process:
    • Step 1 – post a job
    • Step 2 – review applications
    • Step 3 – interview candidates
    • Step 4 – test their skills
    • Step 5 – evaluate their results
    • Step 6 – choose the successful candidate.

    Oh, and then you need to cross your fingers they will actually accept the job, let alone wait for them to finish their previous role and hopefully pass their probation period with flying colors. Outsourcing blockchain development sees seasoned providers entrusted with filling positions as quickly as possible – often immediately given their wide talent pool – and means you are not responsible for all the sourcing, interviewing and evaluation that take so much time as candidates are already pre-approved.

  • Key competencies: blockchain development should not be left to chance. While many companies employ in-house developers, some executives make the mistake of thinking such skill sets are easily transferable to the new technology. That is not the case. Blockchain technology is new and has too many unique aspects for the everyday developer to get their heads around in a crash course. It requires a specialized and personal approach, which is why outsourced blockchain developers are a better long-term option than trying to retrain an in-house team. A specialist technology requires a specialist approach and outsourced providers deliver just that.
  • The team effect: recruiting one in-house blockchain developer is a headache. Now imagine trying to build an entire team. With many companies starting from scratch with their blockchain development ambitions, they are required to search for multiple developers at the same time and, in a restricted market and with the clock ticking to keep pace with competitors, there is no guarantee it will all come together seamlessly. Outsourcing blockchain development means organizations can assemble a full team almost immediately, from project managers and business analysts to UI/UX designers, developers and cryptography experts.
  • Strategic focus: while smart companies will appoint an in-house product owner to oversee communication with and management of their outsourced team, so much of the minutiae involved with administration is left to the outsourced provider. Time-consuming and costly factors such as office rent, provision of equipment, holidays and training is not your problem when you outsource, leaving in-country staff to take an arm’s length approach to day-to-day management of the blockchain development team and focus on higher-value tasks.

Cons for outsourcing blockchain development services

While outsourcing has incredible benefits for blockchain development, it would be remiss not to acknowledge there are potential challenges. Fortunately, they can all be mitigated with careful management and engaging the right provider.

  • Loss of control: managers who micromanage will undoubtedly need to rethink their ways under an outsourcing model. This is particularly so for smaller operations that are used to working closely on all aspects of a project. Outsourcing requires managers to delegate and brief their outsourced colleagues and trust they have the ability to deliver what is needed.
  • Communication: any successful project requires an excellent level of communication, let alone when outsourcing a new technology project. While some onshore companies have encountered communication challenges with offshore destinations, the likes of the Philippines is renowned for producing talent who are highly proficient in both written and spoken English. More importantly, IT has a language all of its own and Filipino blockchain developers are earning a reputation for their exceptional standards of technology smarts.
  • Security: building software on a platform outside one’s own business can be daunting for some companies, with understandable concerns about cyber security and intellectual property. For this reason, quality outsourcing providers will negotiate and sign non-disclosure agreements preventing the disclosure and distribution of any aspects of a project. Clearly communicating one’s expectations and working with well-established and respected organizations is the key to ensuring peace of mind.

Should you outsource blockchain development?

Needless to say, there is no simple answer to this question. Just as every organization is unique, so too is every organization’s blockchain development needs. Such projects vary in complexity and there are undeniable challenges in managing them solely in-house.

Working with outsourcing providers immediately ensures that experience. While a skills gap is a reality in Western countries such as the United States, there are highly qualified and cost-effective blockchain developers waiting to fill the breach from foreign shores.

Many companies are also finding success by implementing blended models, with blockchain experts managing the technical aspects of such projects and in-house teams managing traditional development such as UI design. This model also allows the potential for forward-thinking firms to start training their own developers to work with blockchain and learn the skills needed to manage ongoing maintenance once the system is operational.

While many companies will have the scale and know-how to manage their own blockchain developments, it would be highly recommended to explore outsourcing if an organization should tick any of the following boxes:

  • It is their first blockchain project
  • They do not currently employ any blockchain developers, or
  • They are facing an extremely tight deadline.

Blockchain technology has already changed the world. Now it is time to put a plan in place for it to change the fortunes of your own company.

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