Outsourcing Software Development: Complete Guide

Outsourcing software development can be both a challenge and a lifesaver. True, it’s not always easy to find the right outsourcing partner to entrust with your project. Managing the process effectively can also be difficult, especially if you’re new to the outsourcing processes.

Despite that, software development outsourcing can help you achieve your goals quicker, deliver the projects on time, and efficiently scale your team up and down while saving costs.

We at Softermii have a fair share of experience providing outsource software development services to real estate, e-commerce, healthcare, and fintech companies. Our diverse pool of cases includes medical apps, event platforms, and other projects of various scales and budgets.

We’ll gladly share that experience and knowledge in this software development outsourcing guide by telling all you need to know about outsourcing software development processes.

Source: Mediconnect – a business connectivity tool for physicians and healthcare product companies developed by Softermii

Software Development Outsourcing Explained

To learn how to make the most out of the software development outsourcing process, you have to understand what the process is about clearly. There is indeed a vast amount of information available on the internet, and it can sometimes be confusing or even contradictory. So let’s untangle this outsourcing knot together!

Outsourcing is the process of hiring an external provider to gain control of a certain work project (or a part of it). Simply put, you hire other people to do specific work for your company — in our case, to develop software.

Why do companies outsource software development? Because this can help them in various situations:

• When an in-house team lacks certain skills. For instance, you have a team of Android developers but need to release an app version for iOS;
• When there are tight deadlines to complete the project. In this case, outsourcing the team to do a part of the work can reduce the pressure put on your employees and ensure that you’ll deliver the project on time;
• When the project is too large and the current company’s capacity is not enough to handle it;
• When external support helps the team to free time on high-priority tasks. For instance, you hire an outsourced team for software maintenance after the product’s release, while your in-house employees can move forward and start working on other projects.

Benefits of Outsourcing Software Development

Outsourcing is common among various companies, from small startups to MAANG. That’s because outsourcing development has a lot of benefits, such as the ones listed below.

Cost savings

One of the main and most important benefits of outsourcing software development is that this process helps you save costs. When hiring an in-house team, companies spend extra money on recruiting, training, and management. They also have to invest in corporate benefits, pay for time off, and other things that come with a full-time employment package.

While this is a worthy investment for large companies with a stable workload, this is not the best option for smaller ones or for companies that have to complete only one or two specific projects.

Outsourcing IT development, on the other hand, gives more flexibility. You decide how large your team will be, and you can quickly scale it depending on the project’s needs.

Furthermore, access to a worldwide pool of talents allows you to pick professionals with different hourly rates, from the ones common in your country to much lower ones.

Access to specialized expertise

Different projects require different skills, knowledge, or various languages and technologies. However, even large companies don’t always have an in-house team big enough to cover all of the skills and specializations.

Why should a growing company spend a considerable amount of time and money on maintaining such a large and versatile team if they don’t need certain skills all the time? It’s much cheaper and rational to outsource projects with specific expertise.

Increased efficiency

Outsourcing your software development can also help you gain important insides into a project and see it from the other perspective. While an in-house team knows a lot about your company and its processes, sometimes a fresh look from the outside can deliver a new vision and fresh ideas.

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But besides that, an outsourced team also has a lot to share. Due to their vast experience with different companies and projects, such professionals can offer technology suggestions, product improvements, etc.

Faster time to market

Sometimes all you need to do to succeed in today’s competitive business world is to become the first company to market an innovative product. But even if you’re working on a product that already has competitors, it’s still crucial to deliver it on time.

This could be a challenge, especially if your company has too many projects or a team that’s too small. But outsourcing nearshore and offshore software development can help you in both cases.

You can hire outsourced professionals at every stage of the product development process. They can help you build a product from scratch or join at a certain moment to ensure your company will meet the deadline.

Challenges for CTOs & Product Managers That Outsourcing Solves

Besides the benefits mentioned above, outsourcing can also help solve the most common challenges that CTOs and product managers face.

CTO’s Challenges	Description of the problem	How outsourcing can help
Recruiting Tech Specialists	When you’re looking for tech specialists in your city or country, you are limited by the number of professionals open to job search and often by their fees (they might be too high, especially for startups or small businesses).	Outsourcing gives you an opportunity to look for talents worldwide and to hire experienced workers with lower rates (from countries with a lower cost of living).
Ensuring Tech Innovation	To implement innovations, the CTO’s team has to be technologically advanced, keep up with tech trends, and be able to generate new ideas. However, it might take time for the team to gain all that knowledge and skills. In the meantime, it will delay innovation.	Hiring professionals from other countries can help you exchange knowledge and gain access to new tech insights.
Meeting Project Deadlines	Meeting deadlines can be difficult if you have several overlapping projects. Also, if the deadlines are tight from the start and something unexpected happens, this might lead to the team struggling to deliver the result on time.	Outsourcing professionals can share the workload with your team or work on certain parts of a project to help the team deliver it on time without compromising the quality. It also enables you to hire any number of workers required to complete a project on time.
New Digital Tech Requirements	Innovation requires knowledge of the latest technologies, such as Artificial Intelligence, blockchain, the Internet of Things, and others. It might be challenging to master such technologies if they aren’t present in your region.	Outsourcing grants you access to a global talent pool, allowing you to hire professionals that already have the necessary tech knowledge.
Technical Debt	When your team develops a product using an earlier version of a certain technology, they might need some time to adapt to its latest version. The company might also not be able to afford a quick tech upgrade. This, in turn, can slow the development processes, creating technical debt.	Outsourcing companies can help you update the tech stack or migrate to a new one quickly, allowing you to resume work on your projects without experiencing any significant delays.

Product Manager’s Challenges	Description of the problem	How outsourcing can help
Limited Tech Understanding	It might be difficult to pick the proper framework, library, or stack for development if you aren’t familiar with a particular technology.	Companies can offer their technical expertise to help you quickly catch up with a certain technology and become more technically mature.
Inadequate Planning	Working with new technologies or projects can result in inadequate planning when the desire to achieve the result quicker doesn’t match the team’s resources and work pace.	Outsourcing companies are precise in planning. They know exactly how much time is required to achieve a certain goal.
Managing Cash Flow	It’s vital to ensure that you have enough cash not only to successfully start the project but also to deliver it on time, no matter how many unexpected and potentially costly complications will emerge.	With outsourcing, you receive a tech partner to help you with financial planning. You also save costs by paying the team strictly for their work time and by hiring professionals with lower hourly rates.
Inability To Scale	Scaling can be complex, especially for startups and small businesses. It requires a lot of expertise and resources.	Outsourcing allows you to scale teams both up and down depending on a project’s stage.
Managing IT Infrastructure	Infrastructure management requires constant monitoring of the company’s tech needs and resources. This can be difficult to handle, especially in small teams and companies.	Outsourcing entrusts the management to IT admins and other specialists willing to monitor your tech resources 24/7 to prevent downtimes.

Risks of Outsourcing Software Development

It wouldn’t be fair to say that outsourcing software development only solves problems and helps companies spend their time, money, and other resources more effectively. Just like any other process, this one also has its challenges.

Hidden And Uncertain Costs

The hourly rate of outsourcing software developers is usually quite transparent. However, the trick might lie in the number of edits and interactions available for free. In some cases, they might be available only for an additional fee.

Quality Drawbacks

Always check it before the release to ensure that hiring professionals with lower hourly rates won’t result in a poor quality of an end product. Consider having an in-house QA and some testing methodologies to evaluate the quality of the final product.

Communication Borders

The English level of outsourced employees matters just as much as their skills. Poor English knowledge might result in the team misunderstanding your project’s requirements.

Knowledge Transfer

The outsourcing company has to provide a detailed job description along with any potentially useful additional information to the team that will be working on your project. In return, the team has to deliver code that can be easily used by other developers.

Weak Management

An outsourced team needs an experienced, agile project manager to perform successfully. If you lack one, don’t try to save costs by taking on this role. It might result in poor performance and missed deadlines.

Privacy and Security Concerns

Not all outsourcing companies can boast strong data protection. If you’re working with sensible data, pick the outsources who have already worked with it before.

Viability of Service Provider

Working with relevantly new outsourcing companies that don’t have enough experience and reputation on the market might result in them suspending their work unexpectedly.

Learning the risks of outsourcing software development can help you understand what to be mindful of to minimize them. To find out more about them and options for their prevention, read our article that examines software development outsourcing risks.

Steps to Follow when Outsourcing Software Development

If you’ve decided that outsourcing has more benefits than potential risks, it’s time to learn how to outsource software development to achieve maximum efficiency. The process is straightforward.

Define project scope and requirements

Describe the outsourcing software development projects in detail, clearly stating your goal, deliverables, scope, budget, and other things that matter to you (for instance, a specific framework).

Identify potential outsourcing vendors

Look for companies with a good reputation on the market, are familiar with your niche, and work with technologies you prefer.

Conduct due diligence

Carefully collect and analyze information about the outsourcing company to prevent fraud, data leaks, and legal issues.

Negotiate a contract

A contract has to mention the scope, pricing, and deadlines. Creating an NDA (Non-Disclosure Agreement) is also a good practice if your company deals with sensitive data. You can also state the penalties and project cancellation fees.

Establish communication channels and protocols

If your company’s policy requires using specific communications channels, VPNs, and other protocols (or you simply find it more convenient to communicate in Slack instead of Microsoft Teams, for instance), make sure to discuss it with the outsourcing company.

Set milestones and timelines

Setting milestones and timelines will allow you to track the project’s progress and adjust the deadline if necessary.

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The Main Outsourcing Strategy Based on Scenarios

There are many different ways to approach outsourcing in software development. Simply put, one doesn’t necessarily have to hire the entire outsourcing team if they need only one feature, a consultation, or experts that work with a specific technology.

Let's review different outsourcing scenarios to understand which strategy suits your needs and budget best.

You need the help of specific tech experts

Some companies already have a skilled in-house development team. However, they might find themselves needing to add a specific technology to a project or create a project version for a particular platform.

This can be solved by hiring remote developers familiar with the technology. The number of professionals needed largely depends on the project’s scale: you might need only a few outsourced employees for small projects or the whole dedicated team for bigger ones.

You need a full development team

Plenty of companies, especially small ones, don't have a full development team in-house. Hiring different professionals responsible for software development (engineers, QA testers, UI/UX designers, and others) can be costly and time-consuming.

On the other hand, outsourcing software development enables companies to create tech solutions for their audience while saving costs. The companies are also free to decide how large and functionally diverse teams they need and how deeply they will be involved in the development process.

You need to scale or modernize existing software

A good idea might need some scaling to turn into a great one. Most well-known startups started small but later added extra features to grow their user base.

Let’s take Snapchat as an example. According to Snapchat's blog, the app reached 375 million daily users in 2023, marking a 17% increase year over year.

However, many startups don’t have large teams and big budgets to quickly scale or modernize existing software to remain competitive in the market. In this case, outsourcing these services can be an easy and effective solution to the problem.

You need the assistance of a high-level professional

All companies need to innovate and grow to keep ahead of the competition. Turning to outsourcing companies to get professional tech assistance is one of the quickest ways.

Outsourcing specialists can not only fulfill your requests but also share their technical expertise. You can turn to them for help from top-level performers, such as CTOs and tech co-founders.

Obviously, these aren’t all scenarios that might require you to turn to outsourcing companies for assistance. You can read Softermii’s article on software development team extension to learn more about the options available and pick the one that suits your needs the most.

Best Practices for Successful Outsourcing Software Development

While there’s no general way to build an efficient collaboration with an outsourcing company, there are still some common best practices that can help you make the most out of your partnership.

Know When You Need Outsourcing

Knowing which parts of the process you should outsource and which not can help you save time, money, and nerves. Generally, it’s advisable to outsource functions and technologies you have little to no knowledge of.

Start With Small Projects

Even after you did your research, checked out the company’s portfolio, and liked what you saw, it’s still safer to take small steps to find out if you and the outsourced team are truly a match. Consider working on a small project or a certain part of a larger project first to ensure that the team meets your quality expectations.

Approach Onboarding Responsibly

Whether you hire several professionals to join your in-house team or a separate team to complete your projects, these people will be working for your company. You have to onboard them just like the in-house team to ensure smooth performance.

Monitor Performance

There are plenty of performance monitoring tools you can utilize to track outsourced projects and their progress. Using them can help you ensure that the team meets the deadlines and progresses just as planned.

Exchange Feedback

Open communication ensures productive collaboration. To make the most out of your outsourcing experience, you have to be ready to give feedback to the team and encourage them to give their feedback to you. This way, you’ll both know about the possible pitfalls and will be able to share ideas about the product that could improve it further.

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How to Choose the Right Outsourcing Partner?

Choosing the right outsourcing partner can significantly influence the trajectory of your project. A good partner can accelerate growth, while a poor choice can derail even the most well-conceived plans. Here are critical factors to consider when making your decision:

Domain Expertise

Ensure the outsourcing company has experience in your industry or field. They should be familiar with industry-specific challenges, standards, and best practices.

Past Performance

Review their track record. Client testimonials, case studies, and references can provide insights into their reliability, quality of work, and problem-solving capabilities.

Communication Skills

Seamless communication is crucial. Assess their responsiveness, clarity, and transparency. Consider cultural and time zone differences that might influence collaboration.

Technical Proficiency

Verify the partner's technical capabilities if your project involves specialized technology or methodologies. Check if they're updated with the latest tools and technologies.

Security Protocols

With rising cybersecurity threats, ensure that your outsourcing partner has robust data protection measures. They should be compliant with international data security standards.

Flexibility and Scalability

As your project grows or changes direction, your partner should be able to adapt. Check if they can scale their resources according to your changing needs.

Cost-effectiveness

While cost is essential, it shouldn't be the only factor. A cheaper option might be more expensive in the long run if the quality could be better.

Cultural Fit

The partner's organizational culture should align with yours. Shared values can enhance collaboration, ensuring a smooth working relationship.

Transparency

Your partner should be transparent about costs, timelines, and potential risks. This openness builds trust, which is vital for a successful long-term relationship.

Post-Implementation Support

Beyond completing a project, continuous support can be invaluable. Check their policy on post-launch services, maintenance, and updates.

Selecting the right outsourcing partner is as much about expertise as compatibility. Dedicate time to thorough research, interviews, and due diligence to ensure your choice aligns with your immediate needs and long-term vision.

Where to Outsource Software Development

Outsourcing grants you access to professionals from all over the world, which naturally leads to the question: “Which countries to pick for potential collaboration?”. It depends on many factors, including hourly rate, English proficiency, knowledge of the latest tech technologies, etc.

We at Softermii can name the five best countries to outsource software development: Ukraine, Poland, India, Argentina, and China. These countries have a lot of high-qualified talents with rather low hourly rates and advanced tech knowledge.

Revenue in the Segment IT Outsourcing is projected to reach US$430.50bn in 2023.

Why Choose Softermii for Software Outsourcing

Softermii is an outsourcing company with Ukrainian roots, 100+ clients worldwide, and a 98% client satisfaction rate. In 2022, we reached a 100% client satisfaction rate on Upwork and were in a list of #1000 best software development firms worldwide.

We create websites, mobile apps, and a combination of them for real estate, E-commerce, fintech, and healthcare industries. You can check out our best cases: an E-commerce app, an IoT-powered rental website, and a Telehealth platform.

Source: Streamotion – a live streaming online purchase app developed by Softermii

Source: Rently – a fully IoT-powered rental web and mobile platform

Source: Infomed Telehealth – medical platform, providing easy and quick access to practitioners via telehealth consultations, support chat & health information technology hub developed by Softermii

Turning to us for outsourcing IT services can help you get that professional second opinion you’ve looking for, receive valuable market insights, ensure that your project will be delivered on time and according to the budget, and even receive software support after its release.

Although outsourcing software development can seem challenging, Softermii does its best to make it as simple and smooth for you as possible. We understand that it might be intimidating to have less control over the project and we do everything to help you feel safe cooperating with us.

Forget about communication gaps and poor project management! We offer various cooperation models that allow you to choose the level of involvement. You can manage the team yourself, entrust the process to us, or pick a combination of those options.

Picking Softermii as your loyal outsourcing partner helps you achieve your goals and experience efficient and fruitful collaboration. Reach out to us to discuss your product.

Conclusion

Outsourcing is the process of entrusting your projects to an external team. There are plenty of reasons why outsourcing software development is a good idea: it is cost-effective, helps meet deadlines, allows you to find talents with the right expertise quickly, and scale or modernize your projects without spending time on hiring and training an in-house team.

Despite its benefits, outsourcing has its risks, such as hidden costs, quality drawbacks, data leakage, and unexpected project terminations. However, if you approach the process correctly and stick to our best practices, you’ll be able to minimize those risks.

One of the easiest ways to do that is to choose a reliable outsourcing company like Softermii. We have been working on the international market for many years and can boast a 98% client satisfaction rate. Turn to us for help, and you won’t be disappointed!

Software development outsourcing can help you achieve your goals quicker, deliver the projects on time, and efficiently scale your team up and down while saving costs.