Ultimate Guide To Outsourcing Software Development (2021)

outsourcing software development

Looking to outsource your software development operations?

Over the last few decades, software development outsourcing has experienced tremendous growth. Around 64% of all companies now outsource their entire development process!

But what is software development outsourcing and how do you do it?

In this article, we’ll cover what it is, the benefits and drawbacks of doing it and give you some helpful tips to outsource your software activities seamlessly.

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Let’s get started.

What Is Outsourcing Software Development?

In this type of outsourcing, a company hires a third-party service provider to handle their software development projects.

These projects can range from developing custom software used by your company or developing commercial software for your customers.

By outsourcing software development services, your internal IT team can focus on core competencies such as growth and innovation.

The 4 Key Benefits of Outsourcing Software Development

Here are a few benefits of outsourcing your software development team:

1. Saves Time and Money

This is the principal reason why companies outsource their software development process.
In fact, around 59% of all businesses use outsourcing as a cost-cutting tool!

How does outsourcing reduce costs?

Hiring in-house software developers can be expensive because you’re using resources to scout, train, and onboard new hires.

When you hire an outsourced team, you can save money on these hiring expenses. Additionally, you won’t need to invest in office supplies or training them.

There’s also a considerable difference in the cost-of-living between developing and developed countries. For example, the cost-of-living in London, England is far higher than what it takes to live in a country in Eastern Europe like Poland.

By outsourcing your software development team, you can hire top-quality talent from these developing countries like the Philippines at a fraction of the cost!

2. Access to Global Professionals and Latest Technology

With outsourcing, you’re not location-limited when searching for talent.

Instead, you get access to tons of third-party vendors around the globe to handle your custom software development projects.

Why should you work with third-party vendors?

Most of these software development agencies have accumulated technical expertise by working with a wide variety of clients.

To manage these clients and projects, outsourced teams also have access to top-of-the-line software development tools. This will help them easily adapt to whatever needs you have!

No matter how specialized the project, there’s an outsourced team to handle it for you!

Additionally, outsourced teams may follow Agile development methods or DevOps that allow them to be more productive. These processes can also help speed up time-to-market delivery – helping your company increase their tech capability at a rapid pace.

3. Greater Focus on Core Business Processes

Outsourcing benefits to your in-house team too!

By transferring time-consuming projects to a third-party vendor, you can reduce the workload for your internal tech-team.

As these outsourced teams don’t require any additional guidance, your employees can focus on projects that directly contribute to business growth.

Outsourcing can also take the pressure off your in-house team.

Instead of forcing your in-house team to handle projects they’re not equipped to deal with, just outsource it to a third-party vendor!

This way, your full-time employees can focus on strategic goals that match their skill level, while the outsourced team focuses on these niche software solutions.

4. Improves Product Quality

Having an outsourced software development team can often improve the quality of the final product.


Your outsourced team can have dedicated resources for testing and quality assurance to ensure that the final software product is stable for better user experience.

Additionally, as your outsourced team may have fresh ideas on how to make your software better, it can lead to more innovation. They might even suggest new approaches to solve existing business problems.

The 3 Cons To Outsourcing Software Development

Here are a few problems you might face when outsourcing development of a software project:

1. Barriers in Communication

This is one of the major disadvantages of outsourcing.

You may need to overcome problems like language barriers, cultural conventions, and time zone differences.

For example, if your outsourced team is on the other side of the world and runs into a problem when you’re asleep, they’ll have to wait hours to get your approval on a change!

This can completely slow down the problem-solving process and can even hamper productivity.

So how do you bridge the communication gap?

Here are these solutions:

  • Use collaboration tools like Slack and Jira to manage your processes.
  • Encourage transparency by checking in with your remote team every week.
  • Identify potential language barriers and hire a translator if necessary.

2. Privacy Risks

There can be a few security risks when working with an outsourced team.

Think about it.

You expose confidential company data to a third-party and trust them to use it correctly.

Your software or algorithm is at the risk of being stolen or replicated by an individual employee. Alternatively, if the outsourced company’s database suffers a leak, your valuable information can be compromised!

How do you reduce these risks?

Here’s how you can safeguard your data:

  • Ask software vendors to sign an NDA (Non-Disclosure Agreement) before sharing your data. This document legally restricts them from sharing trade secrets.
  • If your software is proprietary, include the intellectual property rights clause in the contract. This will protect you from any copyright infringement issues in the future.
  • Use performance monitoring tools like Time Doctor to monitor your outsourced team. This will help you keep track of what they’re doing and accessing.

outsource software development

The 3 Most Common Software Outsourcing Models

The best thing about outsourcing software development is that you can manage your outsourced team in any way you choose!

You can use different models to outsource the development, maintenance, and testing of your software to suit your needs.

Here are three models you can use to manage your team:

1. Project-Based

This model consists of outsourcing end-to-end management of the entire software project. You can hand over project requirements to the outsourced team, and the team works on the project from start to finish.

Before the project begins, both you and the outsourced team fix the price and deadline of the project.

Note: The pricing doesn’t depend on the number of hours worked or resources used. This gives the developers full control over the planning and execution of the project.

When should you opt for this model?

  • If the project requirements are clear.
  • If the project scope is fixed.
  • If the deadlines are known and agreed upon by both parties.

2. Dedicated Team

Looking for a tech team that can work on multiple projects?

This model consists of hiring a team of skilled experts from a third-party vendor. These software development professionals work together and act as an extension of your core team.

The dedicated team can consist of a wide variety of skilled professionals like software engineers, designers, UX specialists. They ensure that your product development processes are running smoothly and effectively.

Managing a dedicated team is similar to managing a remote team. You can hire a specialist as a project manager who communicates with your outsourced team and reports to you.

Unlike the Project-based model, the pricing depends on the number of hours and the number of dedicated team members you hire.

When should you opt for this model?

  • If you’re looking to build a long-term relationship with an outsourced company.
  • If your software requires regular maintenance and updates.
  • If your software is highly scalable.

3. Staff Augmentation

In this model, the third-party vendor builds the software development team, but you’re responsible for the core processes.

You, as the client, manage the software development projects and all their individual tasks. You are also responsible for the distribution of responsibilities within the outsourced team.

Meanwhile, the developer is responsible for the team’s productivity. They also manage concerns related to workers, such as vacations and compensations.

When should you opt for this model?

  • If you’re looking to be more involved in the development process.
  • If you want more creative control during software development.

3 Key Software Development Outsourcing Tips

Here a few things you should keep in mind when outsourcing your software development processes:

1. Choose A Service Provider Wisely

The quality of your software greatly depends on the quality of your outsourcing service provider.

A high-quality software development company can create great software that boosts your company’s productivity. However, hiring a vendor with a bad reputation may derail your operations.

So how do you hire the best software outsourcing company for your business?

When looking for service providers, reading their reviews and testimonials isn’t always enough.

You need to look at some of their previous projects.


Their work is an indication of their quality and skills. It also showcases their technical capabilities.

Start by visiting apps, websites and other software that they’ve worked on.

Keep an eye on these features:

  • User Experience – How easy it is to navigate it and engage with content.
  • Mobile Functionality – How well the tool works on mobile devices.
  • Design – How aesthetically well-crafted the software is.
  • Software Load Timings – How quickly the tool loads..

2. Start With A Test Project

Before hiring a software company, you need to be sure about their capabilities.

Start by asking their team to work on a trial project. Their performance on this project can help you decide whether you want to continue working with them.

Here are a few things you can learn about your outsourcing partner through this test project:

  • Communication Skills: Does your outsourced team ask important questions? Are they able to follow instructions effectively?
  • Trustworthiness: Is your outsourced team open and honest about their processes? Are they able to deliver on their promises?
  • Time Management: Does your outsourcing partner create internal deadlines of their own? Are they able to submit their work on time?

Conducting a test project may require some investment in time and resources. However, it ensures that you don’t face any significant problems in the future.

3. Use Performance Monitoring Tools

One of the issues of outsourcing software development is that it’s hard to monitor the performance of your remote tech team.

Think about it.

Your team could be thousands of miles away.

How will you verify:

  • If they’re working during office hours.
  • If they’re accessing non-work related websites.
  • If they’re billing you for idle work hours.

Tools like Time Doctor can help you here.

What’s Time Doctor?

Time Doctor is a powerful productivity software used by pwc, Verizon, and KPMG to track the work activity of their employees.

Here’s how it can help you manage your outsourced software development team:

  • Timesheet Reports – Measure how much time an employee worked during a given time period.
  • Detailed Project Reports – Know how much time your projects took.
  • Web & App Usage Report – Identify what websites your remote accesses during work hours.
  • Distraction Management – Help your remote employees avoid distractions with pop-up alerts.
  • Inactivity Timer – Ensure that your remote employees don’t log idle time as work hours.
  • Payroll – Bill your team for completed tasks within TimeDoctor.

Wrapping Up

Whether you are a small business owner or a CTO, outsourcing is one of the easiest ways to save money and speed up your software development process.

By outsourcing software development, you’ll have no difficulty leveraging a talented workforce to boost the growth rate of your business!

Try Time Doctor

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  • Avatar Rodrigo says:

    Very interesting post! What also works well for us as a software agency is to facilitate our incoming leads the possibility to conect with past clients.

  • Avatar Hector Monzalez says:

    Finding expert developers in limited time to meet fast-approaching deadlines is only one side of keeping your development moving forward.

  • Avatar Smirithi Maya says:

    Yes, your blog nailed it. Many small business entrepreneurs are still not focusing on outsourcing their services. As you said, Growth is one of the most important goals for a lot of small businesses. Outsourcing is popular for a reason – it allows businesses of all shapes and sizes to tailor their operations and make the best use of their time money and resources to grow their businesses effectively.

  • Avatar Rachel C. says:

    Different clients, different needs… Thank you for sharing this information. 🙂

  • Avatar Arooba Sheikh says:

    Very Informative Guide. Thanks for sharing!

  • Avatar Aditya Joshi says:

    Thanks for the nice article. Software is becoming an inevitable part of our life and we are using software no matter in what way on a daily basis. Technology is the demand of time and business can gain advantage from advanced technology. The older it gets the more it will evolve.

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