The Complete Guide to Software Development Outsourcing – 2022

Outsourcing has been a viable solution for companies providing different services related to business. In fact, outsourcing is so effective, businesses now rely heavily on software as their daily operations rely on software. If you’re not familiar with how this process works, contact an IT outsourcing company to see if they’re here for you.

Many businesses already know what custom software can do for their company. These special features will give your company a competitive advantage and make it more efficient for your operations.

In 2022, software development outsourcing is estimated to reach $137 billion. The software development outsourcing market will be driven by a number of factors such as maximum time required for the developer’s work, decreasing number of employees in the development department, and increasing demand for automation in software development.

Never a soft option

Software development outsourcing might be the perfect solution for small and medium-sized enterprises looking to get their software made. However, it should only be used when businesses are able to provide staff for specific roles throughout the process that require constant oversight.

Introduction: What is a Software Development Outsourcing?

Software development outsourcing is an outsourcing form of software development that offers a different type of service than internal development. Outsourced development services are primarily provided by companies that offer enterprise software as part of their services rather than as an end product.

Introduction: Software Development Outsourcing (SDO) is a process where companies outsource parts or all of their software development work to third-party companies and agencies who specialize in the field and typically provide services at a much lower cost.

You may be aware that many businesses are outsourcing software development to an external company because it allows them to focus on other important aspects of their business. There are many benefits; one of which is that, because it gives you access to highly skilled software developers with knowledge and experience, you can tap into their skills.  Outsourcing software development can be a huge time and money saver. It’s a great way to develop & improve your business! It also allows more development opportunities for current employees who may have been doing other work on the side. You’ll be able to tap into the most technologically advanced solutions and ensure that they work in accordance with your needs.  Many companies find the outsourcing software team to be an extension of their IT partners, rather than simply a supplier. They make their lives easier & more efficient.

Outsourcing is the process of handing off your software development to another company. As you are probably aware, there are several ways to do this depending on who or what company is doing work for you.

What are the different types of outsourcing?

Global international communication is now at an all-time high thanks to advances in technology. The world is, quite literally, just a global village. There are plenty of outsourcing companies you can choose from which means you won’t have to worry about the different ways they work or where they may be located. Here are some of the most common types of software development outsourcing that are being used by businesses around the world.

  1. Homeshoring – A popular software development outsourcing technique is to find & hand your project over to a single developer or software team at your location. Hiring an outsourced person not only allows for more face-to-face meetings about work but also saves money in the long run because they are saving their own time & effort.  Although convenient, homeshoring often proves to be time-consuming and expensive.

  2. Nearshoring – software development outsourcing is the most popular form of software outsourcing. In terms of the process, choosing a development team in a country that is close to your own, that is easily accessible from location and cost perspective, but where local culture will also not affect the progress of the project.  Nearshoring is becoming more popular for its apparent positive attributes. It ticks a lot of boxes in terms of are skill sets ease of communication, cost, language ability, time zones, and similar culture.

  3. Offshoring – A form of outsourcing that has decreased in popularity due to digital transformation. Offshoring can present a difficult decision for businesses. It can take a lot of effort, time, and budget to implement successfully, but the benefits may make the effort worthwhile. There’s often more to consider than timezone differences or language barriers. Transport times and customs issues also need to be taken into account before factoring them into your project costs.

  4. Onshoring – the practice of sending work from other countries to a software developer in the same country is what’s been called near-shoring.  At work, there are a number of reasons why you might need to partner with someone, such as a new project or an opportunity to learn more about how your software is developed.

Let’s review the different methods of dealing with your software development project. Location means where does the work take place, which is very important in determining this. There are three standard options for outsourcing some aspects of software development are offshoring, offshore outsourcing & nearshore outsourcing.

  1. Staff augmentation – in this software outsourcing scenario, your brand will be able to delegate the task of building a remote software development team to an outsourced provider.  Although a provider will handle the project and day-to-day running of a team, a client will maintain all hiring & firing responsibilities, be responsible for team management decisions and handle distribution.

  2. Dedicated team – automating software development is becoming more and more popular, with your choice of the outsourcing provider. They will usually provide a team that stays the same for future projects. This model is fairly simple to work with. In this instance, the team will generally retain control of all aspects of running their operations.

  3. Project-based – the most popular type of software outsourcing contract. The project-based software model relies on the power of the development team to decide everything related to that project task. This is an efficient solution when your business is constantly changing, evolving, or growing.

How do you successfully outsource software development?

Many factors have to be in place in order for outsourcing software development to be successful. To help ensure this, we’ll give you some insights into the different factors you should consider in this article.

  • Taking care of communication

  • Following processes and procedures

  • Giving feedback that is regular and detailed

  • You are responsible for creating a software development brief that shows the end result idea and the timeframe.

The best countries for software outsourcing

China and India in particular have been picking up in recent years. It is not uncommon to see software development originating from these countries when it comes to international brands. This goes back to the different time zones, language, and cultural barriers associated with choosing these specific locations…

Poland is fast emerging as one of the world’s outsourcing leaders. Central Europe’s location makes it very accessible to people from many countries. You can access different types of training, or even move personnel if you need to keep up with changes in your business.  Since Poland shares a time zone and cultural similarities with other countries, there are tons of people who are able to speak Polish who have grown up in places like the U.S. or China, for example. Poland has a very strong education system which means Polish people have been excelling in language skills and tech-related expertise since they were young!.  Despite their popularity, Poland is usually cheaper than other European countries when it comes to software development

The table below presents the top 10 counties with the best developers. Poland is in the third position. Ranked by average score across all HackerRank challenges

 How much does it cost to outsource software development?

Without an exact number, we can’t give you an estimate for the design project. Factors like complexity, size, and timing all play a role in determining this. We have included a brief guide that will give you a rough idea of what to expect.:

  • Eastern Europe, countries are very affordable & can provide you with quality software development services. Poland, Romania, and Ukraine are the most cost-effective option when outsourcing your project. You can expect to pay from $50 up to $99 an hour.

  • Western Europe, France, Belgium, Netherlands. Prices for design projects vary, depending on what you’re looking to produce. You’ll often end up looking at $100-$150 per hour, depending on who’s doing the work and their level of expertise.

Although the rates are high, the quality of translators is excellent due to cultural & offshoring needs. As they allow you to leverage the most up-to-date languages.

Software outsourcing – the process itself

Today, many businesses are experimenting by outsourcing some of their work, and there are a lot of ways to do so. However, business owners should keep in mind that not all outsourcing options will suit them and they should be aware of the pros and cons for each type.

Step 1 – Deciding to outsource

The importance of knowing if outsourcing will benefit you can’t be underestimated.  Companies should always look at the cost & skill analysis in order to figure out if it’s worth it or not. It can sometimes be more economical to hire in-house software developers to complete the workload. Keep in mind that while this option may cost more, it can also make your business better off.

A checklist can help you identify what your project requires in terms of staff, budget, and time. It will also help you compare how each option will affect different aspects of the project.

Step 2 – Selecting a supplier

This is a vital step in the life cycle of a software project. It helps to set the tone and gives you the framework for everything that follows. Make sure to take your time on this one and you’ll be ahead of the curve.

Your first step is to decide on the location of your software development supplier. Next, you’ll need to compile a list of outsourcing companies in the chosen country. It’s best to get recommendations from other businesses, look at online rankings or forums for an easier way of selecting your consultant.

  • Request for information and request for proposal You should send a request for information (RFI) to potential suppliers, and a request for proposal (RFP) to software development companies. These are, essentially, documents that outline the parameters of your software project and request that suppliers send you a proposal including a price quote for the work.  When all of the proposals are in, it is easier to screen out vendors that do not offer good value with their products.

    Your RFI you submit to a supplier should include:

    • Software project overview

    • Let’s talk about your company’s history and background.

    • The goals of your software project

    • The project’s scope

    • The schedule for your project’s initial target deliverable

    • Possible roadblocks

    • Budget constraints

    • Expectations from the outsourcing company

  • NDA – protecting your software development project It’s best to have a trusted software development company review your information request or proposal prior to the decision. Since you plan on moving forward with this project, don’t hesitate to ask them to sign on for it!. Ideally, before exchanging any confidential details with a potential outsourcing partner, you would want to have a meeting.

When you’re looking for a supplier, it’s a good idea to ask each company to show you past projects. This will give you a good idea of what they’ve been able to work on and how well they do their work. From this point, you can visit websites and apps to see how well similar profiles function in terms of design, usability, and efficiency – again, this should serve as a good filter.

Now you have a manageable shortlist of software outsourcing suppliers, you might want to test them out with a small project before making a final decision. This will help you to analyze each company in terms of communication, reliability, and time management. It’s not such a difficult decision to make when you’re qualified for this job. Once you’ve found the supplier of your choice, set up a meeting with them – they’ll be able to answer any questions that come up and also guide you through the rest of the process.

Step 3 – Contract procurement

Before moving on to any software development project with a supplier, make sure that you have a proper document that outlines the specifics clearly.  Making certain the important details of the project and protecting you in case there are disagreements is done easiest by using a contract. There are three types of contracts to choose from. These three contract types include:

  • Time & Materials – software licensing contracts outline the hourly rates for different members of your software development team. They may also include procurement of materials like a software license. Time & Material contracts are short-term services. They require a lot of trust between your company and a vendor…

  • Fixed Price – This software development agreement is a one-time cost for all future projects. The client has agreed with the developer to cover any future costs they may incur beyond the current project. This is helpful in making sure that there won’t be any surprises later on and that your staff won’t need to worry about sudden financial burdens..

  • Target Cost – This contract can be flexible and allows for both ongoing and uncertain scope projects.

Step 4 – Implementation

You should consider a number of important things before you start outsourcing your development to a third party:

  • Risk Management Strategy – addresses potential problems like employee absenteeism or market fluctuations while outsourcing your software development project.  It’s important to have a risk management strategy in place before launching any project. Any obstacles along the way are likely to cause problems later on, so it’s important that you’re ready to handle changes.

  • The Software Development Cycle – This project will involve lots of different activities and it will be important to start this process early. It will involve information gathering, system design, requirements analysis, coding, quality control, and testing. The software outsourcing providers will already know how to proceed with a project in a given case. If you want to, it’s a good idea to ask them for a demonstration or have them walk you through the process beforehand.

  • Testing –Online software developers should regularly test their products to ensure maximum efficiency. They should share the results of these tests with their customers to improve the quality of their products. It’s important that you reach out to your supplier for documentation of testing, including the reasons behind success & failure and plans for improvement.

Step 5 – Monitoring and Controlling

Although you may not physically be doing the work yourself, you still hold responsibility for its success. This means that, although the software development outsourcing company may be worthy of trust, the project is ultimately your own. The savvy business owner knows it’s important to monitor the progress of the plan for optimal up-time. Among other possible metrics, you might want to consider:

  • Time management – Are you getting the agreed hours in return? If not, then there could be a time zone discrepancy that should be addressed.

  • Honesty – would like to know if you are being billed for hours not worked (or hours during which employees were surfing the net or engaging in activities unrelated to your project)?

  • Productivity – The project is on target according to the timeline agreed.

  • Reporting – are you up to date on all aspects of the project’s progress?

Keep in mind that monitoring your software team is important, especially if you are in a different country. IT partners are more likely to try extra hard if they know that you trust them. This ensures that the end result will be good, even if it’s not immediately clear.

Step 6 – End of contract or new project

With a good quality IT outsourcing company, your contracts for different projects or services will likely be renewed or extended.

Once a decision has been made, it’s time to see how any exit strategies included in your contract or transfer plans are working. It’s beneficial to have a document for lessons learned so next time you are outsourcing work, your company can benefit from the lessons learned in the past.


Feel like partnering with development companies? By following our guide on what to look for, you can determine which software company will provide the best partnership for you. This way, the success of each project on your side is guaranteed.

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