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Software Development Outsourcing Guide

Rapid global digitization, especially in the conditions of the Covid-19 pandemics, urged more businesses to turn to custom software development. To build their digital solutions faster, ensure their high quality, and provide the best value for money, many of them prefer hiring outsourced software development teams.

In this comprehensive software development outsourcing guide, we’ll get into the details of outsourcing and explain how to outsource your app development effectively.

What Is Outsourced Software Development?

Outsourced software development is a widespread business practice when businesses delegate web, mobile, or desktop development to outside software development experts.

outsourcing software development

This allows non-technical companies to quickly find the IT expertise and build high-quality products, avoiding the necessity to establish their own IT departments. Whereas, technical companies can achieve greater flexibility and focus more on their core business goals.

Why Should You Consider Outsourcing Software Development?

Businesses have always opted for outsourcing to cut down on their development costs and quickly reach the necessary IT talents. Though, recently this IT practice has become especially popular due to the global economic and social behavioral changes.

According to the recent Data Analytics Outsourcing Market – Growth, Trends, Covid-19 Impact, and Forecasts (2021-2026) report, the global IT outsourcing market estimated $3.04 billion in 2020, and it’s projected to reach $9.46 billion by 2026 with a CAGR of 21.5% through the period from 2021 to 2026.

Since 2019 the world is undergoing a deep economic crisis caused by the Covid-19 pandemic. In the time of uncertainty during 2019-2021 businesses have faced many obstacles from temporary closures to new social behavioral norms like social distancing, remote work, and staying at home more.

Companies have been trying to find new ways and strategies of how to retain their customers and keep the competitive edge in the market. One of the most effective solutions is to opt for business digitization and develop their own mobile and web applications for effective interaction with customers and their engagement. Unfortunately, creating a customized digital solution is never a cheap option. That’s why many businesses turn to software development outsourcing.

IT outsourcing allows businesses to adhere to their strategic goals. With the help of outsourcing, companies can:

  • reduce the software development costs;
  • speed up their software development;
  • tap into highly-skilled talents who can implement the latest technologies in their digital solutions, e.g. Machine Learning, Artificial Intelligence, IoT, and many others;
  • keep the competitive edge in the market.

Software Development Outsourcing vs In-House Development

When a company considers creating a digital solution, they need to decide which development practice to choose – in-house development or software development outsourcing. Let’s have a look at a quick comparison of the two.

Costs Elimination

When recruiting staff for an in-house team, a company runs into a set of expenses. They spend significant sums on employees’ hiring, onboarding, and training. For example, the Glassdoor team has found out that the US companies spend on average $4,000 and 24 days just to find and hire a new employee for an in-house team. Meanwhile, Gallup has estimated that the total employee turnover cost makes ½ to 2 times of the employees’ annual salary.

software projects outsourcing

On the contrary, when turning to a software development outsourcing company, businesses considerably save up on recruitment. These companies assume all the hiring routines and provide businesses with highly skilled and ready-to-work programmers and even entire software development teams.

Tapping Into IT Talents and Expertise

Outsource-specified IT companies provide businesses with advanced professionals who specialize in their particular development fields. Businesses can hire programmers who are experts in web development, mobile app development, or can implement innovative technologies such as Blockchain, Big Data, VR/AR, and others.

Besides that, the software developers in outsourcing companies have solid development experience in various fields which they have gained through working on customer projects. This way, businesses can hire the most knowledgeable experts who can develop sustainable and high-quality digital solutions of any complexity and a wide variety of features.

Scalability and Adaptivity

Outsourced software development teams are highly flexible. They can switch quickly between the tasks and adjust to the ongoing project needs. Due to their extensive development experience gained in previous IT projects, programmers can view the current project from a different perspective and share valuable tips on its improvement. Moreover, businesses can add or remove the necessary specialists during the development project, ensuring the best value for money at each software creation step.

Time-Saving Process

When hiring an outsourced team, businesses onboard a team of professionals who can provide high-quality software development services while following all the business requirements and principles. They know how to organize their project development workflow well and establish strong team communication and collaboration. All this results in faster software development processes and an earlier product release to market.

Software Development Outsourcing Models

Software outsourcing providers offer businesses various engagement models, including a project-based approach, IT Staff Augmentation, and fully Dedicated Teams. Let’s find out what’s the difference between them and when it’s better to use one over another.

A project-based approach is a general software development outsourcing practice when a customer hands over their app development project entirely to the software provider. With a project-based outsourcing model, customers can choose between the two options – fix bid and time and material.

The fixed bid is a good option when all the project requirements are set. It has a predefined timeline and budget which can’t be changed during the development process. Whereas the time and material model works ideally for the projects that have no or minimum project requirements and come with many changes during the development phase.

IT staff augmentation is the practice of extending an in-house software development team. Businesses opt for this model when they want to add extra experts with some technical expertise to the existing software development team. The customer can hire narrowly focused experts on an outstaffing basis and control the team themselves being completely responsible for the project outcomes.

A dedicated team is an approach when a company hires a standalone team of software development experts who work full time only on the customer project. This team is an extension to the in-house team with long-term involvement and understanding of customer business inner processes and project requirements.

How to Outsource Software Development Projects Successfully?

Apart from choosing the right software development outsourcing model, businesses also need to know how to work with these teams to bring the most benefits to their app development projects. Here are some useful tips that will help you to outsource your projects successfully.

Outline the Product Requirements and the Timeframes

Before hiring your outsourcing team, develop a detailed project description – clearly state the deliverables expected in the form of feature lists or user stories.

Focus on Quality Assurance

Quality assurance is the key component that determines the high quality of the requested software, therefore, it should be well-established and provided timely. This can be done through the development of test documentation, checklists, test cases and other quality control activities.

Select a Project Management Approach

When choosing your software development partner, make sure that you clearly define who will be in charge of the team or project management – the software vendor or your company’s project managers.

software development projects outsourcing

If the project management is on a vendor side make sure that there is a project manager there who will stay consistent throughout the entire development process. This way, they will always update you on the ongoing development steps and the latest changes.

If you do the project management yourself be ready for regular briefings with the development team to stay on top. Make sure that you’ve got all the communication means to interact with your development team and draw a meeting schedule to be aware of what’s happening with your project.

How to Control Outsourced Software Development Results?

When you have a clear vision of your app idea and you’ve chosen the software development provider, you need to know how to effectively control outsourced software development results. For this you need to:

  • establish effective communication with your team, use instant messengers and delayed in time means of communication such as emails;
  • ensure that your development team provides you with timely project reports;
  • use project management tools for tracking project progress and team workload.


Outsourcing software development has always been a viable option for many companies that wanted to reduce their software development costs, quickly find the best IT experts, and speed up their app creation. Recently, all these outsourcing benefits have become especially valuable for businesses as they’ve faced serious economic issues caused by the Covid-19 pandemic.

Now, when considering creating their own digital solutions companies turn their sights to outsourcing in the first place. This is backed up by the software development outsourcing statistic which shows that the global outsourcing market share was valued at $3.4 billion in 2020 and is expected to reach $9.46 by 2026 at a CAGR of 21.5% between 2021-2026.

Author Bio

Victoria Puzhevich Lead Business Development Specialist
Victoria has over 15 years of experience in IT, keeping track of the current and future trends in the sphere, sharing expert advice and relevant industry experience.