Software Development for Start-ups
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A Guide on How Outsource Software Development

By Akhil SundarJan. 18, 2023, 2 p.m. Application development company
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Global Software Development Rates: An Overview

Modern technologies allow you to outsource software development to overseas programmers who will work remotely and help you to save costs. The other major advantage is that you will have access to large talent pools.


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If you're considering outsourcing software development, this guide will help you weigh the pros & cons. We'll also provide some tips on how to find the right development partner


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How to Outsource Software Development

Outsourcing software development services could mean a lot for both small and medium-sized businesses that are growing fast. It can have the effect of both saving your money and getting your software delivered faster in the market.

To outsource software development projects is a daunting task for organizations big and small alike. This is because it is equivalent to placing your trust in another company to deliver the results that you want. It may also be that the success of your business depends on this. 

In this blog post, we attempt to summarize a few things that you need to know about software development outsourcing, its benefits and challenges, the strategies that you have to adopt, and the key factors you need to consider when you want to outsource software development. 

What is Software Development Outsourcing

This is a business strategy where software development projects are delegated to an external company instead of executing with in-house staff and other capabilities. Here, the business decides to build a software product or service through a third party.

With the worldwide growth in IT outsourcing, many businesses have been able to gain a competitive edge in the market over their competitors. Following this methodology allows them to complete their IT projects faster by leveraging the technical talent, scalability, and know-how that is available with their outsourced partners.  

Benefits of Software Projects Outsourcing

Some of the key benefits of outsourcing software development to third parties are briefly listed below:

1: Reduce Software Development Cost 

The rapid pace at which technology is evolving means the software development field is under constant change. In this scenario, hiring and training software developers with different skills every single time for a new project turns into unnecessary overhead costs.

2: High-quality Software Development Team:

By outsourcing software product development to a third party, you can hire a diverse software development team that has different skill sets. This is because you are augmenting your staff from a huge talent pool. There will be many new experts in your group who can help you to understand the market from a different perspective.

3: Save time on Hiring Specialists 

You can cut costs considerably if you hire pre-approved specialists. When you outsource developer teams, the vetting of the developers has already been done by the company you outsource to. You can just assign the project to the team and watch it get completed. You end up saving time and this translates to saving money.

4: Access to a Huge Pool of Talent

When you outsource software development, you gain access to the best quality talent from other parts of the world. This helps you to reap amazing benefits.

5: Easy and Flexible Team Capacity/Scalability

You can scale your staff whenever you require in terms of the number and talent and this gives you gross benefits in terms of time and money.

6: Work with a Managed Team

Outsourced teams come with their manager and this would help you save a lot of time as you do not have to worry about this aspect. You will, of course, need some basic management to guide the project down the line to completion.

7: Focus on your Core Business Needs

The final benefit of outsourcing software development is being able to free up precious time so that you can concentrate on the core needs of your business. This will help produce a better result and quicker ROI.

Software Development Outsourcing - Models

Given below are brief descriptions of the three main outsourcing models:

Staff Augmentation

In this model, you own the project from start to end. The client takes on a major portion of the responsibility. You hire tech talents from an outsourcing company in order to strengthen the team responsible for the latest development projects in your organization.

Managed Team

Here, both the responsibility and ownership are shared by the client and the outsourcing provider via a contract that determines which responsibilities rest on whom. Your managed team operates separately from the in-house team, and an outsourced Project Manager manages the workflows and daily operations.

Project-Based 

Here, the outsourcing provider takes up a major portion of the responsibility and owns the projects from the beginning to the end. The outsourcing partner completes your development projects according to your requirements and specifications.

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Select the outsourcing model that suits your requirements the best. If you are a newbie, staff augmentation is recommended. Afterwards, you can try other models of outsourcing.

How to Outsource Software Development

In case you are planning to outsource software development, ensure that you are prepared beforehand and you should be ready with a sound outsourcing strategy. 

How to Set up an Outsourcing Strategy

Define Goals

There will be many stakeholders for any project and each of them may not be participating in every activity and detail of the project. However, project stakeholders include the company leadership, end-users, and customers, among others.

Sometimes, the nature of outsourced projects can involve stakeholders from outside the organization or even individuals that will use or be affected by the final service or product. In the end, the stakeholders will have to know the goals of the project.

Prepare the Scope of Work documentation

You have to prepare a clear plan before reaching out to a software development outsourcing partner. You have to present your budget and requirements using clear documentation to your outsourcing partner.

Define the Technology Stack

As software development is done remotely in case it is outsourced, you should ensure that your software development partner has a technical profile matching your requirements. For this, create a resource list for the project and also discuss the security and data protection aspects thoroughly before you ink the deal.

Bring Experienced Leaders

Appoint a high-performing leader who will bring in technical capabilities and choose the best technology talent to complete the project. Such a leader will be able to advise clients, manage remote teams, protect you from poor team coordination, and avoid quality assurance issues.

Manage Project Scope, Budget, and timeline for every Iteration

Ensure that your partner practices the agile software development methodology as it makes budget management a shared responsibility. Scope, timeline and budget form the heart of any outsourced software development.

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A Step-by-step guide to Outsourcing Software Development 

 

A Step-by-step guide to Outsourcing Software Development 

Any software product/service must be adaptable, maintainable, and upgradeable. This can be accomplished only by meticulously preparing every stage, from ideation to maintenance. The many stages of the software development life cycle (SDLC) vary by the software development company. The different stages of SDLC are requirements gathering, design, build, testing, deployment and maintenance. 

How to Choose a Suitable Software Development Company 

This is the most crucial stage of the entire outsourcing process. The maximum amount of time and focus should be spent on this part of the software development lifespan.

For choosing the perfect outsourcing partner, you have to be clear about the outsourcing model you want to use and the type of your project. You will have to assess the developers’ skills and experience, and more specifically, how these will apply and bring success to your project.

 It is important to obtain the most satisfactory answers for the following questions when you have to hire a software development company to outsource your projects to. 

1. Could you present a project similar to mine in terms of technology?

This is to find out if they have the right technical expertise to suit your project.

2. Can you provide some good references?

You have to know if the development company has successfully delivered projects to other clients. Good reviews from clients can help you to choose a good partner.

3. What kinds of companies have you worked with? 

It is a good idea to check if the software development company has had clients like your organization and this would give you an idea of how the partnership would work. 

If yours is a start-up, then engaging with very large software development companies may not be the best fit. 

Contracts and Pricing

Once you have found the software development company that suits your requirements, the next critical step would be to sign the outsourcing contract with them. The contract is a legally binding document establishing the unique terms and conditions of the relationship between the two companies. This will help both parties to avoid any potential conflicts, reduce risks and achieve success by getting the expected results.

Software Development Contract Checlist

 As far as the pricing is concerned, you can go for the hourly charge or a lump-sum option. The main types of software development contracts are:

  • Time and materials contracts 
  • Fixed price contracts

A time and material contract is one in which you pay the developers for the time spent on your project. Here, the total fee is the product of the number of hours delivered by all the developers and the hourly rate that has been adopted for the project.

A fixed-price agreement is executed when there is a high degree of certainty about every dimension of the project. This type of development involves proper assessment at each stage of the project and is best suited for smaller projects. 

Conclusion

Software development outsourcing allows any organization to reach out and exploit the talents of a diverse pool of developers. It also affords a quicker and more cost-effective method for completing the project.

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FAQs

Every organization will derive benefits by reducing its costs. This also frees up extra funds that you can use to channel into the other areas of your business. Outsourcing is a cost-effective option for your business.

Eastern Europe countries consistently maintain an ideal price/quality ratio and its developers are among the best in the world. India or China are most suited for those businesses that have a smaller budget.

The major skills to look out for in an outsourced IT company are: Tech expertise, Reliable customer service, Software development talent, Cloud computing capabilities, Mobile application development

The main stages of outsourcing are: Assessment, Proposal, Due diligence, Contracting, Transition, Governance, Transfer

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