An Ultimate Guide to Software Development Outsourcing

Software development outsourcing – don’t miss this information

According to GrandViewResearch, the software development outsourcing market was valued at a monstrous figure of USD 500+ billion in 2020 which was close to 80% of the total overall market. Furthermore, the IT service market is expected to have CARG of 8.4%, and therefore the worth of it would cross USD 1000 billion by 2025 taking software development to the top of all industries even in the future.

Outsourcing has been the pillar of any industry as it enables business owners to find the best talent from all over the world. For an IT project, outsourcing to a software development company would add great benefits to the business as entrepreneurs can find superb talents and hire dedicated developers in different fields and niches required.

Why should you outsource software development?

Ample benefits are reported for software development outsourcing to an offshore company. You can focus on your business rather than take the burden to handle trivial matters and micromanagement. Outsourcing a custom software project is not only cost-effective but also faster and reliable. Here are a few cogent reasons why businesses, especially startups, prefer to outsource their software development requirement.

Software Development Outsourcing

What are the quality and management benefits of outsourcing?

One of the benefits that most entrepreneurs look after is the remote team management of projects as well as the quality of the product. While in-house management requires a lot of focus and therefore consumes a lot of time, managing teams locally would also burden on company’s overall budget. Outsourcing contracts or agreements takes off all such worries and offers worry-free project execution.

Superior quality

Outsourcing the software development process can make sure that you receive superior-quality products. It is because a reputed software development outsourcing company would have industry-standard practices in place while signing the deal with you. The project development process is strictly observed and invigilated by senior software engineers and managers.

Global talent and expertise

A top-rated software development vendor would have the best talent from the market and you can hire them in any number depending on hiring models such as fixed price model, time and material model, or dedicated software development team.

Outsourcing custom software development services would have an extra edge over in-house development where you need to restrict yourself to have limited talents from the market. Certain software development outsourcing models also allow you to hire talents from outside the offshore company; you can hire domain specialists and experts or full-stack developers as they are associated with or have a contract with your service provider.

No micromanagement

In-house software development requires the sheer attention of the business owners to have the project on the right track. If native software developers’ hiring cost is not enough, entrepreneurs also need to take a big burden of expenses by paying managers and other seniors in the hierarchy. From licensed tools to CCTV cameras, handling documentation, and monitoring every movement of software application developers and designers is a hefty task for any business and organization.

On the other hand, outsourcing your software product development project to an offshore IT company offers you hassle-free micromanagement of the entire project development process because they have dedicated remote software developers who strictly work under senior engineers and managers.

Regular milestone updates

Most external outsourcing software development service providers follow a guide that defines a set of standards to follow. The remote software development team you hire works according to the standard guidelines which include periodic milestone updates.

That said, the full cycle of software development is divided into parts and for each part, it is made sure to update the business owner i.e., you. Hence, it is made sure that project needs are met and client engagement is assured throughout the deal. You don’t need to pay extra for the management because the price you pay for outsourcing projects includes administrative costs.

What are the cost benefits of software development outsourcing?

In most cases, the primary reason for opting for software development outsourcing is the cost. Many enterprises avoid in-house development headaches as they include tedious management and a mammoth amount of investment especially when the company is based in first-world countries such as the US, the UK, Canada, and Australia.

Outsourcing goals of these business owners include heavy cost-cutting through a planned and calculated outsourcing strategy to handle the entire software development life cycle with quality assurance at minimal costs and supervision.

Budget saving

A large chunk of investment goes to any custom software product development or project development. When it comes to building software system of all kinds, the development services costs you an arm and a leg when the resources are hired in your country. Outsourcing hubs such as India does the job for you in a much easier and cheaper way.

Even critical software development can be handled and finely executed through outsourcing due to developers’ hourly rate differences in different geographical nations. Software development outsourcing service-providing companies in India offer several models for hiring that are budget-friendly. You can then invest that saved money in other fruitful ways.

Saving on infrastructure

The outsourcing market size has been significantly growing due to its awesome benefits to individual businesspersons, startups, and enterprises. Whether you want to build or rent software development as a service, hire a web development team or a team of mobile app developers, database administrators, or any sort of remote software development team to build any software of any size, you are likely to save a lot on infrastructure.

The best-known software development outsourcing hubs would allow you to build a software development team and include all the costs of infrastructure, licensed tools, and management services and will still be much cheaper than what you find in your home country such as the United States.

Also, it is worth mentioning that to stay competitive, the right development partner for software product outsourcing equips itself with the latest workstations that are loaded with contemporary software tools that are licensed and authentic. As a result, you get an impeccable software product that caters to your business objectives and company goals.

What are the software development outsourcing models?

A professional software development team or programmer comes with a cost. While software development done in-house would cost you dearly, outsourcing software to external software developers in developing countries is undoubtedly way more affordable.

software development outsourcing model

Chiefly, software developers for hire are available through three basic models. Here is the graphical presentation –

  • Fixed
  • Time and Material
  • Dedicated

These remote development firms have several hiring models according to your budget and the nature of your project.

How to build a powerful outsourcing strategy?

Strategically driven projects are promising, and they will not let you down with their performances because each such project developed is adhered to your company’s vision and mission. Outsourcing your software development project that is well-planned and strategically crafted is likely to assure you success. Here are a few gaps to consider in outsourcing strategy –

Outsourcing Strategy

Time gap

One of the most common factors to mind while building strategies for software development outsourcing is the gap of time. The gap between kickstarting the project and deployment should be calculated. If the gap is extended, there are chances that the project is likely to lag in technology and purpose, and even a trend. It is worth noting that as you ask offshore software development team to work on newer things not mentioned in the predefined scope, the software development time is likely to stretch.

Trend gap

Closely knitted with the Time Gap, the trend gap mentions the difference or change in the market trend or consumer demands. The trend that was hit a year back is now nowhere in the market. In today’s fast-paced world of technologies where change is expected every hour, identifying the factors that allure customers are gloomy. The trends have become volatile and feeble and that is where the gap would affect your software engineering outsourcing. You may need to instruct the software engineers and developers to mind the latest trend and maybe implement them periodically.

Cost gap

The likely effects of the Time Gap and Trend Gap are the cost gap. With each change or day passing by, the software development outsourcing cost will increase. While this is not the case for a fixed hiring model, for time and material and dedicated hiring models, the cost may affect especially when the project takes too long to develop.

Considering these three gaps, you can develop software development outsourcing strategies. Though there is no one foolproof way that would help you to tackle everything at once, these factors, when discussed with software development outsourcing companies would give both parties a fair idea about project development and reduce the chances of conflicts.

How to outsource a software project successfully?

After having strategies in place, you need to then work on primary steps to outsource a software project successfully. The effective software development process comes through a well-researched and planned project by both the business owner and the offshore software development company. Here are some common steps to follow when you want to hire remote sources for your custom software solutions –

Sustom Software Solutions

Define business objectives

You cannot listen to every stakeholder and try to please them with your digital product. Hence, the business objectives you define should be the overall goal that is adhered to your company’s vision and mission. Even if you outsource to an experienced team of software developers, they would ask for a clear representation of your ideas.

Scope of work documentation

The Scope of Work – SoW documentation works as a master sheet that includes business objectives, project methodology, milestones, deadlines and deliverables, and also defined responsibilities of each person involved in the software development outsourcing. The agreement between the buyer and software solution provider neatly defines every nuance of the project to avoid conflicts and confusion among both parties. You may need a professional business and technology consultant to draft a foolproof SoW document.

List technology stack

Depending on the complexity and advanced features you want for your custom software, the technology tools required may vary. From back-end development to front-end user interface, you need a pile of software developers and designers. And, these experts require specific platforms and dynamic tools to execute the procedure of software development life cycle (SDLC). Software and hardware for cloud computing/storage, technology stack required and licensed tools are to be listed separately if a website or a mobile app is be developed.

Bring the best talent to one place

Whether you use online software development companies’ directories to find the best service provider or contact to hire software developers individually, you will have to make sure that your project is in experienced and safe hands. The best part of outsourcing software development projects is not to restrict your resources to a particular niche and place. An international software development company would have amazing resources from various domains and technology expertise. You can hire or build your own team of such masters to have an impeccable product.

Budget and sealing the deal

The last step for outsourcing software development is fixing the price or cost with a software company. You may negotiate the price or simply go for the models to hire that they offer for software development outsourcing. It is worth noting that you should be able to convince them of any possible additional requirements and work on escalations if any. Nevertheless, such changes also bring some additional costs especially when the demand was not described in scope.

How much does it cost to outsource software development?

Software development cost estimation typically varies from a region to region. Here is the atlas of hourly rates for software developers available on rough estimation and range.

Software Development Cost Estimation

The variation is approximate and therefore it is always better to consult software outsourcing company for the final budget or figure before hiring. Typically, Asian countries work at much cheaper prices and rates on an hourly basis. It is for this reason, Asian countries; especially Indian software development companies lead the outsourcing market.

You may do so by price comparison and considering other factors such as experience and portfolio. The overall costs to develop software products offshore may begin at USD 5000 and increase as the features, functionalities, security levels, complexities, industry-specifics, technologies, and many other additions that are needed.

What to include in software development outsourcing contract?

Any business deal should have a foolproof contract or agreement on legal papers and documents. The software development outsourcing contract would include several general and specific terms and conditions, termination clauses, dispute resolutions, and many more essential factors. Here are the sections you may consider for a software development outsourcing contract –


Listing down software services sought offshore or nearshore should be a priority. What you expect from an offshore or nearshore software development company is jotted down in the service contract; in addition, some advanced services would also list down possible changes and additions to the scope.

Project cost and timeline

The timeline for deliverables is estimated and put down on software development contract papers. The specific hourly rates, software development life cycle, and milestones need to be mentioned and signed by both parties. This contract may also define the roles and responsibilities of every person involved in the software development phases.

Acceptance testing

A special kind of test determines whether software development agreement requirements are fulfilled; here, the roles are defined and it is also mentioned who would perform the testing, how much time it takes, and how are the results conveyed to the other party.

Intellectual property rights

The contract of software development outsourcing should not miss the mention of the end product’s ownership. In other words, the buyer should have all rights to the final product. Any negligence in this agreement documentation would cost the buyer a hefty fortune.


The non-discloser agreement along with other contract documents is mandatory for software development outsourcing. Confidentiality should be maintained by the service providers as no information of data of both clients and projects should be sold or revealed to any third-party company or vendor.

The project of software development requires utmost attention and care especially when outsourced. The software development contract with the business deal and details would make the whole process legal and hence would bind both parties in their liabilities and responsibilities.

Wrapping up

This short and amicable software development outsourcing guide is intended to help businesspersons go confidently seal the deal with software development outsourcing companies at quite affordable prices and without compromising on the quality of the product. Following these tips and steps to outsource your digital product would certainly assure you that you will get the best return on every penny spent.

Software development outsourcing FAQs

What is software development outsourcing?

It is a process to build a customized software solution at outsourcing hubs such as India. You can hire software developers or give the entire contract to a software development company providing outsourcing services.

How would software development outsourcing benefit businesses?

Outsourcing software development projects would save a large amount of money without compromising on quality and hire experts from the large pool of experienced and skilled developers from around the world. Additionally, you can save yourself from micromanagement.

How to find the best software development outsourcing company?

You can either take the help of an online directory that lists hundreds of software development service providers in various countries or simply search and research renowned software, website, and mobile app development companies in a particular region or country.

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