Software Development Outsourcing: All-In-One Guide

Every time you call for a plumber to repair your sink or a baker to prepare a birthday cake, you outsource. Software development outsourcing to an IT company is more or less the same. Despite the fact that the responsibility is bigger, the risks are higher, and the process is more complex.

According to Fortunly, the global IT outsourcing market is expected to grow by $98 billion from 2020 to 2024. This means that outsourcing to software development companieshas become a common practice among both established businesses and startups. And it happened for a few reasons. In this article, I’ll share what these reasons are, what software outsourcing is basically, and how to outsource software development right.

software development outsourcing

Software Outsourcing: Types & Models

Software development outsourcing is a lot like home repair. But instead of doing all the stuff on your own, you ask for outside repair services to help you. The end goal is the same – to make your home a more comfortable and nice place to live. The way you reach the goal differs. 

Software Outsourcing Types

types of Software development outsourcing

There are 3 main types of outsourcing depending on the location the work is done: 

  • Onshoring. It's geographically the closest type of collaboration, so you and your outsourcing partner are located in the same time zone. 

The good part of onshoring is that your partner team may have an office next to yours, so you're free to have check-ins in a favorite cafe, but onshoring is an option for people with a fat wallet. 

  • Nearshoring. Outsourcing software development to companies in a country with a similar time zone or one with minimal differences is called – nearshoring. 

The benefits of nearshoring are again in a close location, and it also offers a pool of IT professionals at a lower price than onshoring, but there are cultural and language issues. 

  • Offshoring. If your in-house team is in the U.S and you decide to work with Uptech located in Ukraine, that would be offshoring. In simple words, an offshore team refers to a team located in a different country, usually at a great distance. 

Software development outsourcing to offshore companies is the most cost-effective technique, and it offers you a pool of IT professionals. Yet, you have to deal with time zone differences. 

Software Outsourcing Models

The software outsourcing business model defines the way you collaborate with a vendor, and here is a sneak peek of the 3 most common software outsourcing models: 

models of Software development outsourcing
  • Project-based model

You hire a software outsourcing company to implement the part of work that is already planned and defined. 

  • Dedicated team model

You hire an outsourced software company and, in a common effort, define the project scope. Unlike the project-based model, a dedicated team is more engaged in your project. That is what the "dedicated" part stands for.

  • Outstuff model

Sometimes the outsourced software product development requires finding a couple of additional professionals, and you're free to hire separate specialists or outstaff workers to cover that scope of work. 

Why Outsource Software Development?

This is easy enough to understand some outsource software development benefits, like cost reduction and better efficiency. But there’s something more that makes US companies fulfill their 920,000 open IT positions elsewhere. So let's check the 5 main reasons to hire outsource software development companies.

reasons to Software development outsource

Develop Faster

Software development outsourcing speeds up the whole product development process. You don't spend time on hiring every engineer, designer, or product manager separately. Instead, you hire a full dedicated outsource software development company of professionals who care for your project as their own.

So, you hire once and start the project right away.

Reduce Costs

Recent research by Deloitte found that 70% of respondents consider saving up costs as the main decision driver for outsourcing software development to distant companies.

You may say that this benefit is on the surface. But it's not only about outsourcing developers at the 2 or 4 times lower price, but software projects outsourcing also saves costs on hiring, benefits, vacations, technical equipment and frees up some space for other activities. You can focus on your core business functions, start a side project, or direct time and resources to solving capacity issues. This is a great way to increase cost-efficiency.

Reduce Risks

A software outsourcing company is your partner, and you can fully rely on it. Let me give you a bit more context here. Before you start the collaboration, you choose the outsourcing development model, which I mentioned earlier. 

Each model has its rules and agreements, so you're free to choose the one that suits your project best. What is crucial here? By signing the contract on the specific collaboration model, you mitigate the risks of developing your project. As your outsourcing partner, we commit to following all the requirements on time. 

So you're safe and sound.

Fill the In-House Gaps

Hiring an outsourced software development company is a great tool for completing the skills you lack in-house. For instance, in the outstuff model, you can outsource a separate specialist. On the other hand, if you have a strong marketing team in-house but look for experienced developers and designers, a dedicated team model suits you best. 

In software development outsourcing, you only pay for the expertise you need. This is a great way to gather a full team of professionals or complete your in-house team with the right people who will make your idea a reality.  

Access to Talents Worldwide

My top reason for outsourcing software to remote companies is that it opens all the doors. Your geographical location doesn't limit you. In today's globalized world, it's a significant advantage over competitors. 

Outsourcing programming services is a separate topic I'd like to highlight. As I mentioned earlier there are tons of unfulfilled IT positions in the US. This shortage of IT developers drives Western employers to look elsewhere for securing the best talent. 

Second, there are more than 1 million IT professionals in Eastern European countries. This means that Eastern European countries are in the best position to fulfill the empty shoes in those IT departments. 

The conclusion is pretty clear. Outsourcing software development companies is not just an advantage. Sometimes it's the only possible way to create a successful business.  

why outsource Software development to Eastern Europe

How to Find a Software Outsourcing Company?

Once you have decided to use software outsourcing services, it is time to plunge into the search for an outsourcing partner. I always say that finding a good vendor requires as much effort as finding a good partner. Here are some of the things that help you along the way: 

how to find software outsourcing company

Outline your needs

You need to know what you expect to get in the result and communicate it. So my suggestion is to envision the outcome you want to have in the end. Is it web design only, or do you need to build a mobile app? Do you need to have it on iOS or Android, or both? 

The product requirements really demanded detailing. The first and crucial thing is to clarify your needs and the vision of the product. Here’re 3 questions you can ask yourself at this stage:

  1. What do I expect from an outsourcing software development company?
  2. How do I want to collaborate?
  3. What do I want to get in the result?

Check recruiting platforms

The next step is to check who exists in the software outsourcing market. Luckily, there are recruiting platforms with lists of software outsourcing companies, agencies, or contractors such as Clutch and Upwork.

Study the company’s profile

Part of the homework is done. The next step is checking the company's profile. What do I mean here? A few things:

  • Case studies
  • Industry
  • Previous clients

Case studies are important to see the team's experience and expertise. Relevant industry plays an essential role because working with a software outsourcing company experienced in building real estate startups when you have one is an essential contribution to your success.

And finally, the best way to evaluate your potential software outsource company is by hearing what others have to say about them. So take your time and check reviews from previous clients.

software development outsourcing

Book an introduction call

Once you outlined your needs, checked several recruiting platforms and studied the companies’ profiles you came up with a short list of candidates. By short, I mean up to 5 companies. 

Your next action is booking an intro call. You can do it by simply writing to the company’s email with a short background of who you are, what your idea is about, and we’ll set up a call with you. 

Prepare the questions you want to ask

The introduction call has 2 main purposes: 

  • let the outsourcing software development company get to know you better;
  • let you get to know the outsourcing company better.

While it's more or less clear how to give an overview of your company, things become more complex when it comes to getting familiar with your prospective partner. What questions to ask? Should I check their expertise first or look at the communication only? 

My answer is both. That's why you have to prepare beforehand and make a list of questions. Here are a couple of questions that can be on your list:

  • Can you please give an overview of the process a company will go through when deciding to work with you?
  • What does your typical process of taking a new project look like?
  • When approximately would you be ready to start the work?
  • What will the communication between your and our team look like?
  • What information from our end would be useful for you to prepare the proposal?
  • How much involvement from our end do you expect during the process?
  • The legal part (legal entity, way of payments, periods of payments, etc.)
  • What would the next steps be?

 It is in your best interest to ask as much as possible right at the beginning. The more precise responses you'll get, the easier the decision-making process will be. 

Make sure the outsourcing development company meets your values

Making a software outsourcing deal is like building a bridge. It always goes from two sides.  

When we bid on software development projects that we really like, we are willing to overcome the expectations. It means we're ready to spend extra time and provide clients with a proposal that makes them more comfortable with their decision. 

In turn, you make a decision based on what you value the most. Often, it's not just the nuts and bolts of getting the work done. It's about the match in communication, values, and approaches.  

A small note, a team that overgoes your expectations is a better partner than the one with an attractive check. Just keep that in mind.

Meet the team

Nothing beats a face-to-face meeting to give you a better picture of who you will be working with. Schedule a video call or meet in person with a team. I definitely advise the second one better. You’ll learn if you can communicate with team members efficiently and learn their processes; jokes and informal communication also matter.  

How Much Does It Cost to Hire an Outsource Software Development Company?

It's hard to say the exact number without the context. Based on our experience, the ballpark range of software development costs is between $50,000 to $250,000. 

The lower price tag fits a simple app that requires very little user interaction or backend processing, which means fewer hours to develop. If you're building a multi-platform app with a server-side application, financial transactions, heavy interaction, and connection to external systems, the fee is likely in 6 figures.

To have a bigger picture, take a look at the table below. It describes how hourly rates for software outsourcing companies vary in different regions.

software development outsourcing cost

Check out our article on how much outsourcing software development costs to know what factors determine the cost of software development.  

Top Destinations for Outsourcing Software Development

Earlier I mentioned that Eastern Europe is the most attractive software outsourcing destination. Let me give a bit more details. 

In recent years, Ukraine, Poland, and the Czech Republic are among the fast-growing destinations for offshore IT solutions. Aside from advanced technology, robust infrastructure, and affordable costs, the communication with software outsourcing companies from these countries is smooth and collaborative. 

So the chances are that it matches your company's unique needs and the specific needs of your project.  

Why Uptech is Your Best Software Outsourcing Partner?

Every time at the presale meeting with a client, I show these numbers: 

  • 150+ products completed
  • Clients from 12 countries worldwide
  • Team of 72 experienced IT professionals

It’s not just records. By these numbers I highlight that we don't just want to work with nice people because it's more enjoyable — we strive to become a reliable software development outsourcing company for our clients. Working hand in hand like one team is what we offer our clients and expect from them in response. It's about a partnership, not simply delegating tasks. 

For us, good software development outsourcing is about positive client relationships. It fosters stronger collaboration, ingenuity, and space to do our best work. 

software development outsourcing

Final Word

Software development outsourcing isn’t just a cost-effective technique anymore. It's a common practice among both established companies and startups that benefits business growth. 

It helps you develop, test, and launch the product faster. Software outsourcing isn't something you can do with your eyes shut but preparing for it reduces risks and ensures that your expectations are met. 

If you feel that software outsourcing is the way to go or have any questions, feel free to drop us a line. We'll be happy to help you!

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