A Fundamental Guide to Software Development Outsourcing

A Fundamental Guide to Software Development Outsourcing

A Fundamental Guide to Software Development OutsourcingAs the economy continues to drive towards globalization, more startups and enterprises are determined to gain a competitive edge in every way possible. The most common methods businesses use to get ahead include improving customer service, maximizing efficiency, and minimizing costs.

But how can you reach your goals if you have limited funds? If you are searching for a solution to this dilemma, the answer might be in software development outsourcing.

According to a study, the market for software development outsourcing grew significantly from 2000 to 2018. As of last year, the market was worth $85.6 billion dollars.

Before you can work with any outsourcing company effectively, however, it’s important to have a deep understanding of it. This article will walk you through the important aspects of software development outsourcing and how it can help your business grow.

Defining Software Development Outsourcing

Software development outsourcing basically defines a situation in which a company or organization decides to hire a third-party developer for services related to custom software development. By handing crucial business processes over to a specialized partner, businesses can easily manage even the most complex core tasks.

Nearshore vs. Offshore Outsourcing

A diverse software development expertise and lots of resources are required before any digital transformation can take place in your business. Unfortunately, finding those are often difficult to find in your area. That’s why more and more companies are reinforcing their staff by outsourcing dedicated development teams. That or they look for a third-party firm that can deliver a specific digital solution they need.

Depending on the location of your remote team, there are two kinds of outsourcing you need to think about before selecting a partner: nearshore and offshore.

A Fundamental Guide to Software Development Outsourcing1Nearshore software development typically refers to working with other countries near you, or areas located on the same continent. For countries in Western Europe, for example, Eastern Europe is the most popular nearshore destination with Ukraine as the leading country.

With nearshore software outsourcing, working with a remote partner is made more convenient in terms of project management and communication. Both of your teams work at similar hours which makes it easier to organize joint meetings and manage the project.

Offshoring is when your partner’s office is located in a far destination, either on a different continent or another side of the globe. Offshore means there's a huge distance and most likely a different time zone.

When outsourcing offshore, you can save a lot. This method is worth a try if expenses are one of your main business concerns and you are looking for the lowest hourly rate.

However, before you make a final decision, consider the cultural challenges and time difference. You might encounter challenges in managing your software development project due to the 12+ hours of time overlap.

Free Cost Comparison Tool for Software Engineers

Pros of Software Development Outsourcing

Cost Efficiency

When outsourcing a software development project, you don’t need to invest in infrastructure, HR services, and other operational costs. There are countries where wages are lower than in others. Outsourcing thus gives your company a chance to cut major expenses.

Focus on Core Business Tasks

Your outsourced team is expected to bring your product to success. While they do that, you can focus more on the core business processes of your company. You can also invest more in research or marketing and pay better attention to brand awareness.


Making a mistake in developing new technology can be quite costly. An experienced third-party development team can guide you in making correct technological decisions that will help the company.

Another great thing about outsourcing is that you can hire vendors only when needed. This is very ideal in situations where you are running projects on a limited budget or when your business suddenly hits a low season.

Shared Risk

One of the most significant benefits of software development outsourcing is the risks can be shared. Your partner can then help plan risk mitigating factors effectively.


Vendors are fully responsible for the performance and quality of the products they develop. They prepare an agreement that covers intellectual property rights, regulates penalties, payments, and deadlines, as well as other additional aspects of partner cooperation. This protects both sides of the deal.

Improved Efficiency

Outsourcing partners only hire skilled professionals to their team. Thus, they know how to achieve your goal faster and handle various business situations properly.

Time Savings

When people work 24/7 to deliver your product within your deadlines, software takes less time to develop. You also don’t need to spend time searching for new developers and training them before starting with the project.

Access to Latest Tech

Outsourcing companies are always updated when it comes to the technologies they use. By teaming up with a remote partner, you get to serve your clients better and gain an advantage over your competitors.

Related Content: 7 Ways to Minimize Risks When Outsourcing Your Software Engineering Team

Cons of Software Development Outsourcing

Hidden Costs

These can include travel expenses, phone calls, additional consultations, and meetings. There are also outsourcing companies that deceive clients by giving out false estimates or engaging in double-billing.

Risk of Information Theft

By outsourcing, you share innovations, data, and ideas with vendors who can use them however they want, and borrow them whenever they want. Even if they have signed a nondisclosure agreement, you will not have full control over an outsourced project.

Restrictions in Communication

Huge difference in time zones can affect the entire process of communication. This is the main reason calls and meetings either get postponed or canceled. If the company you are working with fails to understand what you want for your business, your project cannot even begin. Be sure to choose a reliable company to avoid similar problems with your project.

Find out why nearshoring is better than offshoring software development here!

Final Thoughts

Software development outsourcing has emerged as a global trend in the digital world we know today. Gone are the days when outsourcing was only an option for companies lacking financial resources. As the demand for IT talent increases, the pool within some countries are shrinking rapidly.

Companies are now turning to third-party agencies in their search of good talent that is not always available internally, since the gains so often outweigh the drawbacks. So go ahead: give software development outsourcing a try to elevate your business even more.

Free Cost Comparison Tool for Software Engineers

Topics: software development outsourcing


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