Software Development Outsourcing – 2020 Guide

date: 10 April 2020
reading time: 13 min

Is your work related to business? If yes, you probably know how important is software in the day-to-day operations. IT outsourcing companies rely heavily on their software, so that their customers get what's necessary to ensure continuity.

Although there are plenty of off-the-shelf software solutions and software development services to choose from, the successful brand owner probably already knows custom software solutions that can enhance his/her business.  

Never a soft option

Bespoke software is essential for professional and forward-thinking businesses, however, most small and medium-sized enterprises simply don’t have the budget or space to employ their own team. This is where software development outsourcing comes in handy.  


What is software development outsourcing?

As you are surely aware, outsourcing is the process of handing the responsibility of software development to an individual, a software team or an external company. It has a number of benefits; most importantly it gives the ability to tap into a talent pool of highly skilled software developers with experience and expertise who may not be avaiable within your own company.  What is more, Outsourcing software development can save companies significant amount of time and money, freeing up current employees for other projects related to the core business.  Most importantly, by using a dedicated software developer or a software team, you’re ensuring that the latest technological solutions are available for your project.  Additionaly, for many businesses, the outsourcing software team becomes a valuable extension often considered more as an IT partner than a supplier. 


What are the different types of outsourcing?

The world is, quite literally, just a global village. There are plenty of outsourcing companies to choose from and the options available encompass various ways of working and different locations. The following are the main kinds of software development outsourcing, that are being used by businesses around the world. 

  1. Homeshoring – this kind of software development outsourcing involves the handing your software development project to a single developer or software team located in your country or city. This kind of outsourcing allows regular face to face meetings while working on a complex software development project. Although convenient, homeshoring often proves to be expensive.  
  2. Nearshoring – the most popular form of software development outsourcing. It involves choosing a development team in a country which is close to your own and which is easily accessible in terms of location and cost.  The reason that nearshoring is so popular is that it ticks a lot of boxes in terms of skill sets, costs, similar culture, time zones, language and currency. 
  3. Offshoring – a form of outsourcing that has decreased in popularity in times of digital transformation. Offshoring means commissioning software development work to distant countries such as China and India. It often comes with a different kind of price for businesses.  Different time zones, language barriers, long transport times and customs issues can all create major problems for your core businesses. 
  4. Onshoring – this is, essentially, the process where work which has been near or offshored is moved back to a software developer in the same country as yours.  This decision can be made for a number of reasons such as a new partnership opportunity or a need for more hands-on involvement in the software project. 

The above-mentioned types of software development outsourcing are grouped according to different options available in terms of location for software development; now let’s take a look at the ways in which your project may be tackled. 

  1. Staff augmentation – in this software outsourcing scenario, your brand will delegate the task of building a remote software development team to the outsourced provider.  Although the provider will complete the project and handle the day-to-day running of the team, the client will retain control over hiring, firing, team building and distribution responsibilities. 
  2. Dedicated team – this model is fairly simple – your outsourcing software development provider will put together a team dedicated for your project which will usually remain the same for current and future projects.  In this instance, the provider will generally retain control of all aspects of running the team. 
  3. Project-based – probably the most popular kind of contract for software outsourcing. In the project-based model, you can brief the software team working on the project and then, to a large extent, leave them to it.  This means that the developers will make all the decisions relating to the software project themselves and will simply send reports on the progress made.


How do you successfully outsource software development?

There are a lot of things to consider when it comes to outsourcing a software development project successfully.  We’ll look at them in more detail in this article but, in order to ensure the success of your software project, the following should become your mantra: 

  • Taking care of communication
  • Following processes and procedures
  • Giving regular and detailed feedback
  • Creating a detailed and clear software development brief which shows the end result idea and the timeframe


The best countries for software outsourcing

Far-flung countries are rarely the best choice for brands based in Europe due to different time zones, language and culture barriers.  As a result, a number of European countries are becoming software development hot spots.

Currently, of all the countries providing outsourcing services, Poland is fast emerging as a world leader for a number of reasons. Poland’s Central Europe location means that it is easily, affordably – and quickly – accessible to people from many countries.  Additionally, it shares a similar time zone and culture with lots of other countries. On top of these aspects, the Polish education system is ranked 14th in the world with many Polish people excelling in language skills and technical expertise.  Finally, despite the high level of expertise and skills, Poland remains an incredibly cost-effective option for software suppliers in comparison to other European countries.

The table below presents the top 10 counties with best developers ranked by average score across all HackerRank challenges. Poland is in the third position.

RankCOUNTYSCORE INDEX
1China100.0
2Russia99.9
3Poland98.0
4Switzerland97.9
5Hungary93.9
6Japan92.1
7Taiwan91.2
8France91.2
9Czech Republic90.7
10Italy90.2


How much does it cost to outsource software development?

Of course, we can’t give you an exact number when it comes to outsourcing your particular software project as this depends on many different factors such as complexity, size of the software team and the time needed for completion. However, we can provide you with this brief guide which will give you a rough idea of what to expect: 

  • Eastern Europe, including Poland, Romania and Ukraine. When outsourcing to Eastern European countries, you can expect to pay between $50 and $99 per hour for your custom software development project.  This is, without a doubt, the most cost-effective option when looking at the cost/skill ratio.   
  • Western Europe, including the UK, France, Belgium and the Netherlands. Here, prices increase significantly and you’ll find yourself looking at the range between $100 and $150 per hour, depending on the project and the expertise of the team. 

Although these rates are considerably higher than those you would pay in distant countries, they are much more cost-effective due to the cultural and offshoring issues that we already mentioned above. 


Software outsourcing – the process itself

Now that we’ve covered the reasons for outsourcing and discussed different options available for businesses, we’ll delve a little deeper for those wondering how to go about it. 


Step 1 – Deciding to outsource

Although it may seem obvious, this important first step should never be overlooked. This stage requires you to examine your reasons for outsourcing and to perform a cost and skill analysis in order to figure out if outsourcing software development is the right choice for your project. Although rare, there are times when it may actually be more cost-effective and more efficient to look for in-house software development services to complete the work required.  

What may help you is to create a checklist in order to compare the various aspects involved in terms of hiring a member of staff or outsourcing the project


Step 2 – Selecting a supplier

This is, of course, an extremely important step and one which will become the central hub of your software development project.  For this reason, it’s crucial to dedicate a substantial amount of time and energy to this stage. 

Your first task is to decide on the location of your new software outsourcing supplier. Next, you’ll need to compile a list of relevant outsourcing companies in the chosen country. For this, it’s a good idea to seek recommendations from other businesses, take a look at rankings or forums as this will help you to whittle down what may be a rather long list!  

  • Request for information and request for proposal

    Once you have your shortlist of potential suppliers, your next step should be to send a request for information (RFI) or request for proposal (RFP) to each software outsourcing development company.  These are, essentially, documents which outline the parameters of your software project and invite suppliers to send you a proposal including a price quote for the work. 

    Upon the receipt of all of the proposals, you are then in a position to make a comparison of the suppliers based on the information received.

    Your RFI or RFP should include
    • Software project overview
    • Your company’ background and history
    • The goals of your software project
    • The project’s scope
    • Initial target deliverable schedule
    • Possible roadblocks
    • Budget constraints
    • Expectations from the outsourcing company
  • NDA – protecting your software development project

    Since you are about to choose a software development partner and have already shortlisted some outsourcing software companies based on their answers to your request for information or request for proposal, don’t hesitate to ask them to review and sign a Non-Disclosure Agreement as soon as possible. Ideally before exchanging any confidential details regarding the project you’d like to outsource.

Once you have your shortlist of outsourcing companies, you’ll want to see what they can do.  At this stage, you’ll be asking the suppliers to provide details of previous projects which are similar to yours.  From here, you can visit websites and apps in order to see how well these previous projects function in terms of design, useability and efficiency – again, this should cut down the shortlist. 

Now that you have a manageable shortlist of software outsourcing suppliers, you may want to task them with a test project before making a final decision.  This will help you to analyse each company in terms of communication, reliability, time management, and, most importantly, abilities. At the end of this stage, you should have a pretty good idea of which is the best company for the job. From here, all that’s left to do is to meet with your new supplier to ensure that you’re on the same page when it comes to cost, the timing of the software project and the expected end result. 


Step 3 – Contract procurement

Before embarking on any outsourcing software development project with a supplier, it’s of paramount importance to have a proper, legally binding contract.  Not only does this reinforce the agreed details of the project but it will protect both parties in the event of any issues.  In general, there are three kinds of contracts to choose from and these are: 

  • Time & Materials – this kind of contract lays out an hourly rate for the various members of the software team as well as materials which may include things like the procurement of a software license. Time & Materials contracts are generally used for short term projects and require a certain degree of trust between the two companies. 
  • Fixed Price – as the name suggests, this kind of software outsourcing agreement lays out a one time price for the whole outsourced software development project which has been agreed by the two parties.  This mostly protects the client from any unexpected costs levied by the supplier during the project. 
  • Target Cost – in this kind of contract, a project may be ongoing or have an uncertain scope.  This contract allows for flexibility on the side of the supplier.

Step 4 – Implementation

You’re ready to start your development outsourcing project – time to sit back and let the team get on with it, right?  Wrong. First, there are a couple of things to think about to help make sure that the project succeeds: 

  • Risk Management Strategy – addresses anything that might go wrong during the software development outsourcing project, such as employee absenteeism or market fluctuations.  It’s essential that you have a risk management strategy in place so that you’re ready to deal with any speed bumps along the way as your project progresses. 
  • The Software Development Cycle – speaks to the process of the project which will involve information gathering, system design, requirements analysis, coding, quality control and testing. In most cases, your software outsourcing developers will already be familiar with this. It’s a good idea to ask them to walk you through it to make sure you understand the process and know what to expect.
  • Testing – needless to say, your software developers should be testing the product at every stage and the results of this should be shared with you. It’s important to make sure that your supplier is documenting each testing stage, listing the successes and failures and the reasons behind them as well as plans for improvement.

Step 5 – Monitoring and Controlling

As much as you may trust your software development outsourcing company, the project is, at the end of the day, yours.  This means that, although you may not physically be doing the work yourself, you still hold responsibility for its success. For the savvy business, this means putting into place a proper monitoring system to make sure that everything is going accordingly to the plan.  You might be looking at a number of factors, including: 

  • Time management – is the team putting in the agreed hours and, at the agreed times (this may be important if there is a time zone discrepancy)?
  • Honesty – are you being billed for hours not worked (or hours during which employees were surfing the net or engaging in activities unrelated to your project)?
  • Productivity – is the project progressing accordingly to the timeline agreed? 
  • Reporting – are you up to date with all aspects of the project’s progress?

Even though monitoring your software team is important, especially if your team is in a different country, remember that is important for your IT partner to be trusted. If you let them know that they’re doing a good job, you can be sure that end result will meet your needs.


Step 6 – End of contract or new project

With good quality IT outsourcing companies, it is quite often the case that contracts are extended or renewed to cover other projects or services (e.g. support and maintenance).

Once a decision to terminate a contract has been made, it is the time to see how the exit strategies you included in the contract, together with transition plans and arrangements for transfer files are working. It is good practice to keep a lessons learned’ document which will be valuable learning material on your experiences with outsourcing for future use in your company.


Summary

By following this guide and making an informed choice for your business, you can form a mutually beneficial partnership not only with your software development company but also with the team and ensure the success of each and every project, no matter how complex. 

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