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.

What is software development outsourcing?

Software development outsourcing involves contracting out the creation, maintenance, or enhancement of software applications to third-party providers. This approach allows businesses to leverage external expertise and resources for their software projects.

Companies often choose outsourcing to access specialised skills, reduce costs, increase development speed, or focus on core business activities while leaving technical implementation to experts.

This approach offers flexibility and scalability but also requires effective project management and communication to ensure project success.

What are the different types of outsourcing?

The world is, quite literally, just a global village. There are plenty of outsourcing software development 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.

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.

Nearshoring (nearshore outsourcing)

Nearshore software outsourcing is the most popular form of 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.

Offshoring (offshore outsourcing)

Offshoring (also known as farshoring) is 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.

Watch our IT Leadership Insights webinar about nearshoring and offshoring in IT:

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.

What are the different models of software development outsourcing?

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

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. 

For more information on staff augmentation, see other articles:

• Staff augmentation vs outsourcing a dedicated team
• Managed Services vs. Staff Augmentation: Key Differences
• How to write an RFI for Software Development outsourcing projects?

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. 

Managed Services Model

Change will be visible in measuring the effectiveness of sourcing relationships. The traditional client-vendor relation is changing into a partnership. It is no longer only cost-efficiency that matters, but also the impact that outsourcing has on the overall business.

Managed Services Model allows the company to focus on their core business, whereas the outsourcer, being more independent, can manage the investment, benefiting the client.

Learn more about Managed Services Model:

• Managed Services Model: the benefits and key aspects
• Managed Cloud Services: 4 game-changing benefits
• Managed Services – discover what we can do for you!

Project-based software outsourcing

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.

The benefits of software outsourcing services

Software outsourcing services offer numerous benefits to businesses of all sizes:

Cost efficiency

Outsourcing software development can significantly reduce costs. Companies can avoid expenses associated with hiring and maintaining an in-house team, including salaries, benefits, training, and infrastructure costs.

Outsourcing allows businesses to access skilled professionals at competitive rates, especially when working with teams in countries with lower labor costs.

Access to global talent pool and fresh perspective

Outsourcing opens up access to a vast pool of global talent. Companies can tap into specialised skills and expertise that might not be readily available locally. This global reach allows businesses to find the best-fit professionals for their specific project requirements, regardless of geographical limitations.

What’s more, their diverse experience across different industries and projects can lead to innovative solutions and improvements that in-house teams might not have considered.

Scalability and Flexibility

Outsourcing provides the flexibility to scale teams up or down based on project needs. This adaptability is particularly valuable for businesses with fluctuating workloads or those undertaking short-term projects.

It allows companies to quickly respond to market changes without the long-term commitment of hiring permanent staff.

Focus on core business

This allows internal teams to concentrate on strategic initiatives, innovation, and customer relationships, while the outsourced team handles the technical implementation.

Watch our IT Leadership Insights about 5 reasons to outsource in IT:

Access to latest technologies

Reputable outsourcing partners often have experience with a wide range of technologies and stay updated with the latest industry trends.

This gives businesses access to cutting-edge software technologies and methodologies without the need for constant internal training and upskilling.

Risk mitigation

Outsourcing can help distribute and mitigate risks associated with software development projects.

Professional outsourcing firms often have established processes, quality control measures, and backup systems in place, reducing the risk of project failures or delays.

Continuous support and maintenance

Many outsourcing arrangements include ongoing support and maintenance services. This ensures that software remains up-to-date, secure, and functioning optimally even after the initial development phase is complete.

Are you considering transferring your project to another iT partner?

• A Comprehensive Guide to Transferring Your Project to the Support & Maintenance Team
• IT Project Transition: planning, benefits and value
• Guide to IT project transition – real-life tips & tricks

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.

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.

Watch our IT Leadership Insights about comparing costs of in-house and nearshore software development:

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. 

How to outsource software development?

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.

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 outsourcing 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 pentesting. 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 software development company 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.

How do I choose the right outsourcing partner for my software project?

Choosing the right outsourcing partner for your software project is a critical decision that requires careful consideration of multiple factors.

The process begins with a clear definition of your project requirements, including goals, scope, budget, and timeline. This foundational step helps you identify potential partners with the relevant expertise and experience to meet your specific needs.

If you do not yet have precise requirements or assumptions, it is worth considering appropriate workshops and consultations:

• The power of requirements workshop: revolutionising project planning
• How can the discovery stage be powered by design thinking workshops?
• How to work out and test solutions to a business problem: is it doable in just 5 days?

When evaluating potential partners, it’s crucial to assess their technical expertise, particularly in areas directly related to your project. This assessment should include a thorough review of their portfolio and past projects, as well as reaching out to their previous clients for references and feedback on their performance, reliability, and quality of work.

Communication skills and cultural fit are equally important. Your chosen partner should be able to effectively collaborate across different time zones and cultures, and their work culture should align with your company’s values and practices. This alignment can significantly impact the smoothness of your collaboration and the overall success of the project.

Security measures and legal compliance are critical considerations, especially if your project involves sensitive information. Verify that potential partners have robust data security and intellectual property protection protocols in place, and ensure they comply with relevant industry standards and regulations:

• GDPR Compliance: Essential Principles and Tips for Your Business
• NIS2: European ports prepare to comply with new regulations

The partner’s development methodologies and processes should align with your preferences and project requirements. Whether you prefer Agile, Scrum, or another methodology, ensure that your potential partner is comfortable and experienced with your chosen approach.

Scalability and long-term potential are important if you’re looking for a partnership that can grow with your needs. Consider whether the partner can scale resources up or down based on your project requirements and evaluate their stability and growth potential.

Watch our IT Leadership Insights about common concerns when choosing an IT partner and how to address them:

Cost is inevitably a factor, but it shouldn’t be the only consideration. Analyse the cost structure and ensure it provides good value while aligning with your budget. Remember that the cheapest option isn’t always the best – focus on finding a balance between cost, quality, and reliability.

Location can play a role in your decision, depending on whether you prefer onshore, nearshore, or offshore outsourcing. Each option has its advantages and challenges in terms of time zone differences, cultural proximity, and cost.

Finally, conduct in-depth interviews with potential partners. These discussions will give you insight into their understanding of your project, their problem-solving approach, and how well they might fit with your team and company culture.

By carefully considering these factors and conducting thorough due diligence, you can select an outsourcing partner that not only meets your immediate project needs but also has the potential to become a valuable long-term collaborator in your software development efforts.