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The All-In-One Guide to Software Development Outsourcing

When it comes to releasing software products in a pre-defined time with low or no bugs, CEOs and CTOs are faced with whether they should deploy an in-house dev team, crowdsource the entire process, or outsource software development to a professional software development service provider. While outsourcing software development has several advantages like saving tools, training and equipment costs, and time in the hiring process,  finding the right dev partner can be very challenging.

If you’re still unsure whether software development outsourcing is the right option for your business, you’ve come to the right place.

This blog will highlight the benefits of outsourcing your software development strategy and what standards you should keep in mind when choosing a provider.

In this blog post, we’ll discuss:

  • What Outsourcing Really Is?
  • Types of Software Development Outsourcing
  • In-house vs Outsourcing
  • Benefits of Outsourcing Software Development
  • Software Development Outsourcing Models
  • What are the Challenges of Outsourcing Software Development for CTOs, and how can Outsourcing Help them;
  • How can you Get your Business Started at Outsourcing?
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6 Challenges For CTOs & How Software Outsourcing Helps

Software Development Outsourcing – An Overview

Software development outsourcing is the process of offshore partners for software development. This is usually done by hiring software engineers from a software company with relevant knowledge and experience.

According to Statista, Software development is the most commonly outsourced IT function.

Outsourced or Off-shored IT Functions Worldwide [As of 2017]

Statista Software Development Outsourcing Stats
Source: Statista

Outsourcing software development offers several advantages, including access to a large pool of resources, lower time to market, lower costs, optimized efficiency, better quality, reduced risk, and more.

As you can see, outsourcing has been a popular strategy for years, as companies seek to cut costs and increase quality simultaneously.

Tech giants like Google, Facebook, IBM, and Coca-Cola outsource their offshore development centers in other regions for their business operations connected with IT to dedicated offshore teams.

Let’s look at some statistics:

  • The application development outsourcing market is expected to grow to $141 billion by 2026. [Source: Statista]
  • Outsourcing helps businesses of all sizes reduce costs by 15% on average and approximately up to 60% [Source: What To Become]
  • Global spending on outsourcing could hit $731 billion in 2023. [Source: Deloitte]
  • 64% of software outsourcing services are related to software application development. [Source: What To Become]

Types of Outsourcing

There are three main types of outsourcing depending on the area the work is done:


  1. Onshoring. In this collaboration, you transfer your software development to an outsourcing software development partner in the same time zone within your own country.
  2. Nearshoring. Nearshoring means ‘near’ to home, but not in the same area. For example, software developers in Los Angeles are quite expensive, and there’s no easy “onshoring” option. Dedicated Mexican software developers, however, work in a similar time zone and would with much lower costs.
  3. Offshoring. In this model, you build an independent software development team worldwide by setting up an offshore development center, and everyone on that team will solely work on your project. In simple words, an offshore team of software engineers is a team located in a different country, usually at a great distance, that solely works on your project.

In-house Software Development vs Outsourcing

Before deciding on the best approach for your software development needs to benefit your business, let’s quickly dive into the different approaches.

In-house Software Development

Building an in-house team enables you to fully control the software development lifecycle. However, it is a time-consuming process. It requires huge time and money to build an effective internal infrastructure.

Conducting technical training and ensuring the availability of the latest tools and their certification will be quite expensive, and the total cost of software development may overreach the set budget.

Overall, an outsourced software development service provider can help you scale up and meet the dev requirements for your product hassle-free and cost-efficiently. They must have a staff that is already trained and can manage all the responsibilities to decrease the overall cost of your development infrastructure.

Outsourcing Software Development

Outsourcing your software development services enables businesses to achieve specialized tasks that would otherwise be too expensive, time-consuming, or challenging to complete in-house. Generally, software outsourcing services offer extensive benefits, but there are different outsourcing models, each having its own pros and cons. To choose the right option, it’s critical to understand the differences.

There are two types of outsourcing options open: classic outsourcing and crowdsourcing. The former, offshore or nearshore, provides you with a whole team that will work from a remote location and adapts to fit your particular product needs at any time. Crowdsourcing provides businesses with a much larger network of dev experts, but they are distributed globally and use different devices and platforms for development that are independent of each other.

Benefits of Software Development Outsourcing

Outsourcing is a great option for businesses looking to achieve their digital transformation goals while maintaining a cost-savings and mitigating risks approach. These advantages influence more and more global companies.

We’ve outlined six top benefits of outsourcing your software development below.

1. Cost-Reduction

According to Deloitte findings, 70% of organizations is attracted to cost reduction when outsourcing their software development projects. The time and huge expenses associated with recruitment & training and managing technology teams are major factors in these cost reductions.

Therefore, instead of hiring staff and resources, assigning this task to a specialized IT outsourcing company is more beneficial. In addition, employing IT talent from a software development partner helps maintain capacity levels aligned with budget and resource needs throughout the project or beyond.

2. A Larger Talent Pool

One of the critical reasons why organizations outsource software development services is how challenging it is to hire software developers to work on a particular application development project, such as RPA automation or flutter app development, that needs highly specialized professionals.

All that summarizes into a very limited talent pool when hiring locally, which gets even tough when other market players look for the same prospects.

3. Quick Time to Market

Outsourcing software development can leverage a huge pool of resources for software or app development. Customers can access all development resources quickly and hassle-free, allowing them to provide quick time to market for products.

At the same time, a dedicated offshore software development partner ensures the implementation of the Scrum and Agile methodology approaches and sets the necessary priorities to achieve the customer’s desired result.

This significantly lowers the Time to Market and meets the pre-defined parameters for providing the project to real users.

4. Reasonable Development Costs

Most offshore software development companies offer their customers a flexible pricing model and top-of-the-line services. Eastern Europe, for example, gains popularity concerning a bunch of talented IT professionals, a lack of resources, and low taxation for the IT sector.

It also shows the outstanding value for money balance of the software provided.

Below, we have outlined the estimated average hourly prices of the most famous offshoring development destinations that offer outsourcing from startups to fortune 500.

Outsourcing Regions Hourly Wages for Work [Estimates/hr]
Central Europe $25 – $100
Eastern Europe $50 – $200
North America $100 – $149
South America $35- $70
Asia $50 – $100

The development costs may also be influenced by the complexity of the project, types of app development, staff size, technology stack used, domain expertise, and duration of the collaboration.

5. Mitigating Project Risks

Developing and releasing new applications or software comes with several risks, such as code issues, pre-defined tight deadlines, and inaccurate estimations, to name but a few.

Outsourcing software development can enable you to mitigate the risks associated with developing software products. The dedicated offshore software development company provides a team that employs a high-quality project management system, comprises a well-established and smooth workflow, and has proven success in developing applications that ensure consistent business ROI.

6. Focusing on Core Functions

Usually, businesses easily get distracted by dividing their time and efforts between multiple activities that are relevant to the company’s operations but outside the core business goals. This is where outsourcing software development comes in and helps business leaders focus on their areas of expertise.

Simply put, businesses can focus on their core goals by hiring outsourced software development services providers.

Types of Software Development Outsourcing Models

While choosing a company for software development outsourcing, you must be familiar with the popular outsourcing models and select the one you find matches your needs. The three types of models include:

  1. Fixed-price Model

In this type, the enterprise and the development team agree upon a fixed cost and time within which the software must be developed. Any new requirement from the client side must be re-evaluated in terms of time and price. It is a suitable outsourcing model when both parties are clear about the precise project requirements, and there are least chances of any deviation in terms of requirements.

  1. Time and Material Model

When the client cannot clearly define the requirements, a software development company would most probably prefer to implement this model. In this case, the client would pay as per the utilization of the resources (man-hours and materials). The mode is also suitable when the client needs to develop just a trial before a full-fledged software.

  1. Dedicated Team and Resources Model

If a project would run for the long term and the client is interested in hiring the software development experts in a flexible manner (like for the purpose of post-development maintenance or for software with scalability scope), it is good to go for this model. In this, the software outsourcing companies assign a team of development experts for the client who would treat them as their own employees working remotely.

Also read 2022’s Checklist To Hire Offshore Development Team.

Challenges For CTOs & How Software Outsourcing Helps

CTOs or Chief Technical Officers handle maximum development work, whether working with a startup, for a product company, a big enterprise, or other types of organization. They are mainly responsible for managing all aspects of the organization’s project and ensuring tech maturity for any disruption or digital transformation.

However, there are certain challenges that CTOs encounter while ensuring the technical maturity of their organization. And that’s where they prefer to outsource. The major challenges faced by CTOs can be solved by outsourcing software development.

1. Recruiting Tech Specialists

To ensure technology advancements and innovation, one needs to have tech specialists who are not only experts in the technology but also committed to driving performance. However, for most CTOs, it is hard to find specialists for several reasons, the geographical limitation being one of the greatest. Regions like the UK and the US do not have the required technological skills, and even if there is availability, the cost they charge is extremely high. Moreover, training them for the same can delay project completion if you hire someone with average to low skills in the required technology.

How Outsourcing helps: Software outsourcing offers opportunities and entries for CTOs to discover the best IT specialists from across the globe. Geographical boundaries no longer limit them from choosing the right talent. Outsourcing makes it effortless and cost-efficient to recruit tech specialists for any type of technology project.

2. Ensuring Tech Innovation

CTOs are liable for ensuring their business and teams innovate at all levels. They need to take their enterprise to the front foot of digital transformation. And for this, they need a technically advanced team, updated with the leading tech trends and beaming with new ideas. And such skills are not always available for most CTOs, which makes them take steps back from working on innovation.

How Outsourcing helps: Several offshore software outsourcing companies are providing their technical expertise to help businesses digitally transform. Their extensive technology stack will enable businesses to integrate advanced features and functionalities without stressing about the costs or looking for specialization.

Outsourcing to countries like India, Ukraine, and Poland is always a smart choice if you want to innovate. In fact, India is evolving as a tech leader, and you can outsource to India or partner with certified software outsourcing companies in India to embrace tech innovation.

3. Meeting Project Deadlines

Several CTOs have huge pressure to meet project deadlines. And these include both their own projects and client projects. Meeting such deadlines with limited resources could not just impact the quality of work delivered but also stress them.

How Outsourcing helps: CTOs can look for a software development partner to share their workload. They can hire remote developers and build an additional remote team to expand their capacity for completely delegating the project to be managed by the offshore team. It will help them complete the project on time and deliver it without compromising on quality because of time constraints.

4. New Digital Tech Requirements

In a digital landscape, CTOs must focus on innovation. They must embrace new technologies like Artificial Intelligence, Machine Learning, RPA, blockchain, IoT, and many more digital tech to achieve this. However, not every destination has the technology and tech maturity to make that happen. Only two options remain for CTOs in these situations – either invest in hiring a new in-house team or pay for tech experts to relocate to their region.

How Outsourcing helps: Outsourcing mitigates all boundaries and gives you access to a global talent pool. You can not just discover the best digital tech talent in your neighbouring country but even across the globe. You can select the company from the list of software development outsourcing companies that best suits your new tech product and start.

5. Complex Projects

There are bigger or more complex projects that you may find difficult to handle with the available resources present in-house. You need a larger team of experienced technology experts, dedicated developers, and strategists to handle the project’s complexity. This requires expertise that not everyone can offer.

How Outsourcing helps: Software outsourcing companies usually have years of experience working on diverse projects across industries. They have the required dedicated expertise to handle complex projects. You can simply communicate your requirements with them, and they can build the right reliable team for the project.

6. Technical Debt

Another challenge that many CTOs face is technical debt. They have built software, products, or enterprise systems using earlier versions of the technology. Now, the organization is watching the new technologies or latest frameworks. However, the existing resources or developers aren’t adept at doing the same. This might create technical debt.

How Outsourcing helps: Several software outsourcing companies provide upgrading or migrate your existing technology stack. Whether you want to execute new solutions or update your existing process to a new tech stack, they can help you quickly get out of technical debt.

Step-by-Step Process for Successful Software Outsourcing

You must follow the right process to gain all the great benefits of software development outsourcing. Here are the steps that would increase the probability of enjoying outsourcing success.

Step 1: Know the Trends

You must invest time in understanding the most popular software development trends to ensure you pick the right cutting-edge technology. Some of the popular trends at present include:

  • Mobile-first development
  • Cloud computing and cloud software development
  • Progressive web applications
  • Internet of Things
  • Artificial intelligence-driven software development
  • Virtual reality and augmented reality, and so on

Apart from these trends, knowing which programming languages and platforms are in demand for software development would be a good idea. It would help you pick an outsourcing software development company with the right expertise and develop the final product more competitively.

Step 2: Identify Your Needs

The second step is to understand what type of software you want to develop. Only then will you be able to invest in custom software development that would eventually result in an innovative, robust, unique, and quality product. Moreover, determining your markets would also let you make the best team out of the software outsourcing companies coming your way.

Step 3: Start with the Research

Finally, start exploring organizations offering software development outsourcing. Here’s how you can do it:

  • Search for the companies in the top software development outsourcing destinations: India, Ukraine, Latin America, Africa, and China. The benefit of searching in these markets is the chance of getting the best talent that would most probably meet your budget.
  • Consider options from the Google search engine, review websites testimonials, and online ratings to shortlist some of the most renowned companies. You may also accept recommendations from the enterprises in and out of your niche to prepare the list.
  • Check the expertise, portfolios, credentials, past references, and other possible aspects that would add value to the company’s search.
  • Don’t mind reaching out to the past clients of these companies and learning about their experiences.

Step 4: Communicate to Judge the First Impression

In most cases, the first interaction says a lot about a company and its software development outsourcing services. Here are some aspects that you need to watch for:

  • Was the business easy to contact? It would help you judge their responsiveness and communication.
  • At what time was the enterprise available to talk? It would help you address the situation about time zone differences.
  • Did they allow you enough time to express your needs and requirements? A good outsourcing software development team would listen to your needs and ideas to clearly understand your end business goals.
  • Did they understand your project requirements? If the team responds with several inputs and suggestions on how the idea can be developed in a short time, it means that they have your domain knowledge and are quick at understanding, researching, and responding.
  • What technologies or frameworks do they suggest? A good software development outsourcing company would come up with the best recommendations regarding tools and technologies to develop your product. Here, your task about the authenticate trends would be useful in evaluating.

You can ultimately choose a software outsourcing development company based on these evaluations.

Step 5: Set the Right Targets

Once you decide on an outsourcing company, the next step should be to choose the most appropriate outsourcing model. and reach a mutual understanding in terms of development costs and time.

It is recommended to document the entire workflow, needs, and processes so that any difference in opinion between the two sides can be sorted out later. Next, you must communicate regularly with the company to update them about the project’s progress and through what medium.

Choose the secure channel or platform to share, access, and update the documents. You may also consider investing in a project management tool to keep you aligned with the progress.

Step 6: Post-development Support

The right software development outsourcing company aims to deliver continuous post-development support for a pre-defined period to help clients deal with possible issues. From your side, you must keep in touch with the business to maintain a good relationship as it would be useful in making long-term collaboration.

A long-term collaboration will enable you to reach out to them to update or maintain the software. Software development outsourcing should be considered as a collaboration between two parties to achieve the ultimate goal of developing high-quality software solutions.

Where To Go For the Software Development Outsourcing Solution?

Outsourcing your software development outside the US offers immediate resources and ensures productivity efficiencies. Regarding software development solutions and the around-the-clock working model of an offshore approach, you can customize an ideal development strategy that matches your business goals. Overall, outsourcing provides access to domain experts when needed and at a reduced cost.

At Your Team In India, nearshore and offshore software development options are complimentary. Your Team In India has the facilities to offer you the best of both offshore and nearshore outsourcing solutions.

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