What Is Software Development Outsourcing: The Definitive Guide


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Praise Iwuh

August 05, 2022

Software development outsourcing is a widely known concept in the technology world. This is why it is no surprise that Software engineers are in high demand all over the world. The increasing demand for software engineers directly results from the speed with which technology is progressing. Additionally, digital transformation is a crucial factor in the rise of outsourcing development.

Regardless of the size of your business, software development outsourcing is a viable option. Whether you're a startup or a multinational organization, there are numerous advantages to outsourcing this phase of your company's operations.

Software development outsourcing has experienced tremendous growth during the past two decades. Statistics show that approximately 64% of organizations outsource their whole development process.

Outsourcing software development has several benefits, including cost savings, improved product quality, and more.

 In this article, we will explain in detail what software development outsourcing entails and why it is an ideal approach for your organization in terms of time, money, quality, and competition. Here’s a glance at what we have covered in this guide:

  • What Is Software Development Outsourcing?
  • Advantages of Software Development Outsourcing
  • How Do You Outsource Software Development
  • Types of Software Development Outsourcing
  • How is Software Development Done: The Process
  • How to Choose an Outsourcing Vendor


 Software Development Outsourcing is a term that describes an arrangement in which a business hires an external software development agency to carry out all the work that might have been performed in-house.

Software outsourcing refers to a firm handing over control of the business process or project to a third-party vendor competent in doing the necessary business duties.

A company outsources software development projects to a third-party service provider in software development outsourcing. The development services might range from creating unique software for your organization to creating commercial software for your clients.

When outsourcing software development services, your internal development team can concentrate on core capabilities such as growth and innovation.


 There are significant financial advantages to outsourcing, particularly in the case of software development; outsourcing to countries with a lower standard of living can ultimately result in a more competitive market and reduced prices for consumers.

Some of the major advantages of software outsourcing include:

1. Global access to elite technological talent

 You are not hindered by your location when you opt to outsource your product/project development. Your primary criterion can be the team's proficiency and professionalism, not proximity to your workplace.

You can choose the ideal team for your project by perusing the company's portfolio, searching for customer feedback, examining the company's reviews, and utilizing the company's provided items.

Regardless of their location or whether they collaborate in person or remotely, this vast pool of development expertise will maximize the creation of your product.

When considering working with an international or geographically dispersed team, it is essential to understand cultural differences and take steps to minimize their impact on the project development process.

2. The ideal ratio of abilities to pay

Outsourcing allows you to find the sweet spot between the quality of the development team and the cost. Eastern European nations like Ukraine and Belarus are making rapid strides in the outsourcing ranks. Businesses in these regions specializing in software development have repeatedly proven that they can deliver excellent work thanks to a potent combination of technical know-how and imaginative problem-solving.

3. Save time while hiring professionals.

You can reduce costs even more in light of the adage "time equals money" by bringing in pre-approved professionals, This is because the hiring and research processes have already been completed with outsourced development teams. Hence, you can easily swoop in and take advantage of all the successes with minimal effort.

Employing a software outsourcing team can take the same time or less than hiring a single in-house engineer. Consider the amount of time and money that this could save you.

4. Access to extensive information and wisdom

It's common knowledge that hiring a third-party firm to handle your software engineering needs is an excellent method to compensate for a lack of in-house talent or equipment. The aforementioned is, however, simply the beginning.

All that would be on your part is to develop a product idea, and you'll have instant access to a suite of consulting, analytical, marketing, design, and development services.

You may either jump into development or construct a minimal viable product (MVP) to test the waters and make any necessary adjustments before diving in deeper. The outsourcing firm's marketing and design professionals will aid you in creating a cutting-edge minimum viable product (MVP) and deciphering the insights gleaned from its analysis.

Outsourcing businesses can assist with everything from project planning and cost assessment to wireframing, software development, user interface and user experience design. And they do all of this constantly. Therefore, they can create the best possible project plan for any endeavor.

5. Enhanced Concentration on Core Business Processes

Outsourcing also benefits your staff and development team. By outsourcing time-intensive projects, you can lessen the workload of your internal tech team. In addition, as these outsourced teams require no additional supervision, your staff can focus on tasks that directly contribute to the firm's expansion.

In addition, rather than requiring your in-house development staff to manage projects for which they are unqualified, consider outsourcing the work!

Thus, your full-time staff can focus on strategic objectives according to their level of expertise, while the outsourced team concentrates on these specialized software solutions.

6. Boosts Product Quality

Utilizing a third-party software development company can frequently enhance the quality of the final product.

Your outsourced team might have dedicated testing and quality assurance resources to verify that the final software product is stable and provides a positive user experience.

In addition, your outsourced team may have novel suggestions for enhancing your software solution might contribute to more innovation. They may even propose novel strategies for resolving existing company issue

7. Micromanagement is unnecessary.

When you delegate a project to an outsourcing firm, it is managed by a project manager whose role is, as the name suggests, to manage outsourced software development. Your primary point of contact for any concerns that may emerge is the project manager, who handles all matters relating to the development and launch of your product.

You will meet the project manager at the beginning of your project's development and collaborate with them on its plan. Once the project plan and budget have been authorized, the project manager must adhere to the schedule and budget. Typically, the PM already possesses tried-and-true techniques for managing remote and in-house teams.

The project manager is responsible for planning sprints, establishing deadlines, controlling delivery, establishing a delivery calendar, and preparing feature demonstrations. Changes, recommendations, comments, and complaints - you can confidently direct them to the project manager and expect the necessary actions to be made.

8. Flexibility

Customers can engage with software outsourcing providers only when necessary. In addition, in contrast to permanent employment, there is no legal requirement or duty to maintain a long-term contract, giving consumers a choice to pay for outsourcing as the project progresses.

This is especially advantageous compared to hiring full-time in-house developers 365 days a year, when their expertise may not be as necessary following the completion of a project.

9. Reduced development and overhead expenditures

The most typical reason organizations outsource their development projects is the significant cost savings. Reducing expenses and adhering to a budget enables firms to expand and scale their operations and meet market demand effectively. Consequently, cost savings are the fundamental advantage of outsourcing software development for enterprises.

10. Faster development and time-to-market

Since the outsourced staff is already skilled and well-versed in the needed technologies and tools, there will be no need for extra time spent on training and onboarding, saving customers time to speed up the development process. This is especially helpful for large international corporations, where decision-making and approvals may take longer.


 Outsourced software development offers several benefits, including increased productivity, enhanced product quality, and cost savings. You cannot outsource IT development successfully without careful planning; thus, having a good outsourcing strategy is the first step in finding a vendor who can meet your objectives.

When it comes to outsourcing software, several variables might affect the outcome. However, there are a few things in particular that businesses need to remember.

1. Determine your aims

Cost reduction is a typical incentive to outsource, but it's not the only reason; don't restrict your vendor search for pricing alone. Utilizing the latest technologies, optimizing processes, and decreasing the risk of corporate expansion are further advantages of outsourcing. Your objectives must be reasonable, well-balanced, and attainable.

2. Define tasks for delegation

While some organizations are renowned for their coding expertise, others are renowned for their consulting services. Therefore, to choose the ideal outsourcing partner, it is essential to specify the duties to be outsourced precisely.

 You should distribute less critical jobs at the beginning of your outsourcing journey.

3. Assess your technological profile

Because software development outsourcing typically occurs in a remote environment, your vendor must have a technological profile that matches your requirements. To achieve this, we suggest compiling a list of the resources your project requires. In addition, don't overlook security and data protection elements, as data leakage is prevalent.

4. Create a productive workplace

Foster positive relationships between your staff and outsourced personnel by informing them of the outsourcing objectives, avoiding rumors, and bridging cultural gaps between your team and your vendor's team.

Ensure that your organization is prepared for change. There is no surefire way to ensure that an outsourcing endeavour will end in complete success.

However, some measures may be taken to boost a company's chances of success. Further, to improve quality, release frequency, and cooperation, client firms should choose outsourcing partners that use the Agile approach to manage their development projects flexibly. It is also recommended to use sophisticated tools for effective project task management to monitor the project's development.


There are three major types of software development outsourcing. They include:

1. Location-based software development outsourcing models

2. Relationship-Based Software Development Outsourcing Models

3. Contract-Based Software Development Outsourcing Models

1. Location-based software development outsourcing models involve outsourcing software development tasks to teams or individuals located in specific geographic locations, chosen based on factors such as cost-effectiveness, skill availability, and timezone compatibility. These models typically include onshore, nearshore, and offshore outsourcing.

  • Onshore outsourcing involves contracting with teams within the same country as the client, providing advantages in communication and cultural alignment but often at higher costs.
  • Nearshore outsourcing involves collaborating with teams in neighboring countries or regions, offering a balance between cost savings and proximity.
  • Offshore outsourcing entails delegating tasks to teams in distant locations, often characterized by significant cost savings but potential challenges in communication and cultural differences. Each model offers unique benefits and considerations, allowing businesses to tailor their outsourcing approach to their specific needs and priorities.

2. Relationship-based software development outsourcing models focus on establishing long-term partnerships between clients and service providers, emphasizing collaboration, trust, and shared goals. Examples of such models include staff augmentation, dedicated teams, and project-based models.

  • Staff augmentation model: Here, the outsourcing partner provides additional skilled resources to augment the client's existing team, allowing for flexibility and scalability while maintaining control over the project. This model is beneficial for handling fluctuating workloads or filling skill gaps for short-term projects.
  • The dedicated team model involves setting up a dedicated team of developers, designers, and other professionals exclusively for the client's project. This team works as an extension of the client's in-house team, fostering close collaboration, seamless communication, and a deep understanding of the project's objectives and requirements. This model is ideal for long-term projects requiring ongoing support and development.
  • In the project-based model, the outsourcing partner takes full responsibility for the project's development and delivery, from inception to completion. The client provides project requirements and milestones, and the outsourcing partner manages the entire project lifecycle, including planning, execution, and quality assurance. This model offers a fixed scope and budget, providing clarity and predictability for both parties.

Overall, relationship-based outsourcing models prioritize building strong, collaborative relationships between clients and service providers, fostering mutual understanding, transparency, and alignment of goals to achieve successful project outcomes.

3. Contract-based software development outsourcing models revolve around formal agreements outlining the terms, conditions, and deliverables between the client and the service provider. Two common examples of such models are the fixed price model and the time and material model.

In the fixed price model, the client and the outsourcing provider agree on a set price for the entire project, based on a predefined scope of work. This model offers predictability and clarity in terms of project cost, timeline, and deliverables. The client pays a predetermined amount for the completed project, regardless of the actual time and resources invested by the outsourcing provider. While this model provides cost certainty for the client, it requires a well-defined scope and thorough project requirements upfront to mitigate the risk of scope creep and ensure successful project delivery.

Conversely, the time and material model involves billing the client based on the actual time and resources expended by the outsourcing provider. Under this model, the client pays for the actual hours worked and the materials used during the project development process. This model offers flexibility, allowing for adjustments to the project scope, requirements, and priorities as needed throughout the development lifecycle. It is suitable for projects with evolving requirements or uncertainties where the scope cannot be precisely defined upfront. However, it may pose challenges in terms of slow speed to market.


Regardless of the complexity of a software product, it must be adaptable, easy to maintain, and upgradeable. This can be accomplished by planning each phase, from brainstorming through maintenance, in advance. The software development life cycle (SDLC) stages vary between vendors.

However, the optimal SDLC methodology should include the following steps:

1. Ideation

2. Planning

3. Design

4. Coding

5. Testing

6. Deployment and maintenance


Every endeavor begins with a concept. However, ideas are not born from thin air. Identifying a business need is the first step in determining how to fulfill it.

In most cases, an ideation process comprises the following phases:

  • Evaluation of the project's viability and risk reduction can be achieved through a feasibility study.
  • Project scope determination
  • Identifying deliverables (the anticipated project outcomes)
  • Identifying stakeholders
  • Creating a business case that justifies undertaking the project.
  • Creating a work statement detailing the project's goals, scope, and deliverables.



 An important part is ensuring that all the relevant development tools and platforms are available and accessible. Additionally, you must ensure that your daily operations run smoothly without depleting your development resources or interfering with them.

Having well-structured paperwork is an essential part of your success. In addition, communication, job procedures, reporting and team interaction benefit from ensuring that documentation is always consistent.

In the planning phase, the following steps should be taken:

  • Plan-making for the task at hand
  • Putting together a team, determining the responsibilities of each member
  • Calculating the budget and ensuring that everyone has the appropriate resources (in terms of hardware and software) are all steps in constructing your team and preparing for potential problems.

Consider creating a software requirements specification (SRS) during the planning phase, which serves as a document outlining the goals and specifications of the product's development.



The design phase of a software project is an essential part of its lifespan. The product's overall design is referred to as architecture.

It may include the following:

  • Interface — how users engage with and respond to the product.
  • What operating systems will the product support, according to its definition (Android, iOS, etc.)
  • Communications — methods the product will communicate with other assets (the central server, for example) (the central server, for example)
  • The app's security includes mechanisms to prevent data leaks, such as SSL encryption and password protection.

Creating a prototype, a visual depiction of how the project appears and functions can also be part of the design phase.



'Translating' a product's design into existing software is the primary goal of this stage of the SDLC. It also serves as its foundation.

A single developer can finish small projects, but large projects need all duties to be divided among the team members according to their specialties. Thus, a front-end developer constructs the product's UI and interactions with the server; database administrators add all the essential data to the database.

The code must fit the project's needs and the stakeholders' expectations. Thus, it's no surprise that this step takes the longest. However, it's the simplest, provided the conceptualization and planning stages are well-executed.

This phase aims to produce a working product and documentation of the source code.



Quality assurance (QA) professionals will review the product once development is complete to ensure it satisfies all specifications. Several methods are used to ensure that the program is safe to use. For instance, functional testing is required to ensure that the program executes its specified functions in a manner expected by the user, It also helps to test the software's ability to handle a significant workload. Unit testing helps to make sure that each module operates as anticipated. Other types of testing involves:

  • Testing for security flaws to verify that no sensitive data is at risk of being leaked
  • Testing the software's usability to see if it's user-friendly and responsive
  • The QA team then retests the software once the developer fixes the problem; this procedure must be done multiple times to ensure that the final output is free of flaws.



Once the testing phase is completed and there are no bugs or other faults in the product, it is released for beta testing.

During the initial beta testing phases, the support staff gathers user feedback while the development team fixes any issues that may surface.

The product goes on sale as soon as it's perfected in response to user feedback. However, its life cycle doesn't end there: instead, the product is continually upgraded to increase performance and adapt to the constantly evolving needs of its users. 


 Consider the following four factors when outsourcing your software development processes:

1. Select the Outsourcing Service Provider Wisely

Your software's quality is highly dependent on the quality of your outsourcing provider. This is because a high-quality software development company is capable of creating software that increases the efficiency of your business. However, using a software development firm with a poor reputation could jeopardize your business.

 How do you choose the finest software outsourcing firm for your business?

Searching for software outsourcing service providers is not always sufficient to read their ratings and testimonies. Instead, you must examine some of their earlier work.

Their work demonstrates their competence and excellence. Additionally, it proves their technical talents. Browsing through past projects, apps and portfolios would be helpful at this point.

Observe the following features:

  • User experience is the ease of navigation and content engagement.
  • Mobile functionality refers to a tool's performance on mobile devices.
  • The design reflects how aesthetically pleasing the software is.
  • Timings for software load: How rapidly the utility loads.


2. Begin with a Test Project

Before selecting a software development outsourcing company, you must know its skills. Therefore, begin by assigning their team a test software development project. Then, you can determine whether to continue working with them based on their performance on this project. Through this test project, you can discover the following about your outsourcing partner:

  • Does your outsourced workforce ask pertinent questions regarding communication?
  • Are they able to efficiently comply with instructions?
  • Regarding their processes, is your outsourced workforce transparent and trustworthy?
  • Are they capable of keeping their word?

3. Time management: 

Time management is a critical factor to consider when selecting a software development outsourcing vendor. It is essential to ensure that the vendor has robust internal deadlines and processes in place to effectively manage their time and deliverables. This will involve assessing whether they have a track record of meeting deadlines consistently and if they can submit their work punctually. For instance, a reliable vendor will demonstrate their ability to adhere to agreed-upon timelines, which is crucial for maintaining project momentum and achieving overall success. 

4. Define Goals

It is imperative that you properly document the objectives for your outsourced project. However, it doesn't stop at just defining any goal or objective. They must be reasonable, well-balanced, and attainable.

Although the objectives of each software development project can differ, establishing clear expectations from the outset can significantly impact growth and development. It is also essential for measuring outsourcing's success.

In addition, as your project develops, you should do timely evaluations. This might assist you in making the necessary adjustments before expending excessive expenditures.

Read: Outsourcing vs Inhouse- Which is better?

5. Utilize Performance Monitoring Instruments

Utilizing performance monitoring instruments is a pivotal aspect when considering an outsourcing partner for software development. It involves implementing tools and systems to track the productivity and efficiency of remote teams. Furthermore, by utilizing such instruments, you can ascertain whether the outsourced team is adhering to designated work hours, identify any instances of personal internet usage during business hours, and ensure that you are not billed for idle time. Moreover, performance monitoring instruments enable you to assess the quality and progress of the work being done, providing insights into the effectiveness of the collaboration and allowing for timely adjustments if necessary. Overall, integrating these monitoring instruments is indispensable for maintaining transparency, accountability, and optimal performance throughout the outsourcing partnership.


Software development outsourcing has become a prevalent practice in today's global economy, offering companies the opportunity to access specialized skills, reduce costs, and accelerate project timelines. If you are in need of a software outsourcing partner, check out Wazobia Technologies, a Software Development Agency that specialises in custom software products and operations.

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