Outsourcing is for established businesses, intercultural communication is a nightmare, project quality and results will be poor are some common myths associated with software development outsourcing. So not true.

It is quite amazing to notice the sheer growth in the digital sphere started with 1 website in 1991 to over billions today. 

Do you know the number of websites released worldwide in 2021?

Over 1.86 billion websites.

Where to outsource and how much does software development costs? Cost optimization is one core factor companies opt for outsourcing. Did you know an average software developer in the US earns 11 times more than an Asian/Indian developer?

Software development outsourcing

Source: PayScale

In this blog post, we will cover software development outsourcing in detail. A cheat sheet by Phaedra would also be shared so that you won’t make any mistakes while hiring your next technology partner. 

What do we mean by software development outsourcing?

Software development outsourcing means asking for custom software solutions, especially from third party service providers. Hiring an in-house team requires time, effort and money and you may not be able to launch a product fast in the market.

Luckily, you can hire a team outside your company. Outsourcing reduces costs, speeds up the development process and you can hire skilled developers fast. 

Factors you should consider while outsourcing software development services.

-Cost cutting – can you see hiring employees/equipment helps in cost cutting? You need to find how much software development costs and find a technology partner with the right quotation.

-Resources and technology – ask your service provider about the tools and technologies they will be using and how capable are they in handling your outsourcing needs?

-Communication methods – if you are outsourcing from another country do consider the timezones, holidays and language barriers. Use project management tools for remote working.

-Evaluate culture – you want to work with the company where you feel comfortable and for that check their culture by looking into their atmosphere, social pages, talk to employees etc.

-Who will lead my project? You can’t just blindly trust, ask for the profile of the team lead the company is allocating on your project and the resources working along. 

-Past experience / portfolio – check company previous projects they delivered on the same technology stack you are looking for. They usually display them in their portfolio on their website.

-Client reviews – offshore software development companies usually offer services on platforms like Upwork, Fiver, Clutch etc. where they struggle with their ratings and reviews they get from clients. Do look into them.

Software development outsourcing examples 

What do you think world’s top businesses have in common? They do outsource some of their work. 

Do you know Google outsourced contract employees more than direct employees for the first time in 2018?

Two main reasons as Google quotes. One, allows them to engage versatile expertise which they lack in-house. Second, outsourcing helps them cover spikes in work. 

Do you know Slack didn’t have the resources for designing the app interface in 2012? Yes, and they hired the user experience specialists MetaLab. 

Do you know Alibaba founder Jack Ma outsourced development to develop a sustained ecommerce infrastructure for Chinese consumers?

Models of outsourcing software development

Team augmentation 

This is an outsourcing model where the client first evaluates the in-house skillset first and then decides what sort of staff/team augmentation he requires. Companies ask for team augmentation on a temporary basis, mainly because they want to increase their productivity. In this model, an outsourced team works with the client’s internal team for project completion.

Dedicated teams

In this model, the whole project is handed over to an external dedicated team with a tentative timeline/deadline. Client states his requirements clearly and asks for the team allocated full-time. Usually, a client has direct access to the software developers working on their project. 

Project-based (fixed price or T&M model)

Project based model either works on a fixed price model or Time and Material model. If a client has a clear set of requirements, he opts for a fixed price. Whereas if the client doesn’t have clear requirements, we advise the Time and Material model.

Software development outsourcing cheat sheet by Phaedra: 

Challenges and solutions

1-What do you want to achieve from outsourcing? 

You must be clear about the objective of hiring an outsource team. Is it because you want to cut costs on hiring and save time? Or do you want to capitalize on advanced technologies? Or business expansion or aligning internal processes? 

PRO TIP – Decision-makers must brainstorm and prepare goals which are realistic and achievable.

2-Staff augmentation or a dedicated team for the project?

Staff or team augmentation is where you hire an external team to work with your internal team, this speeds up development. Whereas a dedicated team seeks responsibility for the project as a whole and shares their project development milestones on frequent timelines. 

PRO TIP – Choose the type of outsourcing and then the outsourcing destination. Offshore, nearshore and onshore are some types of outsourcing. 

3-Do i need to prepare a project scope/ list of tasks?

Defining requirements will keep the vendor and the service provider on the same page. Prepare a list of tasks as this helps you in choosing the right technology partner. 

PRO TIP – Remember, not all vendors/service providers are proficient in coding. Some may have excellent development resources whereas some may have amazing consultation services.

4-How much cultural conventions, language barrier and time zone difference can affect?

Language barriers, cultural and time zone differences are very common in outsourcing. Example, your outsourced team is working on your project and runs into a problem, and is waiting for change approval. This will slow down development. Use collaboration tools like Slack, Jira, Gchat, etc. Also, encourage transparency and ask for weekly updates. 

PRO TIP – Identify potential language barriers, if necessary hire a translator.  

5-What to do about privacy risk since companies expose confidential data to third parties?

Good service providers always have NDAs in place. This NDA document legally restricts anyone from sharing data. Include intellectual property rights clause in the contract if needed. This will save you from copyright infringement. 

PRO TIP – Use performance / monitoring tools for outsourced teams like Basecamp, DeskTime and Time Doctor. 

6-How do you keep project quality issues in check?

While hiring an outsourcing service, do check if the company has quality assurance resources and processes in place for code testing and review. Conduct regular meetings with the development team and stay on top of development updates. 

PRO TIP – Use Trello, Clickup or Jira for logging bugs and managing your project backlogs.

7-What’s your budget and timeline?

When you prepare a scope of the project document, do ask for the time required to finish and the approximate budget. Bear in mind, the number of hours/days or cost will be rough at the initial stage. 

PRO TIP – Setting a budget will help you pick appropriate tech partners rather than settling on the cheapest service provider. 

8-How can you manage outsourcing teams efficiently?

First use agile methodology, it supports development changes and freezes time and budget. Then launch an iterative development process based on Scrum. Try having overlapping schedules as this way 2 or more teams can collaborate without time zone difference issues. Prefer video calls to keep the team motivated and involved. Invest in team skills. 

PRO TIP – Always find time to speak to your outsourced team. 

Final verdict

Oftentimes a loosely framed contract favors outsourcing companies and the client faces severe monetary losses. Don’t leave loopholes while signing a business contract. The best practice is to outline the deliverables along with the timeline. Milestone based payments is another good practice as this simplifies the payment structure. 

Unaware of how to prepare a business document? Or too afraid of getting trapped into the wrong technology partner? Set up a free consultation call. Ask everything bothering you before seeking for the service. We believe in making relations and not just money.