Software outsourcing is one of the most commonly used services by businesses. Thanks to globalization, people today can access the best development companies and hand over the work for the best results.
However, software outsourcing is not that easy!
Many of the professionals have a misconception that outsourcing software development needs no effort, as all of them are available at the click of a button.
Well, that is certainly not the case.
When building a business, there are several factors that you need to consider when onboarding people in your organization.
Similarly, when you are outsourcing the software development process to a third party, you need to be sure of many things.
So, what are these factors? How to choose the right software outsourcing partner? How to outsource your software development? If all these questions are bugging you, then worry no more!
In this post, we are going to answer each of them and guide you through the software development outsourcing process.
So without further ado, let’s get started!
Software Outsourcing Business: How it Works?
Before we jump into the factors that can help you choose a software outsourcing provider for your project, let us quickly break down how the business model works.
According to Market.us, the Global Software Development Outsourcing Market size is expected to be worth around USD 940.0 billion by 2034, from USD 534.9 billion in 2024, growing at a CAGR of 5.8% during the forecast period from 2025 to 2034.
In 2024, North America held a dominant market position, capturing more than a 34.7% share, holding USD 185.6 billion in revenue.
The way businesses utilize these services is quite simple by hiring a development company to help them build a solution of their choice. These services are often used for specific tasks too, for instance, getting someone to test your code, custom coding solutions, and other processes involved in software development.
The services are certainly a game-changer for businesses of all sizes, as they make the entire process simpler for the business, while opening doors to experts in the field.
Here’s how the software outsourcing business model works-
- Step 1 – A business/individual reaches out to a software outsourcing firm with the requirements and deliverables they have in mind.
- Step 2 – The outsourcing software development agency analyzes the needs and offers industry experts from their pool of resources.
- Step 3 – Once both parties have aligned their interests, the terms of the outsourcing are decided, and the work is delegated.
There sure are intricacies in the steps shared, as both parties can decide the terms of this work delegation, along with the approach. There are different arrangements that can help you choose the team as per your requirements.
Let’s take a look at software outsourcing models in the next section!
Key Models that Software Development Outsourcing Companies Use
Software development outsourcing simply means outsourcing your software needs to a company that has experience in the same domain. Outsourcing companies have multiple arrangements that they can offer to their customers.
These are called outsourcing models. The experts can choose one as per their needs and make the most out of the solution that was built.
Usually, there are 3 categories of models that software development outsourcing companies use –
► Location-Based Outsourcing Model
It is based on the location of the team that you plan to hire. There can be 3 types of outsourcing based on location.
These are –
- Onshore: Hiring a software development outsourcing provider from the same country for easy access and effective communication.
- Nearshore: Handing the project to a company that works from a neighboring country so that the job can be allocated in a timely manner.
- Offshore: Opting for an offshore outsourcing firm that works from a distant country helps you leverage the low labor costs.
► Business-Based Outsourcing Model
What kind of business deal you plan to make with the outsourcing development partner is another type of model that you can opt for. For instance,
- Project-Based: If you want to onboard a team just for a project, you can outsource the project, and the vendor is responsible for managing and executing the project.
- Team-Based: If you believe you need a team for an entire project, you can get access to a team that works on your site, but on the vendor’s payroll.
► Contract-Based Outsourcing Model
Last but not least, we have contract-based outsourcing, which is based on the type of arrangement that the outsourcing software development and you agree upon.
- Fixed Payments: This is an outsourcing arrangement that works on a set fee that can be paid upfront or after the end of the project.
- Time & Material: The fee is decided based on the time and costs of materials that have been spent on the project.
Based on these categories, you can establish an arrangement with the outsourcing software development provider of your choice. Keep in mind that all of them have their perks and downsides when analyzed as per the scenarios. Hence, examine your requirements wisely and only then make the decision.
Benefits of Outsourcing Software Development
Software development outsourcing over the years has gained popularity as it offers flexibility and access to industry experts. However, those are not the only reasons businesses choose outsourcing.
Here are some benefits of software development outsourcing that make it the right decision for businesses!
1. Cost-Effective
The core reason for outsourcing software development is that it is highly cost-effective. You see, keeping highly experienced developers on your payroll is certainly expensive. More importantly, when you have outsourced the project, you only need to pay till you use the service, whereas when you have onboarded a team on your own, you have the obligation to pay salaries irrespective of the projects you have.
2. Ease of Access to Experts
Finding professionals on your own can be tricky. However, when you search for outsourcing software development companies to guide you, they already offer you access to the experts that they have in their time. Finding a freelancer or a developer ready to get on board is certainly a tough task, as the opportunities are endless. Since development outsourcing services have them on a retainer, they can offer you the resources easily.
3. Improved Core Competency
Businesses that have limited resources and want to manage their software can use software development outsourcing to improve their core competencies. Being a business that is not directly involved in technology, managing and building software even for internal use is not optimal. Hence, the best way to be able to focus on the business and make the most of the core competencies is to outsource your software development.
4. Enhanced Quality
You can definitely uplift the quality of your software, be it with professional testing services or professional software designers that can give you a highly optimized solution as per your requirements. Since these outsourcing development companies have enough projects in their portfolio, the experts understand how to achieve the quality, making it more and more accurate for the users.
5. Timely Completion
With experts working on your project, you can expect timely completion of the software development on time.
The experts are always aware of the possible timeline, giving you accurate insights on how much time the software will take, helping you plan the next steps for your business.
However, there’s still a big unanswered question, i.e., how to choose a software development outsourcing partner? Well, we have a complete process defined for you in the next section!
How to Select a Software Development Outsourcing Vendor?
Selecting outsourced development experts is quite difficult, especially for businesses finding experts for the first time.
You see, software development and IT outsourcing are different worlds altogether. You have to understand what your requirements are and then find an expert team that gets the job done for you.
For instance, weighing the pros and cons and identifying which approach, in-house vs outsourced, is better for the process is also crucial to understanding the requirement.
Let’s break down the complete process that you need to go through before you decide on hiring a software development outsourcing firm.
Step 1: Requirement Audit
The first step of the outsourced software development process is a required audit.
As the name suggests, the first thing a business needs to do is figure out what its development needs are. They need to figure out what caliber of software they need, what the software should do, how soon they need it, and so on.
This is an important process considering the fact that good software can elevate a company’s productivity and also save a lot of time.
In other words, you can also call it defining the software. As the company defines what software it needs.
With this explained, let’s move to the next step of the process for software development outsourcing.
Step 2: Define Tech Stack
After the requirement audit, the company needs to define the tech stack for its outsourced software development product.
So, what is a tech stack?
A technology stack, or tech stack, means a set of technologies. It refers to the technologies being used for software development.
This includes the framework, programming languages, tools, scope, toolkits, SDKs, and any other development tools. MEAN Stack and MERN Stack are popular examples of tech stacks.
Defining the tech stack before starting the development is very important. The reason is that the tech stack or the technologies used for software development can affect the total development cost.
While some tech is free for everyone to use, being open-sourced, others can get quite expensive.
In addition to cost, the tech stack also controls the software’s performance. Therefore, it’s recommended that you choose the tech stack very carefully.
Step 3: Create a Budget
While the software development outsourcing option is a lot cheaper than in-house development, it can still be quite expensive.
Software development costs can range from $35,000 to $550,000 based on the project’s specifications.
That’s why, to make sure the software development cost doesn’t get out of hand and become a burden for the business, they have to create a budget.
This is something that will be discussed between the company owners or the company board members. Depending on the amount a company is willing to invest in software development also affects the scope of development and final solutions.
For that reason, it’s important to choose a budget that provides room for development while also not affecting the business negatively.
Once this step of the process for software development outsourcing is done, we move to the next step.
Step 4: Find the Right Outsourcing Company
With all preparations done and requirements set, it’s time to find an outsourcing software development agency.
But the question is how?
Well, in the age of technology, there are various ways to find a development partner. A few of these are, as mentioned below:
- Explore platforms like LinkedIn for software development companies
- Ask for references from your partners who have worked for software development companies before.
- Post an ad on several social media and other platforms for your project needs. You will get many applications from across the market.
Moreover, if you are living in a Metro city, there are high chances that you can find several local development agencies easily.
In any case, there are some things that you need to keep in mind when getting software development outsourcing.
They are, as mentioned below:
- Check out The Portfolio
- Request Client Testimonials
- Check Past Project Performance
- Interview the development team
- Inquire about NDA
- Who will own the Code at the end of the project?
These are some things that you should keep in mind while hiring a development partner.
Once you have shortlisted them, it’s time to move on to the final step of the process for software development outsourcing.
Step 5: Consult & Handover The Work
All that is left to do is consult the shortlisted software development companies and hand over the work to the one that offers the best services at the right price.
With this, you have successfully outsourced your software development work to a market-leading development company.
Looking for Outsourced Software Development? Nimble AppGenie is Here!
When implementing the steps mentioned above, you will have to first decide on the prospects whom you consider hiring.
This in itself is a huge challenge, as there are thousands of mobile app development companies currently functioning in the IT realm.
If you are looking for someone to help you finish the process faster and deliver quality software without compromising on code quality, then Nimble AppGenie is certainly a great choice.
With years of experience in developing an array of software for top players in the market, Nimble AppGenie is a leading software development company that you can easily reach out to outsource your software development.
Connect today to start your journey.
Conclusion
The whole purpose of software development outsourcing is to make the job simpler for your business. Hiring professionals and training them as per the requirement is certainly a costly decision.
Outsourcing, on the other hand, allows you to find the finest developers and analysts and access them for your business at lower rates, making the process cost-effective.
However, choosing the right software development outsourcing company can often become tricky as there are multiple decisions that you need to make.
Hopefully, this post gives you all the insights on models, benefits, and the process involved in software development outsourcing.
That will be all for this post. Thanks for reading, good luck!
FAQs
Niketan Sharma, CTO, Nimble AppGenie, is a tech enthusiast with more than a decade of experience in delivering high-value solutions that allow a brand to penetrate the market easily. With a strong hold on mobile app development, he is actively working to help businesses identify the potential of digital transformation by sharing insightful statistics, guides & blogs.
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