Software Outsourcing - What Is It And How To Do It Well?

February 15, 2023
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Software Outsourcing as the term suggests refers to the notion of hiring another development company or source to help you with the completion of your software development project(s). At times, software outsourcing also involves the practice of handing the entire project to the third-party that is well-qualified to meet the demands of it.Although software outsourcing is not so novel an idea, its hype is getting bigger and better with each passing day.

There are various factors to which software outsourcing owes its popularity - primarily the fact that rapidly changing trends of the digital markets call for innovative minds and skilled professionals to help the marketers and IT companies cope with the waves of advanced technologization.The change in digital trends is giving a boost to the competition among the business ventures and that is what makes software outsourcing a go-to option for them. It is a major driving force behind the digital transformations of several renowned companies.

Here is all that you need to know about software outsourcing-the reasons for it being the trend and how it works, advantages, its drawbacks, and how to outsource the software development effectively:

Why is Software Outsourcing a Big Thing?


Software outsourcing offers multiple benefits to the organizations opting for it. This helps in improving the overall working efficiency and enables them to keep their long-term strategies on track. Moreover, its various types and models are what primarily makes it a convenient option for many companies.

Types of Software Outsourcing Services:

Services that software outsourcing vendors usually offer include artificial intelligence, web or mobile application development, robotic process automation, or the latest trends of cloud computing, which helps the customer companies to have an impactful digital presence. Vendors can also customize their software outsourcing services to cater to the specific needs of their customers.Companies offering software outsourcing services ensure that they have the in-house capacity, and resources (developers, designers, quality assurance engineers, business analysts, need, and project managers) to understand and deliver the project(s) with the required functionalities.

Models for Software Outsourcing:

There are three major ways with which businesses can outsource their projects to the vendors. Mainly being:

  1. Nearshore Outsourcing:

This means outsourcing the projects to the companies in neighboring countries.

  1. Onshore Outsourcing:

Onshore outsourcing means hiring vendors who are located within the country. Being able to speak the same language eradicates all the issues and possibilities of errors that come with the language barrier, thus making it more effective. However, the development cost will be more than the other outsourcing options though.

  1. Offshore Outsourcing:

As the name refers, this means working with vendors from other countries. This helps in reducing the development cost, while online communication platforms like zoom or Google Meet are considered to make the working process and communication more seamless.

What are the advantages and drawbacks of Software Outsourcing?

There are so many factors that contribute to making software outsourcing an advantageous option that results in less product production time and increased working efficiency. To top it all, here are some more benefits of it to help you understand more comprehensively.

The Advantages:

  1. Development Costs and Overhead Spending:

The most compelling reason for businesses to opt for software outsourcing is reduced development costs. It helps them grow with the market demands more effectively and that too while staying in budget. Having so many pricing options at hand is undoubtedly the primary advantage of software outsourcing. Outsourcing means that you won’t have to worry about the labor costs and other benefits like leaves, insurance, etc. and all likewise troubles that come when you hire an employee to do the work for you. You will just pay the third-party and get your done work effortlessly. This is what makes the whole endeavor of outsourcing cost-effective and attractive for the business organizations that are striving to keep up with the rapidly changing digital trends.

  1. It is Flexible!

You are not bound by any long-term legal constraints or wont have to pay for the resources even after the completion of the project. In comparison to full-time hiring, software outsourcing gives you a lot of flexibility when it comes to payment and working plans. You can literally hire any person that aptly meets the project demands irrespective of the geographical location. You wont have to go through those lengthy recruitment processes and prolonged interview sessions. It saves you time and energy to focus on business management.

  1. Boosting Working Efficiency:

Software outsourcing vendors are highly professional, skilled, and well-versed in the modified technological tools that are usually needed in the development process. It will save you a lot of time that you would otherwise spend on hiring new team members. Your project moves forward at a faster pace and the project completion period gets reduced to a greater extent.

  1. Improved Business Strategies:

Having easy access to skilled and experienced IT talent from all around the world helps organizations in getting the work done effectively and efficiently. Software outsourcing enables them to be more focused on the tasks that need to be done on their part instead of worrying about the tasks that are being managed by the third-party vendor. This will aid in improving their work progress as well.

The Drawbacks:

The Drawbacks
  1. Work Quality:

Lower labor costs sound very attractive to us all, but we cannot deny the fact that it comes at a price. The lower development costs might compromise product quality. Moreover, not being able to contact the developers in person will result in delayed feedback, which in turn prolongs the duration of project completion.

  1. Cultural and Language Barriers:

The differences in time zones often hinder the effective communication or feedback between the client organization and the remote outsource team, that further challenges the work progress and leads to extended deadlines. You can overcome this drawback through effective project management.

  1. Security Concerns:

Data is considered to be an asset in todays world. Hiring a third-party to help you with your projects means that you will be required to share some confidential data, or intellectual property with them, which in turn exposes your company to external threats. Therefore, make sure to put some effort and thought while selecting outsourcing vendors. Pick the ones who understand and prioritizes your security concerns to reduce the risks for any data leakage. One highly recommended way to reduce this risk is to sign Non-Disclosure Agreements (NDA)s with the 3rd-party vendors after consulting a law-agency.

How to Do Software Outsourcing Effectively?


No matter how beneficial a process is you can never reap its benefits if you are not doing it the right way. Likewise, when it comes to software outsourcing, various factors should be taken into consideration to ensure success. Keep the following pointers in mind:

Set Goals:

Make a draft of what your expectation is from the outsource team. How you want the work to be done i.e. list some rough deadlines. Have a clear idea about what kind of product you need at the end of the project. You must ask the outsourcing company to do proper documentation since that ll set benchmarks, milestones, delivery dates, and overall project requirements.

Communication is the Key to Success:

If you are not communicating effectively with the remote team, you are likely to run into problems. Since you are working remotely with the outsource team, you must be vigilant about keeping track of the project progress. Communicate systematically, for instance:

  • When posting an ad for software outsourcing, be clear about your demands and job description
  • Make it clear if it is a one-time project or you are looking for a long-term contract
  • State the qualification and skills required
  • State duration of the project
  • List your expectations

Having all these conditions listed out will save your time and energy that otherwise would have been wasted on reviewing applications from professionals or companies that do not fit your project requirements. Besides, after hiring the outsource team, get your project management team to collaborate with the hired 3rd-party resources, and ensure that they schedule meetings more often to get the work done perfectly.

Post-Shortlisting Process:

Even if some unfit professionals/companies have managed to slide their CVs/Proposals in your email, you can surely cross them out after some browsing. Further, you can start by contacting the potential resource, those who fit the project demand. Contact them directly to communicate all the concerns and points we have discussed above. Its good to be extra cautious and call their references or previous employers to see if they are reliable and have all those skills that they have listed etc. This will help you to make an informed decision. Before finalizing your decision, take a demo of their skills. Moreover, observe how they are communicating with you, i.e. if they are pleased, take it as a good sign. If you sense something fishy or they are being ambiguous, then you should opt for other available options. Once you have shortlisted them based on these criteria, it will be easy for you to finally choose.

Be Realistic:

Having realistic expectations is vital to keep things smooth between you and the hired team or individual. For example, if you are looking for lower labor costs then be prepared for the compromised quality of the product. Likewise, have some room for delays in the project and unmet deadlines if you are opting for nearshore or offshore outsourcing particularly.

Be Strategic:

You must have a sound plan for the execution of the project. Set multiple milestones to keep track of the work progress.

Where to Find Potential Developers?

Find Potential Developers

When it comes to the platforms where you can find potential developers, the options are practically endless. You can look upon widely known digital platforms like Clutch, people per hour, Fiverr, Upwork, etc. You can visit freelance platforms and trusted reviews sites that list the top and best-rated companies (offering staff augmentation services), individuals, and platforms.

The Bottom Line:

There isn't a particular way or magic formula to ensure your 100% success with software outsourcing but the above-discussed points will surely reduce the risks that come with hiring a third-party. Going through a huge amount of applications pouring in might be difficult but the process will surely be worth the effort. Just like any other business engagement process, software outsourcing has its strengths and weaknesses, but it is essential to be certain if software outsourcing is the right decision for your company or not. shopdev offers staff augmentation services, empowering tech companies around the globe with skilled and experienced talent. Get in touch with us today to discuss your project.

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