A Complete Guide To Software Outsourcing

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When expert software developers handle software development projects, they usually achieve the desired results faster than inexperienced in-house staffs. One of the incredible advantages of outsourcing software development is that it saves costs. When software development is outsourced to another company, it saves the Outsourcing Software Development company requiring the services the extra cost that would have been incurred if such software were developed by amateur in-house staff. The implication of outsourcing software development is that a company does not need to incur costs of hiring, training, and maintaining expert employees for short-term projects.

All of these outsourcing problems can be overcome by selecting the right partner in software development with experience and expertise. A significant portion of development costs is accounted for by the time taken to develop software and the hourly rate paid to developers. The hourly rate of a developer is far more important than the other. Before you choose a software development model, determine the best developer’s hourly rate. Your development plan can be outsourced to get you exposure to a worldwide talent pool.

You’re responsible for documenting project requirements and specifications (the vendor’s BA team will need your cooperation). But the execution and delivery lie on your vendor’s shoulders. You have more control over the development process as the team members are de-facto your employees. You communicate with them directly, they report directly to you. Which makes altering the scope of work faster and less painful.

The Dedicated Team

Outsourcing has been redrawing core business functions and, in many industries, and it has redefined the way business is done. However, IT outsourcing has not been rapidly growing in the 2010s, having even consolidated in some years of the past decade. The expansion in outsourcing has been driven by another segment. It’s important to note here that most large enterprises employ a mixture of software development outsourcing approaches and partners for different programs of work. A multi-sourcing strategy helps you match the right partner for each initiative, and reduces the risks of over-reliance on a single partner. However, setting up an insourcing model can be a long and costly process.

You stay involved and retain decision-making control, but much of the day-to-day execution happens without your involvement. It falls somewhere between staff augmentation and a fully outsourced approach. When using an offshore vendor, companies can take advantage of the vendor’s expertise and experience, while ignoring its location. Offshoring allows companies to choose from the global talent pool and have access to the best experts at a reasonable price. Most offshore companies provide English-speaking experts, adjust their working hours to those of their clients, or open offices in different time zones to enable 24/7 communication.

software outsourcing business model

You can either do it yourself or assign a responsible project manager or a CTO who’ll be reporting to you. Outsourced specialists become a part of your in-house team and cooperate with your employees. While you remain in charge of the development process and workflow management. You have full control and full responsibility for the project.

When it comes to contracts, the best thing you can do is consult with your provider. See how their services can best be customized to fit your needs. After all, your provider has been through the process many times. They can use their past experience and expertise to create a contract perfectly aligned to your project. That’s why multiple types of contracts are available, to fit the differing needs of those projects. That’s also why, when deciding on a type of contract, there’s no straightforward answer.

Advantages Of Software Development Outsourcing

Alibaba, the China-based global marketplace valuing about $420 billion outsourced the development during the initial years. At the time, China didn’t have the skilled talent needed for the development and on the other hand, it had to compete with brands like eBay. This made it essential for them to find the right talent to fuel growth and outsourcing made it possible. Rather than increasing the number of staff, this strategy to outsourcing product development is somewhere in the middle. Dedicated external professionals are working on a project that is not tied to internal processes. If you’re not interested in the hiring process, you can go ahead with staff augmentation and get a quick onboarding done.

An intermediate option, nearshore development is done by vendors who are located in neighboring or nearby countries. The advantages of nearshoring over onshoring are lower costs and a larger talent pool. The team is managed by the vendor’s PM, and the communication is done by the client’s and the vendor’s PMs.

software outsourcing business model

They are employed based on the talents required and can work with a client for a short or lengthy period of time. You decide on which ground you need specialists and which of them fit into your requirements. Software development outsourcing is becoming more and more popular and prevalent for tech savvy companies.

Flexible Approaches Boosting Project Development!

For example, it can be challenging to measure a provider’s performance and ensure they’re meeting your needs. It may reduce internal innovation, as you don’t have the resources to develop new strategies or improve existing ones. This can also reduce long-term performance and make it difficult for your company to stay competitive in the long run.

Since this phenomenon is not limited to rural areas, the term “low-cost domestic sourcing” is more accurate than the colloquial “rural sourcing.” Depending on their needs, businesses can choose any type of engagement model that best suits them. However, some respected tech-leading companies have developed effective engagement strategies and are reaping the rewards. You have a tech lead in your company- If you choose this model, that would mean that you take care of the management of the project.

software outsourcing business model

It simply bills you based on how much of the material you use in a certain amount of time, or how much time you invest. The process can be changed, and the modifications will take effect as necessary. We solve market challenges and build all varieties of custom and platform-based frameworks and provide comprehensive end-to-end software development and IT services. We solve challenging market challenges and build all varieties of custom and platform-based frameworks and provide comprehensive end-to-end software development and IT services.


The dedicated development team falls somewhere between staff augmentation and a fully outsourced approach we’re going to discuss next. If you’re considering outsourcing software projects from within the US, finding the right domestic sourcing partner might seem daunting. Domestic sourcing calls for a different approach to team management and metrics than you might be used to. https://globalcloudteam.com/ For example, Nexient specializes in a product mindset development approach, integrating the six competencies described above. In the nearshore software outsourcing model, services are delivered from a low-cost country not too many time zones away (e.g. Latin America). This is an agreement between a business and the outsourcing service provider to carry out a software project.

For example, you may only need iOS programmers, back-end developers, and QA engineers to monitor the product’s quality. Hiring a middle-level developer from Canada or the USA costs three times more than hiring a middle-level developer from Latvia or Estonia. You expand your development team whenever you need and for exactly as long as you need. That’s how the staff augmentation (also called ‘extended team’) model works. Outsourcing offers so many options these days that it’s easy to get confused. Some companies work on a ‘turn-key’ basis; some offer to expand your internal team with their programmers.

  • It applies innovative technical expertise to offer innovative, timely, and valuable solutions.
  • The way companies have been using GPO is doing agile, small-scale pilot projects that are limited to specific geographies or products or other segments of growth activities.
  • Once you deeply understand all of the available options, you can select one or more partners based on what they have to offer and their rates.
  • It’s important to note here that most large enterprises employ a mixture of software development outsourcing approaches and partners for different programs of work.
  • Your staff augmentation outsourcing provider does all the footwork to match you with high-quality candidates who have the right expertise.

It’s how we take your software development project on a journey from requirements to success. A dedicated team works well if there are tech gaps you need to close. For example, if your in-house team works on a mobile app and you need someone to create its web version. If you’ve never worked with a tech team before, it’s better to turn to a project-based model that allows building products from scratch. Like any contractor, your outsourced software product development resources will require a good amount of daily management time—in some cases, as much or more than hiring your own staff. Make sure you have sufficient internal resources if you need to onboard, support and manage a large group of contracted or staff augmentation resources.

Software Outsourcing

Nearshore software outsourcing is best for medium scale programs. Like offshore software development, it’s a model useful for projects with well-defined requirements, transition plans, and again, where scale and cost are more important than speed and context. IT staffing agencies have numerous suitable candidates that match the talent search requirements of businesses, whether it’s recruiting a single specialist or a complete IT team for a long-term project. Talent from IT staffing agencies are usually ready to join a project right away, as they typically have extensive experience in the areas you select in your search.

There’s nothing wrong with these responses (although we might question the scalability of sourcing talent in remote locations where there isn’t a good mixture of universities and other tech employers). But it’s up to you to decide if these factors are powerful enough. We have expertise in most technologies, verticals and industries. You probably already know what kind of development you need, when you need it, and maybe the budget available to deliver it, and the tech stack you want to use. When buyers want great and fast, they often turn to boutique consulting services.

In this case, outsourcing specialists work independently from your in-house employees. Gathering an in-house development team makes sense when you have money or can attract the right specialists. The project-based model works well if you have a limited in-house engineering force or no team at all.

Propriety Code Quality Tools

Nowadays, software services have become an integral part of the business. The limitations that one might have had to outsource your software development cross-country do not exist anymore due to the advancement in technology. If you wish to be involved in the decision-making- You would be part of the decision making the process more with a dedicated team model of outsourcing. This would mean involvement in the development process, such as the functionality, features, and other prioritization.

Nexient uses a MAP to help clients evaluate their product management, Agile, development, UX, verification and DevOps practices. These competencies form the core of our product development strategy, developed to help businesses create a healthy sustainable engine for successful digital products. As explored in the New York Times’ “white collar job apocalypse” story quoted above, domestic sourcing emerged as a more responsive alternative to offshore software development. In reality, it is one of the traditional approaches for creating and deploying applications in the software development sector.

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