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Software Outsourcing

A Comprehensive Guide to Outsourcing Software Development Services

How do you even outsource software development? What should you look for? What should you expect? All of that and more in here.

Emma White

By Emma White

Business Development Manager Emma White helps BairesDev grow at a global level by expanding the client base and overseeing of growth projects.

10 min read

It’s abundantly clear that any company that wishes to succeed in today’s business landscape can only do so by leaning on digital solutions. The last decade saw how companies across all industries started a digitalization process that led them to adopt software of all kinds to gain a competitive advantage. But what once was a strategic move has now become a mandatory step.

That couldn’t be more true after the Coronavirus pandemic. As the crisis brought about by the COVID-19 showed us, digital technologies are essential to keep a business running. That’s why so many companies rushed to adopt digital applications during the first months of the pandemic, ushering in the era of digital acceleration. 

Such digital acceleration further disrupted the software development world, an industry that was already highly demanded and that had been suffering from a talent shortage for years. Now that more companies are looking to digitally accelerate their capabilities, finding the right development team is harder than ever, especially if you’re looking for experienced professionals with solid knowledge of the latest technologies in a developed country. 

That explains why outsourcing software development services has become a very popular option for anyone thinking about developing IT solutions. Driven by the talent shortage, a lot of companies are looking elsewhere for development teams capable of delivering what they need to meet the new fluctuating demands. But once those businesses start to work with an outsourcing development company, they see that there’s more than just an OK alternative to overcome the shortage.

Want to know why so many companies are investing in outsourcing development services? You’ve come to the right place. In this guide, you’ll find everything you need to know about outsourcing software, its associated benefits, and what you need to do to power up your own digital acceleration process with outsourcing services. 


What Is Software Development Outsourcing?

Software outsourcing takes place when a company decides to hire a third-party development team to take care of its software development needs. In other words, outsourcing happens when a business partners with external developers and tasks them with the full or partial development of the digital solutions the business needs to meet its customers’ demands. 

There are 3 major ways in which you can outsource your development: onshore, offshore, and nearshore outsourcing:

  • Onshore outsourcing happens when you hire a software development company in your same country (be it in your same city or not). For instance, a NY-based company that hires a development company from Chicago is onshoring its software development.
  • Offshore outsourcing is about hiring a development company located in a distant country or region, typically to lower costs. For example, a US-based company that hires a company from India would be offshoring its software development.
  • Nearshore outsourcing is halfway between the previous options, as it implies hiring a software company located in a nearby country or region. Thus, a US company that hires a Latin American software development company would be nearshoring its development needs.

Naturally, these 3 different ways have their own advantages and disadvantages. For instance, onshoring development would mean there wouldn’t be any cultural or language barriers but it could also mean a higher cost. Offshoring would be the cheapest option but it would have you working with a vastly different time zone and with people with significant cultural differences. For its part, nearshoring isn’t as cheap as offshoring but it provides talent in your time zone.

Before committing to one of these ways, you need to fully understand the differences between onshore, offshore, and nearshore development, which exceed the purposes of this guide. However, you can check this article where you can learn more about the differences between those outsourcing approaches in detail. 


Software Outsourcing Services

Apart from the ways in which you can outsource your development projects, you also need to consider models in which the outsourcing services are served to you. There are 3 main models to outsource development, maintenance, and testing, each of which responds to different needs. 

  • Autonomous Dedicated Teams. A dedicated team is a group of software engineers that work autonomously from your company. This means that they can take care of the parts of the project your in-house team can’t handle. This is a good way to increase your productivity by adding a team of experienced developers that can take care of specific parts of your project on demand. 
  • Staff augmentation. By augmenting your staff, you add the key roles you’re lacking in-house to power up your team. In other words, you’ll be in charge of the development project and will only add some needed engineers according to specific needs. In that way, you can bridge any skills gap in your team quickly and without committing to a full-time employee. 
  • End-to-End development. With this model, you hire a software development team to take care of the entire project. You only provide your needs and requirements at the start and give feedback along the way. The team works on the product and presents you with different iterations until they reach the final product. This is the perfect alternative for you if you don’t have in-house engineers or if the ones you have are occupied with other, more pressing projects. 


When to Outsource Software Development?

Like we said in the introduction, the software development industry is suffering from a talent shortage across developed countries so, for companies based on them, hiring software engineers with enough experience and expertise can be quite a challenge. That’s why onshoring isn’t the best option for them, either, so they end up looking for developers through offshoring and nearshoring.

By searching for engineers in other countries, companies widen the talent pool from where they can choose. Thus, they overcome the restrictions imposed by the talent shortage while also multiplying their possibilities of finding highly-skilled engineers. But that’s not the only moment when you can benefit from outsourcing software development. Other moments when you should definitely consider outsourcing include:

  • Spikes in development needs. When your company needs to tackle different development projects at once, you can’t task them all to your in-house team. Hiring outsourcing services can help you navigate multiple projects at the same time, increasing your productivity and providing you with faster development speeds.
  • Lack of specific roles. If you are working on a development project but lack a particular skill to keep it moving forward, outsourcing can be key. Through it, you can find the perfect professional with the right skills you need to move along without having to commit to a full-time employee.
  • Cost reduction. When your development budget is tight but you still have to cover your development needs, outsourcing is a good way to go. Outsourcing has been a typical option for companies looking to cut costs and it continues to be so (though there are some considerations you need to keep in mind before outsourcing software development based solely on costs).


Pros and Cons of Software Outsourcing

As it happens with every business practice out there, outsourcing your software development to third-party engineers can bring you a whole host of benefits. Naturally, you need to counterbalance those with the cons of outsourcing and see if the final result is compelling enough for your software development needs. 

It’s worth noting, though, that most of the cons we’ve listed can be softened and potential risks can be reduced with enough attention and careful planning. However, it’s important that you know them because knowledge is the only effective way to devise a strategy to minimize the impact of these disadvantages.


Pros of software outsourcing services

  1. Access to talent

We’ve touched on this already but it bears repeating: outsourcing opens you the door to a bigger talent pool. That’s because you aren’t limited to the software engineers you have in your same city but, rather, can hire developers from virtually any place you can think of. This multiplies your chances of finding the perfect candidate for your development projects, even if they call for highly specialized engineers. 


  1. Increased flexibility

Hiring a software outsourcing company provides you with significant versatility. That’s because you don’t have to commit to long-term relationships with in-house software engineers. Instead, you can hire a development team for as long as you need it and then end your relationship without consequences. This is ideal for companies that only have sporadic development needs or whose development requirements fluctuate notably during the year to a point where having an in-house team isn’t justifiable. 


  1. Improved productivity

Even if you have your own in-house development team, hiring outsourced developers can be a good thing. That’s because you can boost your team’s productivity by seeking external help. In that sense, you can task the outsourcing development company with one-off projects or with parts of your development needs while the in-house team focuses on the core development needs. That way, you don’t overwhelm your own team and help it focus on the important tasks. All that results in a significant boost in productivity. 


  1. Faster times to market

Living in the times of digital acceleration means that you need to cover your software development needs fast to keep a competitive edge. By working with an outsourced development team, you can be sure that you’ll meet your deadlines and imprint a dynamic rhythm to your adoption of digital solutions. In other words, an outsourcing company can help you develop your solutions more quickly and efficiently, even in projects involving cutting-edge technologies. 


  1. Reduced expenses

When most people talk about outsourcing, they often think of the cost reductions it can bring. When it comes to outsourcing development, those reductions can come from different things. The first is accessing a team that can charge you significantly less than an onshoring team. However, this isn’t necessarily the best option, as you might end up with subpar software. There are other cost reductions to strive for, though. When you outsource, you don’t have to invest in infrastructure for an in-house team nor do you have to commit to salaries, paid leaves, and other costs that come with hiring full-time employees. 


Cons of software outsourcing services

  1. Low quality

If you search across the web for outsourcing experiences, you’ll come across many accounts that resemble some sort of nightmare, especially when it comes to the low quality of the final products. Unfortunately, those experiences deter certain companies from outsourcing development, because they believe that outsourcing leads to low quality. It doesn’t have to be that way! Sure, you can find software developers that are too cheap to be true that end up providing you with what you paid for. The general suggestion is to avoid unbelievable prices or companies without a proven track record. 


  1. Miscommunication

If you hire a software development company from another country, you risk being exposed to differences in language, culture, and time zones. If mismanaged, all of those things can quickly wreak havoc on your project and lead to miscommunication which will undoubtedly translate into failure. You can minimize those issues, though, by partnering with an experienced company that employs bilingual engineers, are within your timezone, and are located closer to your country. 


  1. Inherent risks

Whenever you bring a third party into your processes, you are exposing yourself to risks. For instance, you may expose your intellectual property, your company’s financial records, or your client’s private information. It’s not that the outsourcing partner will steal those from you but if you aren’t careful with who you work with, you might end up collaborating with someone that multiplies your vulnerabilities and that opens up the door for malicious agents. While those risks will be always on the table, you can limit them by hiring a company that offers you a secure software development process and the proper documentation to protect your agreement with them.


How to Outsource Software Development Effectively?

Now that you have understood the basics of outsourcing software development, it’s time to take the next step: finding the perfect partner for your development needs. Though that might seem like a trip to the market, it’s trickier than it sounds. Development projects can be costly and they have multiple risks that you need to limit. That’s why you have to hire a company with enough experience and expertise to help you navigate through the turbulent waters of software development.

It’s not just about guidance, though. A reputed software development company can provide you with high-quality solutions in less time which, in turn, will give you the competitive edge you’re looking for with your digital acceleration. In fact, partnering with a good software development provider is the only way to secure the benefits we’ve discussed before.

How can you be sure that the companies you’re considering are good providers? While there isn’t a recipe that can guarantee you a solid partnership, the following suggestions will bring you as close to that as you’ll ever be. 


1. List your candidates

One of the biggest mistakes you can do is hiring the first company that you’ve come across. Unless that company comes highly recommended by someone you trust, you should always do thorough research on what the outsourcing development market has to offer. This means that you have to take a look at a list of candidates and compare them to see which one better suits your needs.

So, you have to begin by creating that list. You can always google outsourcing software companies and write down a few names from there but you need to go a little deeper. Ask your team if they have references of good outsourcing companies, as they may have collaborated with one in the past. You can also ask colleagues or other industry professionals about their experiences with outsourcing companies. Finally, reading forums and social networking sites can provide you with some extra names.

All of those sources should provide you with 5 to 10 companies that you’ll later have to research. Before getting to that investigation, though, you have to write down the list with the companies and their most important details, including names, services they offer, relevant clients, and contact information.


2. Start your research

Armed with that list, you’ll have to take the first step: learning a little more about your candidates. The best way to do this is by googling their names and analyzing the results you get. Naturally, you’ll start your research on the companies’ websites, where you’ll get the basic info you need to get started. But you don’t want to stop there –  you should check reviews in other platforms (such as Clutch or Glassdoor), visit their social media profiles, and read as many reviews as you can.

Forums or sites like Reddit are also a great way to learn about specific companies and their services, as they often offer you unbiased reviews and accounts of software development companies. Additionally, you should check blogs and news sites to see if the companies you’ve listed are mentioned there. If you’re targeting reputable companies, chances are that they’ll have some mentions in specialized blogs where you’ll be able to further check your candidates’ legitimacy.

Conduct research as comprehensive as possible but remember that you shouldn’t discard a company just because you’ve found a bad review or a bad article about them. There’s plenty of competition out there and chances are that competitors will try to bad mouth each other. That’s why you need to calculate an average of your findings regarding a specific outsourcing company to truly get who they are.


3. Learn what you can about the country

Since you’ll be working with a company from another country, you’ll need to learn as much as you can about it. Why? Because there may be certain cultural differences or specific contexts that can end up affecting your partnership with a company based on them. For example, there might be hidden costs of hiring a company from a specific country, or its professionals may lack the language proficiency you need to work with them.

If you hire a development team from a vastly different country, you may find out that they have a different work culture, which can impact how you work with them and the results you’ll get. Not all outsourcing companies have adapted themselves to the international standards, so you have to make sure that the one that you’ve picked has done so, especially if they are located in a distant region.

Finally, there are countries or regions that adjust their time zones depending on the season. This might seem like a detail but changing the time can further hinder your collaboration with them. Looking for companies within your time zone (or similar ones) are your safest bet here, as you won’t be troubled by different work schedules.


4. Interview the companies themselves

The final step is to conduct thorough interviews with your candidates to get to know them better. In these meetings, you’ll be able to learn a lot about them and not just about their services and past accomplishments. Sure, you’ll have to ask them about their workflow, their processes, how they think they’ll tackle a project like yours, and whether they have worked on similar projects in the past. But you need to go beyond that and pay attention to other things, too.

For instance, meeting with them can offer you a glimpse at how organized they are with their time and how effectively they communicate with you. Some of the things you should check for is how quickly and precisely they answer your questions, how accommodating are to your needs, how clear they are when explaining their processes, and how confident they feel when they do so.

Naturally, the interviews will also be great instances to clarify the thornier aspects of the potential partnership, including contracts, service agreements, fees, and confidentiality agreements. All of those things are significant facets of any outsourcing project, so be sure to bring them up (although maybe you should aim to work with a company that discusses them without you having to put the topic on the table).

A final suggestion would be that you shouldn’t vet a candidate based on one meeting or video call. The best way to truly know your candidates is to meet several times, so you can better understand each other’s expectations and requirements. Besides, having multiple meetings will let you peek into some extra details, especially about their communication and internal organization. 


A Winning Partnership For Your Digital Acceleration

If you follow the suggestions above, you’ll be closer to finding the perfect company to cover your outsourcing needs. Of course, you’ll have to do your homework by thoroughly researching your options but also by clearly defining what you want from your outsourcing partnership. If you don’t know where you want to go with your digital acceleration, then your project is doomed to fail. 

Besides, knowing what you require from your outsourcing partner in detail will aid you when selecting the best match for it. Just remember that it might take some time before you find the right company for your outsourcing needs but also know that it’ll all be worth it: if you can find an outsourcing company that can bring all of the benefits of outsourcing to your table while minimizing the downsides, then you’ll have struck gold, as you’ll have found a company that can become a partner for the long run.

That’s nothing to scoff at because your digital acceleration process won’t end with your first software development project. You’ll need constant updates and upgrades, something a reputable outsourcing company can give you for as long as you’re partners. 

Emma White

By Emma White

Emma White is a Business Development Manager at BairesDev with a background in tech company expansion through client base growth. White helps to expand BairesDev's business at a global scale while managing new market research, overseeing growth projects, and generating leads.

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