Software Development Outsourcing: What You Need to Know

Software development is a rapid procedure with five main steps, similar to the science of application development activities – such as initiation, design, creation, deployment, and support. These five phases assist with software development procedures and result in a commercial product. This product raises the market demand as long as the market observes new innovations.

Table of Contents

Even though technology transforms with the passage of time, key fundamentals of edifying bespoke software continue to be independent of integrated hardware. System software, application software and programming software are key fundamental categories of software development services.

  • System software, as the name implies, manages program operations and functionalities including disc, operation, hardware, utility, and MS project management tools.
  • In order to create system software in addition to application software, programming software offers project management tools like text editors, compilers, and debuggers – sometimes linkers.
  • Application software, such as Office 365, Media Players,, Facebook, Snapchat, Instagram, and other pertinent mobile apps, performs the necessary jobs or tasks.

Up until now, connecting traditional programmes like WhatsApp to Facebook Messenger was a chore that any professional could complete. However, this current technology calls for modern methods, which might take a while to master the financial limitations. You might be wondering, why is this important…

…let us make it clear. You can always pick up new talents, but your customer can’t wait until you learn and deliver the needful job. This would, of course, be a wasteful tactic. Then what is an alternative? Outsourcing a project portion that you or your firm do not specialise in, whether entirely or exactly one portion of required deployment, is one potential solution to avoid this delay.

Outsourcing project or software development outsourcing is an approach where you contract out project operations like financials, compliance, or auditing from external parties and reach the final milestones. Employing an external developer individually or software development company to help you with your milestones is known as software development outsourcing.

 Read more: Software Development Firms

Software Development Outsourcing Practice

This practice assists you with user activities listed under certain software projects – to keep the project scope maintained. Other than that when you are not willing to engage an external resource with your project for an extended period, software development outsourcing becomes necessary. Software Development Outsourcing assumes responsibility for your project functionalities while assuring eminence and delivering high-standard capabilities, allowing you to reach your milestone swiftly.

Statista – a market research data site – reported that 9 out of 10 outsourced business functions are IT-related applications after 2016. In reality, Software Development Outsourcing services are on-demand and rapidly expanded to $66B’ worth globally – Statista mentioned. Additionally, it is anticipated that the software outsourcing market will hit $99B in 2024. Such reliable data demonstrate the rising need for software outsourcing because firms, corporations, and people intend to digitise or alter in-house operations. Under these aims remote and hybrid operational models are successful.

Other than that, offshore, onshore, and nearshore software development outsourcing models enable businesses to relish the perks of the finest portfolio. These models are applicable in situations where software development is crucial.

The IT sector features a tremendous outsourcing business rise in the modern era. Coming years will give birth to new inventions because current innovations will quickly become outdated technology. Since the advent of software development, rivalry has never been intended. Businesses adopt new trends, economics, and business strategies while analysing these technologies. Businesses that implement these trends sojourn competitive edge. The factors that contribute to business growth include affordable project developments, IT’s large pool accessibility, exclusive timely deliveries, collaboration with global tech talent, etc.

Software outsourcing development leads to money-saving approaches while meeting business and market-related milestones within required and existing frameworks. The only issue software companies face with developments is the rising demand for enhanced technicalities. We all are aware of newly created programming languages, strategies being introduced by various software outsourcing businesses, advancements in previous industry-standard procedures becoming obsolete technologies, and many more strategies taking charge of traditional models every day.

Meeting the prevailing client-centric demands creates a bottleneck for developers operating in one region due to quick breakthroughs and global initiatives. Relying on an outsourcing model is the only assistance these days. You can get help with various domains such as blockchain, non-fungible tokens, cloud computing, Internet of Things (IoT), artificial intelligence, robotics, data science and big data. Any firm may now outsource its software ventures relating to these domains, therefore new technologies are no longer a barrier.

Let’s take a look at software development outsourcing, market demand and effective models, benefits and more in this post.


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What is Software Development Outsourcing?

Software development outsourcing opens opportunities in which a development business collaborates with an external software development company in order to meet and fulfill all project-related responsibilities assigned to an internal team.

Software outsourcing transfers the project control to an outsourced expert for project improvement. This technique is important to enlist assistance—a tactic to please the client with your brand while insuring satisfied project deliveries—while leveraging a referral network.

Read more: Outsourcing VS Outstaffing: what is more suitable for your business?

Why Should you Opt for Outsourcing in Software Development?

  • First, reduce developing product (software) costs. Suppose an average in-house developer salary is 2.7 times additional to the base salary. With outsourcing saving, 2.7x on each external employee would lead to large bucks.
  • Secondly, reduce hiring mistakes. What is that? Look, when searching for an external software developer, your firm invests at least three months in the hiring process. The three-month cost you will risk in these months would be 30K USD Dollars on average with no profitable outcomes.
  • Furthermore, maximise in-house productivity and scale up your portfolio. Upon project outsourcing, you can meet the customised and on-demand services required by your clients. In addition to this, you can maximise your tech skills and budgeting just by dragging your business scale from 0 to 101.
  • Besides your productivity, never compromise on core functionality. If your client is demanding a development which is out of your forte, hit your smart device buttons which are already in your hand and rent freelancers.
  • Finally, partake in international standards by incorporating a Faraway team. Remote working is a new norm! Tomorrow is digital most expert belief and one way of digitisation is outsourcing – a remote working. Don’t invest in recruiting; simply search for a freelancer; & hire him/her for your job from any location.

What are the Types of Outsourcing?

1. Professional Outsourcing

While opting for professional software development outsourcing, be aware of your business and company needs, covering team expertise, such as accounting, administration, auditing, buying, legal, CPA, BPO, CAD, and digital marketing. Most of these experts own licences and extensive expertise in particular niches.

Professional outsourcing is an excellent tactic to advance and escalate your skill sets.  Contact freelancers based on your project constraints, make a mutual agreement with them and conclude the contract upon project completion.

2. Multi-Sourcing

Multi-sourcing combines mix-and-match infrastructure of IT functionalities and other project-related operations. This outsourcing type meets diversified infrastructures of distinct vendors while delivering transparency throughout project development. Anyone can adopt this outcome-based outsourcing approach to showcase top leading freelancers.

3. IT Outsourcing

You can possibly own a mutual contract with an IT facility offered online. If you have IT support through this outsourcing, feel free to outsource security maintenance, assistance with license acquisition and updates, etc.

4. Process-specific Outsourcing

This is a straightforward approach, just have a deal signed with a freelancer or an outsourced company over a specified niche. To understand it briefly, consider its three types.

  1. KPO (Knowledge Process Outsourcing) will help you improve your businesses through projects and services that involve market research and data analysis.
  2. LPO (Legal Process Outsourcing) assists in regulating the financial and compliance department by a captivating charge of auditing, compliance, laws, litigation, liabilities, and key legal operations of the corporation.
  3. RPO (Recruitment Process Outsourcing) covers everything amid recruitment procedures – no matter whether you or your corporation resides local wide or somewhere on the globe. This includes centralized job postings, recruiting applications, candidate shortlisting and their evaluation.

5. Business Procedures Outsource

You know about BPO (Business Process Outsourcing) model, don’t you? Simply let an outsourced corporation handle all software development activities like scheduling, reporting, monitoring, correspondence, customer services, lead generations and other administration-related tasks to an outsourced resource.

6. Project Outsourcing

As mentioned before, you can outsource anything or everything when you get yourself into an online platform that brings practical specialties to one-stop. Be it a part of software development or your entire project, outsourcing software projects is everyone’s thing it behaves as a friend who is helpful in need. The help could be of any sort (practical skills, funds management, or technical resources) that ensure meeting the project milestone. Website branding & designing, content creation & writing, and digital and print media campaigns & SEO optimisation are all examples of this model.

7. Local or Onshore Outsource

Hiring an expert locally on a contract basis lies under local outsourced services or called onshore. You might argue about local hiring, but the truth is local outsourcing also have various advantages in terms of money saving. These perks may or may not include similar speaking habits and language, culture, and business working hours or time zone – matching time with an outsourced resource is the major issue in freelance but going local can minimise this problem by maximising the GDP of your country.

8. International or Offshore Outsource

Knowing the best practical country or region in (consider) Blockchain or Data Science technology is an offshore approach. With this knowledge, acquire online access to a highly qualified resource and your recruitment process done. This approach will not only help save investment in the hiring process, but it will also help you neglect regulations such as the country’s taxation and legal charges.

For our beloved reader’s assistance, we have researched the most renowned and practical countries that have mostly worked as freelancers and anyone can outsource them when it comes to reaching software development milestones.

Wait for a while – The next section is all about the best tech cities (countries), you can outsource from while being in Ukraine.

9. Nearshore Outsourcing

Last but not least, the Nearshore comes where you don’t know whether you want to hire locally or internationally; all you know is client satisfaction through quality work. The outsourced resource depends on the expertise level that you will identify before hiring someone for your crucial tasks. So only get outsourced resources in your agreement that own portfolio of accomplished projects in your niche.


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Which Countries are the best Outsourcing Software Development?

Know which worldwide countries are highly qualified in IT resources and acquire software development services from them. Through global media, outsourcing platforms, and variate economies, hiring skilled software developers in the required niche from anywhere is straightforward.

Renowned worldwide outsourcing countries are listed here.

Tech CitiesCountryAverage Cost Rates by Hour,$Programming Languages
JavaPythonSQL ServerAlgorithmFunctional DevelopmentPHPC, C++, C#Ruby & Swift
Buenos AiresArgentina45YesYesYesNoYesNoNoNo
Rio de JaneiroBrazil40YesYesYesNoNoNoNoNo
Porto AlegreBrazil40YesYesYesNoNoNoNoNo
Blumenau & LondrinaBrazil40YesYesYesNoNoNoNoNo
BeijingChina NoYesNoYesYesNoNoNo
Shanghai ShenzhenChina47NoYesNoYesYesNoYesNo
Praga BrnoCzech Republic40YesYesNoNoNoYesYesYes
ManilaPhilippines30NoNoNoYesYesYes Yes
Lviv OdessaUkraine45YesYesYesNoNoNoNoYes

Naturally, several additional elements, such as the ramifications for your finances and the demands of the project, will also influence your decision. Many developers, all with different abilities, competencies, and fees, work either as independent contractors or for outsourcing companies.

How to Calculate Outsourcing Cost?

Everyone wants reduced development costs but not everyone masters it. Here is a guide for your outsourcing project’s feasibility study depending on your business operational cost. Know the four steps first.

  1. Initially specify the operations and functions of an IT software you want to call for outsourcing. While specifying your requirements, do not neglect quality over quantity in order to reduce the cost.
  2. Subsequently, highlight the needs of your IT project. See which functionalities are appealing to your software development company and what requires to be outsourced. When you classify them, consider the cost of both sides.
  3. Calculate the amount you can invest in outsourcing as you have to pay for your outsourced resource too.
  4. Finally, subtract your expenditure of outsourced resources from an in-house investment.

Here is a simple guide for analysing outsourcing costs.

simple guide for analysing outsourcing costs

Source: Medium

Software Development Outsourcing – Facts, Figures, and Future

#1. The concerning reason for outsourcing software development is the Reduction in cost

outsourcing software development

Source: Deloitte

#2. The unexpected business growth from the developers’ population is because of the outsourcing model

The unexpected business growth from the developers’ population is because of the outsourcing model

Source: Statista

#3. Among Gender Representation, Women are the successful players of Outsourcing Business

Women are the successful players of Outsourcing Business

Source: Engineering UK

#4. The demand for edge computing is higher than other technologies on outsourcing platforms

The demand for edge computing is higher than other technologies on outsourcing platforms

Source: IoT Analytics Research

#5. Most Ranking Profiles on Outsourcing Platforms offers the listed services

Most Ranking Profiles on Outsourcing Platforms offers the listed services

Source: Forbes


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The 8 steps process of software outsourcing

Step 1 – Deciding to outsource software

See what kind of project you have got from your client. When you successfully get a project for a specified time frame, analyse what aspect can be covered within your organisation. Upon deciding the aspects that can cover at ease make a list of non-doable tasks and start looking for external specialists for each listing.

Step 2 – Selecting a supplier

When you know the need, you know what kind of skill you need. Depending on the level of proficiency and quality of software categorise outsourcing suppliers and choose the best candidate for your tasks.

Step 3 – Description of risks

When hiring external, know that there could be some risks associated with it! For instance, you cannot share the legal and hidden information of your client company’s internal models with your hired freelancer. All you can share with your outsourced resource is the standard you need to have rather than sharing sensitive data. Get frameworks online and incorporate them into your projects yourself.

Step 4 – Deciding to model

Select the model you want to work on it with your freelancer. Whether work first payment later or pay first get work later. Whatever you choose, be sure to know your outsourced resource completely.

In addition, choose among onshore, offshore and nearshore models of outsourcing.

Step 5 – Contract procurement

With your hired resource, have a mutual agreement on the delivery. Get approvals from your stakeholders, consumers, and end-users (if needed).

Step 6 – Implementation

When implementing, be sure to remove saturations in your developed project. You cannot incorporate different models to hurt your client. Be consistent in your implementations.

You can implement the agile model in order to avoid inconsistencies.

Step 7 – Monitoring and Controlling

Never ever cross your budget while outsourcing your project. Test each phase of your project; then launch. Monitor the performance. If you find a lack in performance, control them by inspecting the area of concern. If you find issues caused by your in-house team, let them remove or go back to your outsource resource and discuss to resolve the problem.

Step 8 – End of contract or new project

Close the outsourced project when it is completely done. It is time to market your complete project and move to the new one.

Software Development Outsourcing Models

1. Time and Material

You can get frequently developed software! How come? That is simple! You mostly get your work done in no more than four to five days as this is outsourcing policy (we can say confidently). Even the largest, time-consuming projects deliver drafts within a few days. But when it comes to your in-house team, you can only get the work that is possible within 8 hours shift of a day. These 8 hours involve breakfast, launch, snacks, and meeting time. So, you can think about the perks of outsourcing models when it comes to time spent and materials consumption.


  • Less time
  • More development
  • Frequent project submission


  • One time service
  • With every new task, new recruitment process

2. Fixed-price

There are hourly rates that work on freelance or outsourcing platforms. These hourly rates never change. So, you can get a fixed price depending on your services.


  • Save money
  • Save energy
  • Save resources
  • Save maintenance cost
  • Save long-term salaries


  • Again, and again hirings for each required task

3. Dedicated Team

With this outsourcing model, you can get hands-on experience on your needed skill. As outsourced professionals are dedicated to their work and they never compromise on quality in order to maintain their digital profile, you can relax over their work.


  • No Risks
  • Proven Experience
  • Frequent implementations
  • Improved Communications
  • More software development control


  • Different time zones
  • Only one skill at one profile

Read more: How to choose an app development company

How to set up your outsourcing strategy?

1. Define your goals

Define your business KPIs and success measures in this step. See what aspects can help you build your projects and accomplish them. Outlines the details and then looks for the next step.

2. Define tasks for delegation

In the next step, group the listings you made in the first step. See which project aspect can be accomplished by one professional based on the technical skill. When you know the skill gap and required skill, you can simply define what task is needed to be done. This definition will help you in your outsourcing process.

3. Determine your technological profile

As you know what your skills are and what you need to work on, you can upgrade and maintain your profile. See which type of tasks cause you repetitive hirings, if there is something hire an outsourced service permanently or for long term or even get involved in a contract of mutual understanding.

4. Establish a good job climate

Ensure whoever is working with you gets a good working environment. Never high full-time outsourcing services. Never show rudeness to your outsourcing companies because you are paying. Always try to make a communication that delivers only positivity. This way you will be able to secure your reliable resources for future assistance.

The Benefits of Software development outsourcing

1. Get Quality with Agility

With outsourcing, you can ensure agility in your business processes. Outsourcing ensures you greater collaboration, efficiency in productivity and unmatched speed in project delivery. Each and every phase in this approach is accessible, manageable and reliable as the model is perfect when it comes to software development disciplines.

2. Acquire a Future-Ready Attitude

With the outsourcing approach, your business can be sure of future stability. This age of modern technologies has come to the stage where nothing would work except remote facilities and digital business transformations. With everchanging transformations and innovations in technologies, hiring full-time employees or staff augmentation with one specified skill will disbalance the revenue of the business. Therefore, other than basic needs, hiring professionals to form outsourced platforms is a new norm to save money over unnecessary long-term hirings.

3. Save Bucks in Bulk through Outsourcing

As mentioned several times in this article and among the benefits of outsourcing projects, the cost is the major reason behind the demand of businesses approaching outsourcing software developments. With fixed or hourly rates, anyone can save huge bucks on software developments.

4. Ensure Fastest Deliveries from Day One

As the product development phases consume 80% of project implementation, we don’t get time for software testing and monitoring the project. In this scenario, you can simply hire a QA (Quality Assurance) person to save your time. The same goes for other software development-related scenarios. You can hire or outsource experts depending on your business need while delivering development projects timely.

5. You can Focus on Your Initial Idea till Project Closing

Mostly, we have unique and worthy ideas to implement while being software developers. But we often fail to achieve our goals due to technical issues – we don’t have a complete skill set or sometimes we don’t have complete resources for our project completion. With outsourcing, businesses can simply focus on their innovative ideas and business goals while ensuring the implementations are done as required.

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The IT industry of today is plagued by a lack of skilled workers, financial restrictions, and rapidly evolving technology. Therefore, you need a team that can offer everything from app development to its maintenance, and everything in between your project support. To free up businesses from expenses, and dependence on people to support your business and its digital transformation, get a free consultation with our software development outsourcing company and discover new business automation with us.


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