Everything You Need to Know About Outsourcing Software Development
10 Jan 2023 • 24 min read
With the rapid changes in the market and the ever-growing development of technologies, there is a great need to invest in digitizing your company or creating a new application which can generate great profits. The best way to expand and upgrade your business is to have custom software.
However, with the difficult economic situation and uncertain times, you are constantly looking to cut costs and accelerate time to market. In this scenario, the greatest solution is to outsource a development team, jump-start your project right away and balance the books.
To help you understand such a complex process we prepared a list with term explanations, checklists and things to consider when outsourcing IT.
What is outsourcing software development?
Software outsourcing is the process of hiring a third party to develop software for your own company. Nowadays, it is one of the most common methods of creating software. According to the grand view research, the global IT outsourcing market size was estimated at USD 245.91 billion in 2021 and is expected to reach USD 261.9 billion in 2022.
After the quarantine, remote work incorporated itself into our lives for good. The barriers between continents also melted down. Covid caused shifts in the market and changed the approach in the IT business. Nowadays people are more likely to hire an outsourcing company rather than create an in-house development team.
Outsourcing is a solution for many companies, big and small, no matter the size. It is chosen by the best prospering businesses. as it is proven that 92% of G2000 companies outsource, but it is also a strategy for small startups.
Why do companies outsource software development?
With the market, development and popularity growth, you may wonder why outsourcing prospers so well. There are many factors that add up to its growing success. Most importantly the benefits they provide for the companies:
- Reduction of overall costs
The costs of recruitment are much lower if you compare them to in-house recruitment. It is especially beneficial with the rapidly growing cost of having an employee.
- Faster time to market
There is no time wasted on looking for talents, onboarding and other procedures when outsourcing. The team is ready to start working on your project right away.
- Flexible team capacity and scalability
What if your project requires more people than you anticipated? Or less? If you would have an in-house development team these changes could take weeks or months to resolve. However, when hiring an outsourcing company this is only a matter of days.
- managed team
When you decide to hire an outsourcing company, the team should have a dedicated person designated to manage it. This way, you could focus on different things and trust the expert in their fields.
- better business focus
If you outsource a team for your project you save a lot of time. Not only at the beginning but throughout the whole process. All of this time saved (hiring, onboarding, managing, scaling up or down) could be put to better use, which is taking care of your business! Teams for your projects can be funded, but you- NOT!
- the broad skill set of developers
Outsourcing companies have excellent access to the developer talent pool from all over the world. Moreover, if you hire a team from an outsourcing company, you can use all their knowledge of them, members, not only the ones on your team.
What are the types of software development outsourcing?
Outsourcing has its own categories and it’s important not to miss the differences between them. To better understand this practice, here are a few main types and their explanations:
1. Location-based software development outsourcing models:
If you conduct some research on outsourcing It you probably encountered names like offshore, onshore or others. Those terms correspond to the location of the vendor’s company in relation to yours. To better understand it, let’s imagine your country is in the US:
Means that the outsourcing company you are planning to hire is based in the same country as you are. Our example would be anywhere in the US. This could be an advantage because of time zones or customs. However, the costs may be unfavourable.
Is when you outsource a company from another country which is close to you and has the same time zones. Therefore, if we are from the US, such an outsourcing company could be from Canada or Mexico.
Happens when you hire a company from a distant country, with different time zones. The company may be even from different continents. In our imagined case it would be India, UK or others. Its biggest advantage is the prize: it may differ from your country and be attractive.
- multisource outsourcing
A practice when outsourcing from multiple service providers. It can be helpful when wanting to meet the market changes or wanting a special level of expertise in certain fields.
2. Relationship-Based Software Development Outsourcing Models
The market understands that no solution fits them all. There are cases in which you do not need a whole new team or every position. To match the individual requirements there are a few solutions:
- team & staff augmentation
There is no such thing as outsourcing all or nothing. If you have an in-house team and you need more staff or specialists from other fields you could always augment your existing members. This way you could skip the hiring process and use all the help you need.
- outsourcing IT project/project-based -> whole end-to-end project management and software development
This arrangement means that you give your ideas and requirements for the project, do not manage it and meet only in most significant points of the development. On the other hand, you could take part in the development, meet regularly, give feedback and have more control over the process or the software.
- Managed teams shared team management (PO/PM on the client side)
Think of what would be your perfect management style. Would you like to have a lot to say and manage it yourself or would you rather give it all to the Project Manager form the company you hired? One means more control but a lot of effort and needed extra leadership skills and the other is the opposite.
3. Contract-Based Software Development Outsourcing Models
Money is an important factor of each business agreement or purchase. It is crucial to know how you want to pay or what are your criteria for cost calculations. Outsourcing has its own types accordingly to different needs.
- Fixed-price model
Consider if you would like to get the price at the very beginning and stick to it for the rest of the agreement. This could save you from inflation or other out-of-control factors.
- Time and Material model
This approach creates the price based on the time spent on the project and the materials or tools used. If you are uncertain of how much your project should cost or how long will it take, this method is safer and more secure as you can easily control and adjust the time and materials that go into your project.
5 Steps to outsource software development
As it is a great investment and a big reask it is always good to have everything important in place. We prepared most crucial steps to guide you and help to better proepare yourself:
1. Define your goals
It is always best to know what you are asking for. Without this, it is impossible to achieve anything. With clearly defined goals, the team you are hiring will work efficiently and the process will be measurable. This process could be intimidating as it is too big to grasp. However, the company you are planning to outsource is likely to help you define your goals and draw attention to important things you may have overlooked.
2. Prepare Scope of Work
With defined objectives, the next step is to make a plan. This will help you see what needs to be done and how it can be done. This part is especially crucial, as it will set the work, the roles and the time frames scheme. A great advantage of outsourcing is that the company you are choosing to work with most likely has great experience in planning the execution of the project.
3. Choose a Tech Stack
Once you have your aims and plan how to achieve them then it’s time to decide the technology you will use to execute your project. Outsourcing enables you to pick every technology there is and match it with your needs, not the other way around. They also have experience in vast majority of them and will help you to choos the right one.
4. Find Tech Leader and set up a development team
Each team you hire should have a leader, otherwise, the team you choose won’t get far. It has to be the person who has great technical experience and knowledge with a bit of managing skills. The company you choose to hire should help you in this process. They are the ones that know their employees best and have tested their skills in different fields and roles.
5. Organize Project Management (adopt agile methodology)
The final step will be to set up how you and your team will communicate and manage the work. Would you like to use a particular methodology? How often would you like to have meetings? What would you use to communicate daily? Those are questions you should answer together with your outsourcing company and find a middle ground.
6 stages of the software development process
1. Gathering requirements
Before you even start the work you need to collect the business requirements. Think about your and your client’s needs and wants. Once you establish what is important you can create a plan that the developers could focus on.
In this step, the software team designs a draft. It helps to see what it looks like, and what needs to be changed or improved. It also brings to attenuation what hardware or other components are needed.
3. Build (coding)
Once the design is ready the team decides how they will divide their work and what needs to be done to make the software function. This is the time when you focus on actual coding and the body of your project.
Once the software is developed it needs to be checked if it functions properly. This is the time when the developers repair any mistakes that were detected by the testers. This item cannot be overlooked. Sometimes it is necessary to reconsider the previous arrangements or make new ones just to make the project reach its full potential.
This is the time that sets your software out into the world, to its users. This stage seems as one of the most exciting ones but it also could be extremely stressful. It is important to stay alert at this point and look at any errors or faulty processes. This way you could fix them immediately and avoid any further problems.
6. Maintenance and further development
The last stage of software development is its maintenance of it. This is the time that the team cloud scales down so everyone can rest and catch a breath. But don't let it full you. There always should be a group of developers to look after the project and fix any problems that may occur. After further consideration, you may think if you are satisfied with the outcome and consider if there are more withes or need that you did not take into account at the beginning. This could lead to a decision of further development. Then the whole process starts from the beginning.
Tips on how to start outsourcing IT projects
- Don’t compare prices: compare experience, talent pool, and the portfolio
The saying “All that glitters is not gold”, goes here in both ways. You may think that a judgment on the price is a good solution, but you could not be more wrong. Let’s say you find a cheap outsourcing company and you think: they are too inexpensive to be good, or you may consider: this price is great and I will save up a lot of money on the outsourcing! This thinking could be also applied when the price is high.
Therefore it is best to consider their portfolio, the developers' description and their abilities or level of experience in the group. This way you could see if they could deliver the project you wish for. Then you could think about the money. If I can afford a team with such great qualities, do I need to invest more, or do I have to settle for a more inexperienced team with lower cost and take risks?
- Set expectations
Think through what you want your software to be like. Consider this. Imagine all the aspects from more than just one perspective. Once you have a clear vision, give it to the team you are going to work with. They will work much more efficiently and give you better results if they know what they have to do.
- Set up communication (channel, how often we meet)
If you outsource a team, they will not be in your office. You cannot just go and talk to them in person in another room. To make this work, you need to set up the main rules of communication so the work will run smoothly and there will be few misunderstandings from it. Pick a channel that you are both most comfortable with, choose the response model, and most importantly, establish the frequency and the rules of the meetings. This thing will help you work with less stress and confusion in the future.
- Always provide feedback (timely)
To avoid any build up you should report anything that you do not like as fast as you can. Moreover, you should point out what you value the most so that the team would know what should be repeated. This way you and the team could apply any changes fast so there are little errors that could be easily fixed, which takes less time than rebuilding whole segments.
Most common risks of outsourcing software development and how to avoid them
Outsourcing like every other solution is not magical. If you are not careful and you do not take it seriously or you make no precautions, there are some risks. Luckily you can still avoid them if you pay attention and do some research.
Choosing the wrong vendor could be the first mistake to avoid. Be prepared when looking for an outsourcing company. If you are struggling to familiarise yourself with the questions you should ask when outsourcing.
Be sure of the security concerns or IP when vendors manage your data. Always protect important and valuable information if you share them with someone else. Think of any consequences that may occur if vendors would violate your data. Be certain to have your procedures and expectations in place before starting your collaboration. It will be easier to manage and notice any incorrectness that may occur, once you set this before the process.
As we mentioned before, many companies have problems in communication with their outsourcing teams. This is the most common and easy-to-manage problem. Be sure to set up rules at the very beginning as it will be fruitful in the long run. Make sure that the agreements are comfortable for both parties and give feedback regularly. That will save you a lot of time and nerves.
Last but not least are the unexpected costs. If you choose your outsourcing company without more in-depth consideration or you base your judgment solely on the price range they offer, there might be hidden costs. Be sure to be as clear as possible when negotiating. Then look out for common tactics such as unnecessary changes in the team that may cost you more. Think of loose quantitative quality measurements that would help you navigate if there is a quality decline.
Software development contracts
In the end, the whole agreement has its foundation in the contract. That is why you should consider everything when setting up yours. You can always refer to it when you want to demand the team obey the rules.
A solid contract should include:
- Services description and project scope
Strictly describe what you want from the vendor to avoid fundamental errors. Prepare detailed project specifications and attach them to the contract.
- Project time and cost
This is the space to create solid time frames for your project or generate some room for flexibility. It all depends on the approach you would like to take. Remember to make room for any changes and touche ups as the projects may face some difficulties.
- Acceptance testing and delivery
A period in which you access the software and test whether it meets your needs and requirements. Be sure to state that your software is only ready to market after this period not sooner.
- Warranties and liabilities
Start with the essential disclaimers on software delivery, such as deadlines or requirement fulfilments. Additionally, make sure to establish the vendor's liabilities towards merchantability and legal compliance depending on software usage.
- Intellectual property transfer
Intellectual property is the core of the whole service provided by the outsourcing company. Rights to it are extremely valuable and need to be transferred to you from the developers. Be sure to include statements that indicate the transfer of ownership in your contract, as not every company provides it in the first place.
- Privacy and confidentiality
The developers you will work with need to keep your and related information confidential. The contract should clearly state which information is confidential and the consequences of the developer’s disobedience.
- Success metrics
To achieve the right goals, avoid broad terms and set specific measurements and checkpoints to ensure the success of your collaboration.
- Pricing and billing
If you are still in the haze when thinking about this, try to look for some examples or templates that may help you form yours.
Why choose Poland to outsource software development?
The outsourcing sector in Poland has significantly increased in recent years, and Statista shows that it broke the record with $2,255.05 million in revenue in 2020. It has distinguished itself in the market for quite some time and has an excellent reputation among other European countries in this market segment. In 2014, it overtook its neighbors and grew three times faster than India. In 2020, big enterprises such as Microsoft and Google announced to invest $1 and $2 billion in cloud services and others.
So why choose Poland as a software development outsourcing? Here are some of the benefits:
- Talent poll
- The level of professionality
Almost 80% of the developers in Poland have a higher degree which is more than 60% of other European countries. Highly developed technical universities in Poland give solid education that prepares them to spet into the workplace with a great knowledge foundation and practical skills.
Let's face it, the cost in business plays a significant role. Countries such as the UK or Nordics report that outsourcing in Poland allows them to save up even 15-30% instead of hiring locally. The US reported an even bigger price difference which goes up to 50%.
Poland is in the geographic centre of Europe. It has almost the same or little shifted time zone for most of the other EU countries, making communication a lot easier.
The last, yet significant advantage is the language proficiency among Polish developers. Each person who graduates from the university (as we know most of the developers in Poland do) has to use the English language on level B2 and pass certified exams.
On top of that, Poland has almost zero cultural boundaries with other western countries, making communicating easier.
Benefits of choosing SolveQ as an outsourcing partner
If you are looking for an outsourcing company that has year of experience and talented deleopers managed by professional project managers, you are in the right place. SolveQ has over 4 years of experience and many satisfied clients. If you are still considering read about more benefits explained in depth:
SolveQ has years of experience in outsourcing and many accomplished projects to represent proudly. We have an inclusive system of operations that supports our clients and developer.
- Domain knowledge
Here at SolveQ, each team gets a designated consultant that focuses on managing. They make sure to crate and maintain the smoothest and most efficient workflow. They also guard communication between you and the team, making it more transparent and less time-consuming.
- Battle-tested processes
Our company developed original work processes that have been tested on many projects. Through the years, our consultants have gathered and created procedures that help to manage the work and bring the best possible outcomes for both parties.
- Well-coordinated teams
No wonder one of SolveQ’s divisions is: SolveQ Software House HOME! We employ especially selected people and work for good relations in the company. Our HR team makes every effort to build solid teams and helps integrate everyone.
When choosing to develop your project with an outsourcing company, be sure to do your research and avoid many risks. It all looks pretty complex. Luckily with years of experience and many projects accomplished, we came here with help and great guidance. Be sure to save this ultimate guide and choose wisely. If you want to minimize the risks and achieve great results, give your project to the hands of professionals. Contact SolveQ and start your project within 2 weeks or less!
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Founder and CEO of SolveQ. Huge fan of building things with purpose, agility, and having fun while changing the World. Loves his family, teammates, and nature.
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