Software Development Outsourcing: The Complete Guide

Linh Nguyen

Linh Nguyen

Technical/Content Writer

Software outsourcing gives you access to a well-qualified IT talent pool, 24/7 services while reducing costs. Accelerate your business with the ultimate guide.

Software outsourcing has been one of the most talked-about business strategies as technology is advancing at a fantastic speed, and businesses are more competitive than ever.

Through this guide, we wish to explain in depth what software development outsourcing is about and why it is an excellent strategy for your business regarding time, costs, quality, and competitiveness. Let’s take a deeper look at what it is and how it may help your company.

What is software outsourcing?

What Is Software Development Outsourcing?

Simply put, outsourcing software development is the process of getting a company to develop software for you. This is usually done by hiring engineers from a software company with relevant knowledge and experience.

Outsourcing software development has several benefits, including access to a large pool of resources, enhanced efficiency, lower software development costs, better quality, reduced risk, and more.

In 2021, the application development outsourcing market was worth $109 billion, and it is expected to grow to $141 billion by 2026. As you can see, outsourcing has been a popular strategy for years now, as companies are seeking to cut costs and increase quality simultaneously.


Increased Demand For Software Development Outsourcing

The need for software engineers is soaring worldwide. The rapid pace of technological advancements has led to increased demand for software development. In addition, digital transformation is also driving the need to outsource development.

Due to the shortage of in-house software developers, many companies are turning to IT project outsourcing to meet their software development needs. In addition, outsourcing offers businesses access to a larger pool of resources like never before. Therefore, outsourcing should be a key ingredient in every digital transformation strategy.

7 Reasons Why You Should Start Software Development Outsourcing Now

There are multiple benefits associated with outsourcing software development. Here are the top benefits:

Access to Top Engineers

Access to Top Engineers

Outsourcing it’s not all about the costs. Sometimes, you cannot find the right team of people for our project. Software outsourcing services give you a chance to explore the world and meet new talent trained to do what you need them to do. Hire top engineers from a leading software company globally.

Complementing Existing Teams

Complementing Existing Teams

You might want to outsource software development but still keep your primary development team in-house. This is a good way to beef up your software development team if they lack specific skills or capacity to handle more work.

Access to New Skills and Experience

Access to New Skills and Experience

With software outsourcing, you can access new technology skills and expertise that will help your organization to grow. This is a great way to keep up with the latest technological advancements and innovations. You can also learn from your software development outsourcing partner’s experiences working with other clients to avoid potential pitfalls in your project.

Increased Flexibility

Increased Flexibility

You only need to pay for the expertise that you need when outsourcing software development. Also, you can scale up or down the size of your software development team as required. This is one of the primary advantages businesses seek when outsourcing software development.

Lower Costs

Lower Costs

If you are looking for a one-word answer to your business challenges, outsourcing is the word. Software development outsourcing reduces your internal costs while allowing your company to focus on its core competencies. In a competitive world where technology and demands are constantly changing, outsourcing development is a make-or-break solution for your business’s success.

Reduced Time To Market

Reduced Time To Market

Outsourcing your IT projects can reduce your time to market significantly. Working with competent software developers who understand your project’s ideas will help you create your product more quickly. You can also benefit from team expansion across different time zones, which is essential in today’s fast-paced business environment.

Improved Quality and Reduced Risk

Improved Quality and Reduced Risk

Outsourcing software development allows businesses to benefit from the expertise and experience of professional developers. An experienced team can identify issues and bugs through comprehensive QA and testing. This will help reduce the risk of errors being introduced into your software.

How Do You Find The Right Software Development Outsourcing Vendor?

Proper evaluation and selection of offshore vendors are vital for your business’s success in overseas software outsourcing. Therefore, it is crucial to select the right offshore partner to complete the work to your standards and have a compatible working culture and high ethics.

Here are a few qualities that you should look for in software development companies:

Make a List of Potential Software Outsourcing Companies

Make a List of Potential Software Development Outsourcing Companies

An excellent way to determine whether a vendor is a good fit is to research and list all potential partners who can provide the required software outsourcing services and send out the RPP (Request for Proposal). By sending out the RFP, you can check and ensure that the vendor can fulfill your requirements and expectations. Also, talk to your business contacts, colleagues, and friends to see whether they have any recommendations.

Ensure that You Can Communicate Effectively with the Outsourcing Company

Ensure that You Can Communicate Effectively with the Outsourcing Company

Communication between you and your offshore vendor is of utmost importance. Request a call or meeting to help you get a better idea of their communication style and look for a good fit. Good communication improves quality. You can use tools like Microsoft Teams, Google Hangouts, Zoom, Skype, etc. Tools make it easier for your team to work more efficiently.

Ask for References of Previous Clients

Ask for References of Previous Clients

It is a good idea to check the software company’s reference portfolio and get in touch with the client they have worked with when you need reassurance about quality. It is recommended to call the reference customers to get their feedback.

References are helpful but remember to read their case studies and do your research. Look through their past case studies and achievements to determine whether they are experienced in similar projects or are experts in specific technologies you need for your project.

Cheaper Doesnt Mean Better

Cheaper Doesn’t Mean Better

Always be cautious about software development outsourcing companies that offer “cheap” costs or “rock-bottom” rates. You should never sacrifice quality for price when outsourcing software development. Instead, enquire about the company’s expertise in specific technologies, what they can deliver, and where they have had success in the past.

Verify a Vendor Security and Privacy Policies

Verify a Vendor’s Security and Privacy Policies

An offshore vendor should have secure servers to protect sensitive information. Make sure to check how the software development companies protect your data. Usually, an offshore vendor has strict security policies to keep clients’ sensitive data confidential.

Certifications and Accreditation

Certifications and Accreditation

Vendors should be accredited and certified with industry standards. Verifying a software engineering outsourcing company’s accreditation and certification is an integral part of the vetting process to ensure quality standards, security, and confidentiality. Look for certifications like ISO 9001 and ISO 27001 (issued by International Organization for Standardization). ISO 27001 is especially important as it covers data and systems security.

Professional Liability Insurance

Professional Liability Insurance

Before starting software development, make sure the vendor has professional liability insurance. This is because professional liability insurance can help protect your business from any potential damages from mistakes or faults.

A significant risk for system development outsourcing is that the project might not come to fruition due to external issues, such as pandemics, natural disasters, or simply the third party going bankrupt. Therefore, your outsourcing vendor must have a business continuity and risk mitigation plan to help recover from any issues.

Do Not Neglect Technology Aspect

Do Not Neglect Technology Aspect

Although there are many other aspects to consider when selecting a software outsourcing vendor, do not neglect the technology aspect. For example, your offshore vendor must support all of the programming languages you need for your software development projects. Also, it is essential to find out if their software development process aligns with yours. Agile software development is preferred by most companies these days.



Which Software Development Outsourcing Model Is Right For You?

There are three main models of outsourcing software development. They are the dedicated developer model, staff augmentation model, and project-based model.

Dedicated Team Model

Dedicated Team Model

With this model, you will have access to a dedicated team of highly skilled developers in the technology stack required for your project. In addition, the software development outsourcing company will provide you with fully dedicated resources, so there is no confusion about the expertise of the individuals you are working with. This is a preferred model for many businesses as it offers greater control and customization.

Staff Augmentation Model

Staff Augmentation Model

In the staff augmentation model, a software development company adds skilled resources to your existing team. The main advantage of this is that you will have access to top engineers at scale.

Project-Based Model

Project-Based Model

The project-based model involves developers working on a project in a well-defined timeline. The software development company will be responsible for managing the whole process of developing your product from A to Z. This method can be cost-effective. Still, there is no room for scope adjustments during development. Quality may be sacrificed due to this.

How To Outsource Software Development Successfully?

Here are some tips for getting started with outsourcing software development after choosing your software development outsourcing company.

Know your needs

Know Your Needs

First, you need to know the skillsets you want for your project. You also need to determine what you want from your software partner; do you want them to work only on the frontend or the backend? Or both? How much input do you want regarding design and architecture decisions? Once you have a good idea of what you are after, it will be easier to find the best IT outsourcing companies to deliver what you need.

Start Small

Start Small

If you are just getting started with outsourcing software development, you should start by working on smaller projects to get comfortable with the process. This will help you understand how things work and what relationship works best for your project. Working on small projects is also better than jumping in headfirst and taking on a big project.

Project Management is Important

Project Management is Important

Find out what project management tools your software outsourcing company uses and how they work with them.

Talk to your project manager frequently. This will allow you to stay in the loop and ensure no miscommunication between your team and theirs. A project manager can also help you smooth out any problems.

Make your Outsourced Developers Feel Welcome

Make Your Outsourced Developers Feel Welcome

If you want to work with your outsourcers long-term, it’s essential to make them feel like part of your team. You can do this by personally connecting with them, for example, finding out their interests and sending them articles you think they would like.

Look for ways to build trust

Look For Ways To Build Trust

As with any relationship, building trust is hard work. However, if you are open to putting in the work, it will pay off for both of you. You can build trust with your team by giving them access to all levels of your company, which means sharing ideas and information with your outsourced team.

You can also do this by being open and honest when some problems or obstacles arise during the software development process. Another way to build trust is by clarifying what you expect from your software development outsourcing company, transparent communication, timely updates, etc. And finally, once you have created a relationship of trust with your software development partner, you can go on to grow with them.

Identify and solve problems as they arise

Identify and Solve Problems As They Arise

Another critical aspect of success is identifying and solving problems as soon as they arise. And this doesn’t just mean technical issues; it also means any other type of issue that may come up, such as scope creep, budget constraints, or timeline changes. You need to be proactive about these issues to have a strong outsourcing relationship that will allow you to move forward with your project without any complications.

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Introduction to Vietnam – A Premier Outsourcing Destination

The main reasons why Vietnam is considered one of the best destinations for outsourcing software development are the talent and affordability of human resources and its strong technology base.

Young Population and High IT Talent Density

Young Population and High IT Talent Density

Southeast Asia holds a large pool of IT experts – more than 10 million developers. Of all the regions, South East Asia has the lowest labor costs for software development. Vietnam especially has a young population – 70% of the population is under 35 years of age, and a concentration in IT, focusing on Machine Learning, Artificial Intelligence, and Mobile Applications. Vietnam is also a middle-income country and one of the most dynamic emerging countries in the East Asia region, which means the cost of labor will be affordable, and the education level is increasing.

One of the top IT hubs of the world

One of The Top IT Hubs of The World

According to the global real estate adviser Cushman & Wakefield (C&W), Vietnam topped the Global Ranking for top outsourcing locations in 2015. Vietnam is also considered the top software outsourcing country for Japanese businesses and many global partners, including Apple, IBM, Intel, Microsoft, Bosch, etc. The market size is predicted to reach US$300 billion in 2025, making it the fastest-growing location for software engineering services.

Despite being a late player as Vietnam has a relatively short history of outsourcing software development, Vietnam’s success has over 400,000 IT engineers, with over 50,000 IT students graduating annually from 153 IT institutions.

Cultural Fit

Cultural fit is an important consideration when outsourcing to any destination. The Vietnamese culture is described as friendly, hospitable, and hardworking. In addition, the Vietnam workforce is known for its dedication, discipline, and team orientation – which are ideal characteristics for outsourcing.



What Should You Consider Before Outsourcing Your Software Development?

Outsourcing your project can help you have a more flexible team that will work on the areas of your project that they are most skilled at. Here are some things to consider when outsourcing your software development project:

Choose the right software outsourcing partner for your project

Choose The Right Software Development Outsourcing Company for Your Project

When choosing a partner, you need to be sure that they have the right skills and resources available for them to be able to work on your project. Make sure to check out what software development process they are following. Not all software outsourcing services are created equal.

Establish Clear Expectations from the Beginning

Establish Clear Expectations from The Beginning

Even with a strong partnership, things can go wrong if you and your partner do not have clear expectations from the very beginning. Even with a high level of trust between partners, it is still important to clearly define the boundaries for what parts of the project each partner is responsible for.

Choose the suitable software outsourcing model for your project

Choose The Suitable Outsourcing Model for Your Project

As mentioned above, there are three main outsourcing models. Each option comes with its own unique set of benefits and drawbacks. It’s vital to understand the differences between them and choose the one that best meets your needs.

Trust and Communication is key

Trust and Communication Are Key

When outsourcing your project, it is vital to communicate with your partner frequently so that you can avoid unforeseen problems. This also boosts the trust between partners and can make your outsourcing run smoothly.

Stay Involved in the project

Stay Involved in The Project

The most successful companies that outsource software development stay involved in their outsourcing partner throughout the duration. This way, they can help achieve better results.

Buckle up for a long ride

Buckle Up for A Long Ride

Outsourcing is a long-term strategy, and this requires a significant commitment on both sides. Your company should be ready to go through a long-term relationship and invest time and resources to make it work.

So, You Are Ready for Software Development Outsourcing; What Is Next?

So, you are ready, what is next?

Are you ready for outsourcing software development projects yet? Hit your potential partners with a welcoming email, open yourself to a new partnership opportunity, and watch your business transform over the next few years!

Do not hesitate to ask for an expert’s opinion. All software outsourcing companies will give you input on your projects. Take this as an advantage to further understand what technology is needed and which type of process is the most fitted for your project.

And above all, always have a backup plan. You cannot foresee all the risks. Be ready for the unexpected, and you can overcome all challenges.

Topics: Software Development Outsourcing