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The Complete Guide to Software Development Outsourcing

How to make a perfect choice to squeeze the maximum from IT outsourcing instead of taking the average minimum as everybody does.

In this guide, you’ll learn:

  • if software development outsourcing is right for you

  • when hiring is a better option

  • how to choose the right partner

  • how to establish a successful cooperation

  • and more...

  • and more..

Introduction

According to Deloitte’s Global Outsourcing Survey, 78% of organizations feel positive about their IT outsourcing relationship.

We’re surprised that this number is so high. The way most companies perceive and execute outsourcing is wrong. Delegating a project outside to save money and focus on core business, to a company that doesn’t know anything about your reality. Doing what we were hired for without any additional effort. 

In many fields that may be enough but not in software development. To create a successful digital product or service, or even a part of it, we need a lot more engagement and trust. We need partners who will throw us a challenge, maybe even question our whole concept, suggesting in return something that will actually work. 

Companies like that exist. Software houses with experienced consultants. Those who not only code, but also advise, being as engaged as you are. And that, in our opinion, should lie in the heart of software development outsourcing. 

That’s why we’re writing this guide. To give you advice on how to select the best outsourcing providers. To show you what you can squeeze from outsourcing to a top software house. 

Because you not only don’t want to end up in that 22% of unhappy ones. You want to be in 1% of those who conquered the markets after a perfect choice.

The stuff below is going to be a whole handbook. The most crucial info is already there, along with a few first chapters that evolve some topics. Each of the topics will be deepened in time, resulting in a handbook with all the details you need.

If you like what’s already there, the final version will delight you, I assure you of that. We will add new chapters successively. Click “Get updates” to receive notifications when that happens. 

So, enough chit chat, let’s explore.

Outsourcing – What’s In It for You?

When you explore the web in pursuit of benefits and risks connected to IT outsourcing, you read a lot about time and cost efficiency, your ability to focus on core business procedures, etc.

So, what’s the truth? How software development outsourcing can actually help you?

Lack of Time

The necessity to respond to the market needs quickly, an in-house team with conflicting projects and priorities. Whatever the reason will be, outsourcing helps to start the project quickly and cuts the time needed for recruitment.

Need for Particular Skills

If you want to add to your product something that needs to be done in particular technology you don’t have expertise with, external specialists will be a good fit. Outsourcing gives you access to various skills and responds to the lack of in-house experience.

Urge to Achieve More 

That’s the secret sauce we mentioned in the introduction. What I mean, is that with outsourcing you may get a lot more than just coders who will do their tasks. You can also get a team of business advisors, who will assess your ideas and get some of them out of your head. But are you ready for that kind of challenge

Outsourcing Benefits

Time Efficiency

Outsourcing grants not only the faster start (you don’t have to waste time on recruitment, onboarding, and training) –  an external team will also be highly organized. Management skills will improve development speed.

Flexibility and Scalability

That’s the big advantage of outsourcing to a software development company. The team is flexible, you can scale it up or down, according to your project’s needs. If you want to speed things up, a new developer can supplement the team. 

A problem with hiring and firing according to changing demand doesn’t exist.

Large Talent Pool

The number of developers working locally, as well as the level of their experience, is limited. It highly depends on your location (if there are big players around, they may attract talents; if you’re from a small town, it may be hard to find experienced specialists).

Outsourcing gives you access to a global pool of talents. Companies are more likely to have extensive experience with various projects. You can aim at the best experts.

Knowledge Transfer

Besides having their job done, an outsourcing partner will also share the knowledge with you and your team. Your team will gain experience and learn about methodologies they will be able to use in the future.

What About Costs?

That’s a tough one. For sure, you spend less on the whole recruitment process, including office space adjustments, hardware, etc. But what about the development cost? 

According to the Global Software Development Rates 2020 report, the total cost of in-house development equals $75/h, and of outsourcing – $45/h. (The report is a result of surveys conducted among more than 357 companies from 23 countries in 5 geographical regions.) 

In general, outsourcing often offers a higher rate per hour. But in the case of hiring, you have many additional costs to cover, like taxes or benefits. Although, costs are an aspect you need to consider. If you need developers for a long-term project, they will most likely pay off.

Challenges in Software Development Outsourcing

Understanding Your Business Vision

The team that doesn’t understand your vision most likely won’t deliver the product you expect. Besides, it’s one of the top benefits outsourcing should provide: getting support with clarifying your vision and goals. 

While looking for a potential partner, aim at experienced consultants eager to help you, not people who will just take your specifications and write code without any advice.

Communication

Communication issues are often caused by language and cultural barriers. Cultural differences can result in misunderstandings so it may be better to choose a company from a not-so-distant, culturally-similar location. 

Consider cultural fit also in terms of similar values you and your potential partner share.

Most reputable providers are fluent in English and you won’t find it problematic. However, if you’re not feeling comfortable speaking in English, choose a partner that speaks your language. 

Time-zone Differences

If you decide on offshoring (outsourcing to a company that operates in an entirely different time-zone), your cooperation may be completely unsynchronized. It doesn’t mean you’re destined to fail. But it means your outsourcing provider has to run procedures that will ease the cooperation. 

Ask your potential partner how they organize cooperation with partners from different time zones and establish procedures you’re comfortable with. This point can indicate a high-quality partner.

CHAPTER 1:

In-House vs Outsourcing 

Let’s explore it for a while. If any doubts about hiring vs outsourcing still exist in your mind, it’s time to face them. When hiring is a better option? It all depends on your project, location, goals, industry type, budget. 

Nevertheless, it all comes down to analyzing 8 aspects: cost & time to recruit, costs of development, talents nearby, flexibility and speed of development, communication (with language and cultural fit), project management, security issues, and time zone differences. 

It’s also essential to specify for yourself, how much time you’re willing to spend on the project-related activities (will it be the core of your business?).

Where to Find a Reputable Partner?

  • Ask your connections for referrals
  • Check out Clutch
  • Post a question on LinkedIn
  • Ask Google
  • Lookup sites like Appfutura, Goodfirms, The Manifest, Crunchbase
  • Attend events for software developers
  • Check out who built apps you like or your competitors’ apps
CHAPTER 2:

How to Choose a Company?

We’re finally here: it’s time for a choice.

3 crucial aspects differentiate your perfect fit from a mediocre company:

  • People – responsible, proactive, passionate, and ready to share their advice.
  • Expertise – experienced in working with your specific type of construction, required tools, and materials.
  • Process – transparent, adjustable, speed, and outcome optimized.

Start with defining your vision and product requirements, and then look for a partner that specializes in that field. Look at their previous work, reviews, tech expertise.

Red Flags

  • Poor quality website
  • Vague portfolio descriptions
  • Generic testimonials

Tips

  • Aim for the quality, not the lowest bid
  • Be open-minded
  • Ask lots of questions (about their experience, portfolio, the way they will organize a project, communication habits)

How to spot the best ones? 

They will challenge you from the beginning! Instead of boring sales talks, they will tell you the truth about your idea immediately. If you aim for the highest quality, be prepared for a harsh disappointment. 

But do you actually prefer: 

  • someone who will take your specifications, transfer it into code without any consultations, and we’ll see, maybe it will end up ok, in fact, your provider takes no responsibility for the final product’s market success?
  • or someone who will tell you the brutal truth and advise you on the better solution, probably saving your project from a disaster?

Choose for yourself!

CHAPTER 3:

When a Freelance Developer Will Be Enough?

When your demand is limited and all you need is one developer, you probably also consider hiring a freelancer. The solution has its pros and cons, as always. It may be sufficient for you if you want someone for a small project, who is available right away. The rate per hour will be lower than in the case of a software house. 

What are the consideration points then? Most of the freelancers have little or no business expertise. There is practically no way to scale the team up when needed because it will be difficult to delegate work to two separate freelancers. Can you count on consultancy here? In most cases no.

Toptal is the most popular solution for hiring freelance developers. Although it’s not a fit for everyone, because the platform is expensive and, in fact, it is aimed at enterprises. Toptal alternatives are platforms like Gigster, Gaper, YouTeam, or Adeva – each one of them is different and offers various benefits.

How to Establish a Successful Cooperation?

Make Your Expectations Clear

“Early in the process, both teams must have great clarity not just on the project’s objectives, but also on project methodology, deadlines, budgets, and more,” says Paul Brownell from Nearshore Outsourcing.

You need to know what you want to achieve, share it with your partner, and make sure they understand it. However, be open to suggestions.

Establish a Toolset

Choose the right toolset for communication and collaboration between you, your team, and a vendor. Slack, Jira, Trello, SharePoint are only examples. Your partner should advise on the best toolset. Make sure you understand how everything works and what it’s used for.

Set Up Procedures

How will the team report progress to you? Will you work in Scrum/Kanban? Establish procedures that will allow you to track the progress and provide feedback.

Clarify Your Role

Determine the level of your engagement, appoint decision-makers and team members who will stay on top of things.

Communicate Instead of Micromanaging

If you want to have a true strategic partner, communication is a better alternative to micromanagement. Give them space. They are experts and know how to organize work to bring the highest value to the table.

Summary

Finding a perfect fit is a crucial part of this process. After that, you can delegate the work with a high sense of security. You trust your partner. Your project ends up successfully because they are engaged, transparent, and helpful.

That’s how software development outsourcing should look.

The whole process, from choosing the right partner to establishing the right cooperation rules, requires attention to details. I hope that you already have an idea of whether outsourcing is a beneficial solution in your case.

If this part of my handbook helped you and you want to deepen research and knowledge, remember that the best stuff is yet to come. We’re working on new chapters and the goal is to go deep into each topic and provide guys like you with a guide that covers everything you’d like to know. 

So remember to subscribe for updates, and we will notify you after publishing a new chapter. 

This was an introduction to Handbook:

The Complete Guide to Software Development Outsourcing

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