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Complete Guide to Software Development Outsourcing

Complete Guide to Software Development Outsourcing

Imagine streamlining your inventory process with a custom app, or boosting customer engagement with a loyalty program. Outsourcing software development makes these possibilities a reality, even for companies without tech expertise.

In situations where budget or timelines pose challenges, outsourced software development can make even more sense. An external team can help companies keep costs down, focus on core competencies, or access niche developer skill sets. In this guide, we’ll take a closer look at this approach and how to implement it successfully.

What is Software Development Outsourcing?

Outsourcing software development refers to the method of hiring an external team to build an app or other digital solution. These third-party teams can range in size and responsibilities, from one-off-projects to ongoing support. 

Outsourced developers act as an extension of the internal team. This arrangement allows the business to focus on its core competencies without overextending itself and still benefit from the skills and expertise of a dedicated development team.

Advantages of Outsourcing Software Development

There are many reasons why hiring an external development team might make sense. Below are a few key advantages to software developer outsourcing.

Global Talent  

Companies building in-house development teams are typically limited to local, or at least U.S.-based talent. Labor shortages and high competition in many areas make it difficult to hire qualified candidates. If a project requires specialized skills, local developers with the right expertise might be hard to find or costly. Software development outsourcing, however, opens you up to a world of options. Qualified developers are abundant in some parts of the world, including Eastern Europe and Latin America.


Outsourcing software development often shortens the time to a finished product. For an in-house team, you’ll need time to hire developers, establish processes, and secure space. None of that is necessary with an external team. A dedicated development team will be singularly focused on your project, meaning they can be up and running and finished faster.


Perhaps the most compelling advantage of outsourcing software development is cost efficiency. If your developers are not in-house, you don’t have to worry about the costs associated with benefits, training, or additional office space. Depending on whether you choose an onshore, nearshore, or offshore development method, you might also save on the cost of labor.

For example, nearshore teams, like those in Latin America, can provide a high-quality work product at a significantly lower rate than U.S.-based developers. For example, according to the payment compensation data site Levels.fyi, the median software developer salary in Argentina is less than a quarter of the U.S. developer's median salary due to a much lower cost of living. This means you can often hire a top-tier, senior dedicated developer in Latin America for less than even the most junior developer in the United States.


When you delegate the development work to an outsourced team, you can focus on the areas of your business that match your core competencies. Software developer outsourcing will allow you to make progress toward your development goals without distraction from important business initiatives.  


An outsourced software team gives you more flexibility than an in-house one. If the scope of your project grows, it’s easy to level up with more developers. The same is true if you need to shrink the team. Working with a software development firm means you won’t have to fire or hire individual developers. Instead, your outsourcing partner can scale up or slim down the team as needed.

Disadvantages of Outsourcing Software Development

For many firms, the pros of outsourced development far outweigh the cons. There are, however, a few possible challenges you should consider.

Best for Projects

Outsourced software development is best suited to medium-sized projects. If you anticipate having many and varied development needs over a long time, it may make more sense to hire an internal team. The big exception to this is if you can find a long-term development partner that functions like an internal team. That is, can you find a dedicated development team that launches product after product for the same client?


To effectively manage an outsourced team, you must be committed to prioritizing communication. Your development partner should be in lockstep with your internal team to the extent possible. Otherwise, if needs change, you’ll risk slowing down or wasting money. Operating in the same or a similar time zone can help make communication smoother and prevent significant lags in response time on either side.

Less Control

Any time you outsource a task or process, you have to be comfortable giving up some level of control. Your development partner won’t be located in the same building, or sometimes even the same continent, as your internal team. So, you’ll have to be able to trust that they’re plugging along in the right direction. That’s why finding the right team is so important.

How to Outsource Software Development

Ready to start your project? Follow these steps to tackle your software development goals with an outsourced developer team.  

Define Your Goals

Before you find and secure an outsourced developer, you must pinpoint exactly what you want to accomplish. The clearer you can be about what success looks like, the better your chances of reaching it.

Identify Your Development Requirements

Once you’re clear on your goals, it’s time to nail down your dev needs. Will you need a team with specific expertise—say, for example, mobile enterprise app development? Is it important for your team to have the same work hours as you? The answers to questions like these will help you narrow the pool of possible partners.

Consider Partner Options

Next, you’ll need to begin your search. Use the parameters you set before to determine where to look. For example, if you want to prioritize a balance of quality and a team in the same or similar time zone, nearshore software development partners might be the best fit.

Vet Top Choices

Before you land on your team, be sure to vet your top options thoroughly. At best, your outsourced development partner can be a huge advantage to your company, but at its worst, it can harm your business. So, it’s important to be thoughtful about who you choose.

Questions to Ask Potential Outsource Development Partners:

  • Where can I find case studies that demonstrate the quality of your work?
  • How do you assemble dedicated software development teams?
  • What project management standards do you use to keep projects on task?
  • What sorts of data safety protocols do you use?
  • What kind of experience do your developers have with projects like mine? 
  • How can I expect to receive updates throughout the project and how often?
  • Do you use waterfall development processes or agile software development?

Establish Contracts

Don’t neglect the importance of legal agreements. Strong contracts will protect your business and minimize risk. Your contract should at minimum outline project deliverables, project milestones, and payment terms.

Also, consider what level of flexibility your partnership offers. Many firms require clients to sign lengthy project contracts right away, but others offer a shorter commitment for proof of concept. Designli, for instance, begins projects with a SolutionLab, a two-week introductory period and design sprint focused on vision alignment and resulting in a prototype.

Begin Project

Once contracts are signed, it’s time to press “Go!” Starting your development project might feel daunting, but remember, with the right partner, it will all be worth it. At the start and throughout the project, remember that your participation, input, and regular communication are key to great results.

What to Look for in a Software Development Outsourcing Partner 

When comparing your outsourced software development partners, look for these qualities. No two firms are the same, but the best partners have these traits in common.


As the saying goes, everyone has to start somewhere. Ideally, however, your project is not new territory for your outsourcing partner. You can feel confident that the team will produce a functional, effective, and well-designed software product if they have deep experience–ideally with your type of project.

Positive Feedback

Ideally, you shouldn’t have just to trust what your partner says about the quality of their work. Case studies, positive feedback from other customers, and glowing testimonials can help you validate a potential partner's claims. You can also check G2, Clutch, Google, and other review sites to see what other clients have to say about working with a particular firm. Five-star reviews and recommendations can offer reassurance that a firm is as great as it seems.

Schedule, Cultural, and Language Differences

Working with a partner on the other side of the world isn’t necessarily a problem, but it can be. There are all sorts of advantages to choosing a partner in a similar region of the world versus one that’s more than five time zones apart. Likewise, a shared language and cultural point of view can be helpful. Collaboration and communication are usually much easier when schedules, cultures, and languages are aligned.


Infringement on your intellectual property (IP) can have serious consequences for your company. Always ask prospective partners about their processes and procedures around managing your IP. Similarly, the outsourced software developer should have protocols in place to safeguard company or customer data.

Where to Find Outsourced Developers

Outsourced software development can take many different forms. Although many outsourced developers are located overseas, they don’t have to be. Contracting with an onshore team within the U.S. still provides many outsourcing benefits.

You can also look to offshore or nearshore development teams for support. Nearshoring often provides a happy medium between onshore and offshore teams. Nearshore teams offer the cost benefits of the offshore approach with the convenience of the same or similar time zone.

To find options that meet your desired development approach, try searching online platforms for outsourced developers. Sites like Clutch, G2, Google Reviews, TopDevelopers, DesignRush, and Business of Apps are all great starting points for finding great firms. Great reviews from other customers can be a helpful indicator of which software development companies to investigate further.  

Alternatives to Outsourcing Your Software Development

While outsourced software development is a perfect fit for some firms, it’s not right for everyone. In some cases, another alternative makes more sense.

In-House Development Team

For very long projects, investing in an in-house team might make more sense than outsourcing. With an in-house development team, you can develop your own culture and project management norms and invest in specific training.

Off-the-Shelf Software Solution

If cost or time prohibits creating a custom software solution, there might be an existing enterprise solution that can fill the gap. For example, a subscription-based SaaS solution might fit the bill instead of a time management system built for your company.

Final Thoughts

Outsourcing can be your shortcut to innovative software solutions that boost efficiency, enhance customer experience, and give you a competitive edge.

Looking for an outsourced software development partner? We’re here for you. Reach out for a free consultation.

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