Everything you need to know about software development outsourcing

The main reasons for software development outsourcing

Companies resort to software development outsourcing for several reasons. Here are the main ones.

Reducing software development costs

Outsourcing allows for optimizing software development costs by 30–60%. It is made possible due to the lower labor costs of IT specialists in some countries. In addition, there is no need to pay salaries to in-house developers between projects.

Access to highly skilled IT talent

Typically, outsourcing companies have many experienced developers specializing in various technologies. It allows you to quickly select a team for any task.

Acceleration of software development

Due to the flexible, scalable outsourcing model, it is possible to significantly reduce software development terms and bring products to market faster. It is achieved due to the parallel work of many developers.

Focus on core business

By outsourcing software development, a company can focus its resources and competencies on developing its core business instead of being distracted by technical tasks. It increases the efficiency of the core business.

How to choose a software development contractor

Choosing a reliable outsourcing partner is crucial to determining the project’s success. Let’s consider the main selection criteria.

Portfolio and feedback analysis

It is necessary to study the company’s experience in developing similar products and assess the number and status of clients. Also, reviews will help you form an objective opinion.

Checking certificates and qualifications of developers

It is essential to verify the professional level of the team: certificates and experience with the required technologies. It will reduce the risk of getting a weak final product.

Comparison of development technologies used

Choosing a partner that uses a modern technology stack that optimally suits the project tasks in terms of functionality, performance, scalability, and cost is necessary.

Analyzing the offered cost of services

You should compare the prices and terms of different outsourcers, analyze the included services, and consider the possibility of price adjustment. It will help in finding the best value for money.

Checking data protection

Determining what guarantees data security and what the contractor can provide is necessary. It is especially relevant when developing finance, e-commerce, and health tech products.

Pricing models in software development outsourcing

• Hourly model. The work is carried out based on hourly payments to specialists of the outsourcing company. Suitable for small tasks or MVP products. Allows for flexible team scaling and budget control.
• Fixed price model. The project’s total cost is agreed upon and kept the same. The risks of budget miscalculation fall on the contractor. The optimal option for medium and large projects with stable requirements.
• Extended development team model. A team is formed from full-time employees and outsourcers. It fills the need for more specific competencies in the company while maintaining control over the process. It is well-suited for startups and small product companies.

Outsourcing has transformed over time from a simple cost-saving tool to a powerful lever for innovation and the strategic development of companies. A hybrid model that combines the strengths of internal and external IT teams may be the optimal solution for many modern companies.

Minimazing software development outsourcing risks

Despite many advantages, outsourcing software development carries certain risks that are important to consider. Let’s assume the main ones and ways to reduce them.

Misunderstanding software requirements and failure to meet deadlines

Due to the lack of communication, the outsourcer may need to be more accurate with the tasks assigned and the customer’s wishes for the software product. This, in turn, leads to the necessity of multiple revisions and a violation of the original project schedule.

To avoid this, it is necessary to formulate the terms of reference as clearly and in detail as possible to state your vision of the finished product. It is also vital to ensure regular communication at all stages of development for prompt clarification of emerging issues.

Exceeding the initially agreed budget

To rule this out, it is essential to specify in the contract the conditions for making amendments to the budget or to use flexible pricing models that allow you to scale the scope of work to meet current demands quickly.

Data leakage and vulnerabilities

To minimize such threats, it is essential to carefully check the data security guarantees of the potential outsourcer, ensure encryption of information transfer channels within the project, and include appropriate terms in the contract.

Loss of internal competencies

Relying solely on external contractors, a company risks losing critical skills and knowledge in developing its digital products over time.

To prevent this situation, it makes sense to train and develop your technical specialists in parallel and involve them in outsourced projects to transfer their experience.

Conclusion

Software outsourcing is a fast-growing and promising market that allows companies to access high-class developers and advanced technologies. However, the maximum benefit of outsourcing can only be realized if the contractor is selected correctly.

By following the best practices and recommendations in this area, you can count on successful software development projects and achieving your business goals with the help of outsourcing.