What is Software Outsourcing? Model, Types & Mistakes

Love it or loathe it, software outsourcing has become a prominent feature of business life reaching $430.50bn (Statista) by the end of this year.

You might be thinking…Why? Consider this, if you have access to global talent at a market-friendly price then why not?

For years, software project outsourcing has remarkably helped companies improve their focus. By outsourcing development processes, you can liberate the inner sources for other purposes like idea digging or lead generation, etc. However, the doubt surrounding IT development outsourcing like bad coding and non-responsive resources is not something new. 

Yet the times have changed and in this inflation businesses are burning out because of the financial costs of development. Outsourcing can be lucrative and worthwhile!

If you are looking to develop MVP start a project from scratch, or need improvement in your product. Then outsourcing software projects my friend is your ultimate answer! 

Therefore, in this blog read about the outsourcing types and models. Also, break your outsourcing myths to liberate yourself from fear. So you can hire the software development team to erase your development worries and focus on important aspects such as management and idea implementation etc.

Let’s just first start with an intro to custom software development outsourcing.

In detail, software development outsourcing is a practice for businesses and organizations to handle some or all of their software development needs with a third-party vendor. This could be an individual freelancer or a software development company.

Read More About Software Consulting: Why Do You Need It?

You can select software outsourcing based on the types given below.

Four Types of Software Outsourcing

There are four ways to outsource software development. Here are the common types of software outsourcing to choose from.

1. Offshore: Here the work is outsourced to distant countries yet it involves concerns like time zone differences & language barriers. The Software outsourcing companies set their working hours as per clients' regions. Also, most companies train their developers to be proficient in language for smooth communication.
2. Homeshoring: In this, the project is delegated to a software development company within the city or the country to avoid the time difference-usually pretty expensive.
3. Nearshoring: In nearshore, you can select an outsourcing company that is located in a nearby country to defeat the time difference. However, more expensive than offshore.
4. Onshoring: It involves bringing back a software development team to the organization's home country.

3 Software Development Pricing Models

Just like types there are different software outsourcing business models. Below are some common outsourcing models to select from.

1. Staff augmentation model

It is not just about hiring people for your company, it’s also important to find the right fit. Hiring through a staff augmentation company can be a way of doing that because they’ll come into an office and work with you on projects. Whilst, providing their own unique skill set- which could help improve productivity by taking some pressure off!

These services are typically offered as time/materials contracts where clients pay based on how many hours or task completions each specialist works per day. So there’s no risk involved if something goes wrong during this period since companies are already been paid fees upfront.

Recommended read: Staff augmentation vs Project outsourcing

2. Dedicated development team model

In this model, you hire a dedicated remote team of software developers from the software development company to work on your project entirely. In most cases, it’s a team that dedicates itself completely to one client at once. While the client (you) monitors daily activities as well as measures the overall progress throughout each phase of development.

This process allows both parties customers and engineers to stay aligned by eliminating the role of third parties.

Recommended read: Benefits of Hiring a dedicated development team

3. Fixed-price or Project-based Model

A fixed-price contract is based on the amount of work that needs to be done. Here, the project needs are required to be written down for developers and designers to define the scope. This helps them figure out how much time they’ll spend implementing features while taking care not to overstep their boundaries.

The benefits are obvious: there are no surprises when it comes down to what was agreed upon at first. Because anything more than basics has been negotiated beforehand nothing changes unexpectedly during deadlines or days left before completion.

Myths In Software Outsourcing

Software outsourcing myths often halt companies from accessing the great talent present globally. So we are debunking these myths below for you.

These are just 4; read the full list of myths that have colluded your faith in outsourcing for so long. Myths often arise when companies make mistakes in hiring software outsourcing companies. So below is the list of mistakes you can avoid whilst hiring.

Common Mistakes In Software Outsourcing

Some common software outsourcing mistakes that can lead you to select the wrong software development company are

• Selecting a vendor without any reference checks or market research.
• Not having a clear sense of vision about what you want in your project 
• Choosing a company that does not offer testing or QA service from the very start. 
• Putting experience over cost and low cost means bad coding.
• Signing a short-term agreement and making your software project liable to haste leads to incomplete work.

Read about the secrets to the fault-proof software development process.

Why Do Companies Outsource Software Development?

The software development market size is estimated to reach the value of  $781 billion by 2030 which means most of the companies are going to opt for software outsourcing. 

Check out the reasons behind this massive trend

• Even though many entrepreneurs have long seen outsourcing as a strategy used by big businesses. The technology has made it more accessible for small businesses and startups alike. For some small firms, outsourcing has made a powerful impact on growth and productivity.  
• Outsourcing is leveraged by many businesses ranging from multinational firms to small and medium-sized enterprises. It offers limitless possibilities to C-level executives of both SMEs and big companies.
• Maintaining an in-house team has become much more difficult and far less effective. However, a dedicated product development team can help improve cash flows and increase work efficiency. By allowing you to scale up and down whenever you need it, without firing or looking to hire new team members. 

Before hiring a development team examine the list of things given below 

What to Examine Before Building Cooperation With a Software Development Firm?

This list is helpful if you have compiled a list of software outsourcing firms.

1. Look For Companies Providing Comprehensive Services

Find out the services offered by the company. The companies providing full-stack development services normally put; business analysis, prototyping, design and development, quality assurance, project management, and support services at your disposal. If a company isn’t offering full-stack development, chances are you have to recruit multiple resources to complete your project. 

2. Check If The Company Has A Strong Client Portfolio

Look for companies that are veterans in software development because software development companies build their engagement models according to the location of the client. Most experienced ones already know how to work across various time zones, understand cultural differences, and are well-versed in handling these situations.

3. Search For Recommendations

Read the clients’ testimonials about the company on reviewing platforms like Clutch and learn about their experience working with the company. You can also ask the company if they have worked with clients from your country. In such cases, it would be easier for them to work in the same time zone and collaborate with your team easily.

4. Ensure The Company Has the Expertise You Need 

Ask if the company has the talented and experienced resources you need in your team. Otherwise, you will have to find off-site experts for the job.

Things To Look At Before Signing the Contract

Once you find the right company to outsource software development projects; it’s time to make sure everything is clear before cooperating. Here are some important things you should take care of

1. Sign a Non-Disclosure Agreement

As an entrepreneur, you might not want to share confidential data about your technology.  The key is to sign a nondisclosure agreement (NDA). Such agreements set out terms and conditions under which proprietary data is to be kept confidential. This data usually includes the development process, source code, and any discussions related to the product.

The agreement specifically highlights the consequences of disclosing confidential data to any third party. A signed agreement is necessary to ensure that your project information is secure.

2. Check The Company’s Awareness of Risk Management

While choosing your technology partner, think about the risks and problems that might pop up during the development. And ask the vendor if they have the resources and experience to manage these problems. Because it is important to conduct a risk analysis of every project to identify and manage risks.

3. Set Up Communication Channels

Ask your team about the communication channels they use. You can create your communication channels as well. For instance, your Slack channel or maybe weekly phone calls.

4. Ensure You Are Acquainted With The Pricing

You do not want your project to stick in the middle because of disagreements over finances between you and your partner. Different companies offer different pricing models and you need to identify the models that best suit your needs. You also need to find out the additional expenses that might occur and who will be covering those costs.

5. Develop Trust With Your Software Development Partner

When you hire professionals to do some work they will need the liberty to do things their way. Micromanaging and over-controlling can destroy their productivity. So you must trust your team and let them work their way and keep you informed about the development of the project.

Software Outsourcing with InvoZone

Do you know that tech giants like Google, Alibaba, Slack, AppSumo, and GitHub have successfully used outsourcing software development services? Then it is time to put your trust in outsourcing companies and let them take care of the rest.

 

FAQs Section

Is outsourcing software development a good idea?

Outsourcing software development can be a good idea for businesses searching for cost-effective solutions, access to global talent, and increased flexibility. However, it is important to carefully consider factors such as communication, cost, and project management to ensure a successful outsourcing experience.

What are the pros and cons of software outsourcing?

The pros of software outsourcing include access to global talent, cost-effectiveness, and scalability. However, the cons may include communication challenges and time zone differences. Assessing the specific requirements and risks can help determine if outsourcing is a suitable option for a particular business.

What are the benefits of outsourcing software development?

The benefits of outsourcing software development include access to global talent with specialized skills, cost savings via reduced overhead and operational expenses, and increased scalability to handle project demands.

How much does IT cost to outsource software development?

The cost of outsourcing software development can vary based on factors like project complexity, scope, location, and engagement model. Generally, offshore outsourcing tends to be more cost-effective.