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How to outsource a software development?

This comprehensive guide is your ticket to outsourcing software development with confidence. We've packed it with practical advice and insider tips to help you make smart decisions and get the best results. If you're ready to take your project to the next level, keep reading.

By 2025, companies around the world are expected to pour a staggering USD 133.3 billion into outsourced development. It's a clear sign that more and more businesses are turning to external teams for their software needs. While outsourcing can be a game-changer, it's not always smooth sailing. Some companies will hit roadblocks they never saw coming.

Here's the hard truth: outsourcing doesn't guarantee success. When projects go off the rails, it's often because of sloppy processes, mismatched partnerships, or a breakdown in communication about what's needed. Just ask Cambridge University NHS Foundation Trust. They outsourced an online patient record system, but when it launched, performance tanked by 20%. Inaccuracies put patient data and privacy at risk. The fallout was massive – GBP 200 million (about USD 300 million) in costs and a deep dive into how the money was mismanaged.

The good news is, you can outsource smarter. The key is planning carefully and finding the right development partner. In this guide, we'll walk you through the steps to outsource software development like a pro and tip the odds in your favor.

The Great Debate: Outsourcing vs. In-House Teams

When it comes to product development, you've got two main options: outsource it or keep it in-house. Each path has its perks and pitfalls. On one hand, an in-house team means you can communicate directly, have more control, and worry less about your intellectual property getting leaked. On the flip side, specialized talent can cost a pretty penny. You'll also need to budget extra time to put together and train your team, which could push back your launch date. Plus, in-house teams can be less flexible when you need to scale up or down as the project evolves.

Outsourcing: The Secret Weapon for Business Growth

At the crossroads of outsourcing and building an in-house team? Take a step back and look at your unique situation. If you're on a tight budget and want to hit the market ASAP, outsourcing could be your golden ticket. Not only will it free up your time, but you'll also tap into a pool of seasoned developers who know their stuff when it comes to niche areas like mobile and cloud computing.

Just keep in mind, that outsourcing has its own set of challenges. Communication can get tricky when you're working across time zones. And there's always the risk of your intellectual property falling into the wrong hands.

Zoom out and you'll see outsourcing comes with some serious perks:

  • More Bang for Your Buck: Outsourcing slashes labor costs since you don't have to shell out for in-house developer salaries and benefits.
  • Specialized Skills on Demand: Can't find the expertise you need in-house? No problem. Outsourcing is your VIP pass to specialized talent, especially for complex or cutting-edge projects.
  • Get to Market Faster: Outsourcing greases the wheels of your product launch. You'll skip the time-sucking process of hiring and training an in-house crew.
  • Flex Your Operations: Outsourcing makes your business more nimble. You can adjust your team size on the fly as the project evolves. Teaming up with a trusted partner who has a track record of success is also a smart way to cut down on development risks.

10 Insider Secrets to Nailing Software Development Outsourcing

1. Paint a Clear Picture of Your Vision

Before you even think about hunting for a development partner, you need to know your vision inside and out.

Ask yourself:

  • Is your idea battle-tested or brand-spanking new?
  • Have you put it through its paces with a Proof-of-Concept?
  • What's the secret sauce (aka tech stack) that'll make it work?
  • What user headaches will your software cure?

Locking down these nitty-gritty details is the key to finding your outsourcing soulmate.

2. Create a Detailed Project Plan

Starting a partnership with a development company without a well-planned project is a big mistake. You need to clearly explain your goals, what you want to achieve, and describe the project scope and budget before getting started.

Your project plan should include:

  • Overall Project Goals: Give a general idea of what your software project aims to achieve and how it fits into your larger business goals. This big-picture view will guide the entire development process.
  • Specific Deliverables: Clearly describe the concrete results you expect at the end of each development stage or when you reach the Minimum Viable Product (MVP). These deliverables will help measure progress and success.
  • Project Limits and Constraints: Specify the project's start date, target deadlines for MVP and full launch, important milestones, budget limits, and any relevant regulations. These limits will set the boundaries for the development team's work.
  • Estimated Hours and Hourly Rate: Provide a reasonable estimate of the hours needed to complete the project, along with an hourly rate that fits your budget. This estimate will help plan resources and manage costs.
  • Stakeholder Agreement and Approval: Get full support and approval from all key stakeholders, clearly describing their roles and responsibilities, and sign off on the project plan. Having everyone on the same page will ensure a shared vision and reduce the risk of internal disagreements or misunderstandings.

3. The Million-Dollar Question: To Outsource or Not to Outsource?

Do you keep your development in-house or bring in some outside muscle? There's no cookie-cutter answer. Cost is a biggie, but it's not the whole enchilada. Shipping your software development abroad can save you some serious dough, especially if you find a team that's on the same wavelength.

4. Choose Your Outsourcing Adventure: Onshore, Offshore, or Nearshore

When it comes to picking an outsourcing partner, location is everything. It's not just about the price tag. Where your partner hangs their hat can make or break your project's success. It colors communication, workflow, and the final product.

In the software development world, potential partners come in three flavors:

  • Onshore Outsourcing: Joining forces with a company in your neck of the woods.
  • Offshore Outsourcing: Teaming up with a crew in a far-off land.
  • Nearshore Outsourcing: Collaborating with a company just across the border.

Why Culture, Language, and Street Smarts Matter?

The world's a big, beautiful melting pot. Some spots, like India, have a deep bench of fluent English speakers who know how to dance between cultures. That can grease the wheels of communication.

How to Spot a Rockstar Outsourcing Partner?

Peek under the hood. Have they worked with companies of all shapes and sizes, including the big kahunas? Do they have a trophy case of glowing case studies and happy campers to vouch for them? Any outsourcing partner worth their salt, whether they're in your zip code or on the other side of the globe, should have the receipts to back up their rep. If they don't, keep shopping.

5. Select Your Outsourcing Strategy

In the outsourcing game, you've got three main plays: staff augmentation, managed teams, or project-based outsourcing. The right call hinges on your unique needs, war chest, and long-game.

  • Staff Augmentation: This is all about drafting outside talent to level up your team's skills for a one-off project. It's a clutch for plugging holes and cranking up productivity. The temp crew rolls up their sleeves under your lead to help you crush your project goals.

    Want the full scoop on the perks of staff augmentation? We've got a whole blog post that dives deep.

  • Managed or Virtual Teams: This model is a love child of staff augmentation and project-based outsourcing. With managed teams, you build a crack squad of specialists, from Business Analysts and Designers to QA gurus and code wizards, to crush all or part of your project.

    These teams usually ride shotgun with your in-house posse and report straight to your Project Manager. The beauty of this setup is that you can keep your eye on the prize instead of getting lost in the weeds with every single team member.
  • Project-Based Model: With this route, the outsourcing company's Project Manager grabs the wheel and steers the team assigned to your project. They'll huddle up with you to map out timelines, milestones, and deliverables, and make sure your wishlist is heard and handled.

    You'll still be the boss when it comes to big-picture calls like feature priorities and project direction, but you can hand off the day-to-day team wrangling to the Project Manager. It's the best of both worlds: you're in control where it counts and can delegate the rest.

6. Identify the Ideal Partner

After determining the country for your software development outsourcing, the next step is to refine your options. Begin by conducting extensive online research to evaluate potential software development agencies. Consider the following resources to aid your search:

  • Software Development: Review Platforms Websites such as Clutch, GoodFirms, G2 Crowd, Agency Spotter, and Crowd Reviews offer carefully curated lists of software development companies. These platforms allow you to search for highly rated agencies and apply filters based on location, reviews, rates, expertise, and other relevant criteria.

    For those seeking a reliable software development partner with a proven track record of success, Porat is a reputable choice. They offer a comprehensive range of services and have a well-established reputation for delivering high-quality solutions.
  • Leverage Your Professional Network: Reach out to industry colleagues, clients, and acquaintances who have previously outsourced software projects. Their experiences and insights can help you create a shortlist of agencies with relevant experience in your sector. A recommendation from a trusted source can significantly increase your chances of finding a suitable partner.
  • Explore Freelancing Platforms: Do not overlook the potential of software developers available on freelancing platforms such as Toptal, Upwork, Fiverr, Freelancer, and People Per Hour. These platforms allow you to post your project requirements and budget or directly contact potential providers. Take the time to review profiles and apply filters based on location, budget constraints, and other specific criteria to identify candidates that align with your needs.

7. Thoroughly Evaluate Prospective Partners

After reducing your options to a select few, it's imperative to conduct an in-depth assessment of each candidate. Consider the following factors during this evaluation process:

  • Company Size: Ascertain the development company's scale. Do they possess an adequate number of developers to accommodate your project needs?
  • Business Longevity: Investigate the company's operational history. Prioritize well-established firms with a proven track record spanning at least five years to minimize the risk of project disruptions caused by abrupt closures.
  • Technology Experience: Assess whether the company possesses relevant experience with the technologies required for your software product.
  • Software Development: Process Evaluate the agency's proficiency in the Software Development Life Cycle (SDLC) process.
  • Development Methodology: Inquire about the software development methodologies they can support, such as Agile or Waterfall, based on your preferences or existing internal processes.
  • DevOps Expertise: Confirm the company's competence in implementing Continuous Integration/Continuous Delivery (CI/CD) pipelines and their prior experience with DevOps practices.
  • Language Proficiency: Gauge the company's overall English proficiency level, as effective communication is paramount for successful software development collaboration.
  • Time-Zone Adaptability: Determine whether the company can align with your working hours, demonstrating flexibility in accommodating your scheduling preferences.
  • Industry Experience: Verify if the company has previously developed software solutions for industries similar to yours.
  • Pricing Transparency: Ensure that the pricing structure aligns with your budgetary constraints and is transparent, without any hidden costs.
  • Portfolio: Examine the agency's portfolio of past projects and clients, particularly if they have collaborated with well-known brands.
  • Compliance Certifications: Validate the company's adherence to industry compliance standards such as PCI-DSS, GDPR, or HIPAA.
  • GitHub Contributions: Investigate any GitHub contributions from the shortlisted companies to assess their technical expertise and community engagement.
  • Business Continuity Plan: Inquire about the company's business continuity plan for managing emergencies and evaluate its dependability as a long-term partner.

8. Arrange Consultations

Once you have narrowed down your choices to 4-5 software development agencies, initiate contact with their sales teams. Engage in discussions with their experts, request complimentary consultations, and thoroughly review their work portfolios and case studies. Conduct a comprehensive analysis of their software development process, methodologies, preferred programming languages, and technology implementations.

These discussions should encompass:

  • Your software requirements
  • Criteria for Minimum Viable Product (MVP) development
  • Collaboration duration: short-term or long-term?
  • Cost and development time estimates
  • Development roadmap

9. Contractual Agreements

Upon selecting a software development outsourcing partner that aligns with your requirements, proceed to draft the necessary agreements, including:

  • Non-Disclosure Agreement (NDA) This agreement ensures confidentiality between the parties, safeguarding against the disclosure of sensitive information to third parties. It typically encompasses:

    • Confidential and non-confidential information
    • Intellectual Property (IP) rights associated with the software project
    • Duration of the NDA's validity
    • Consequences of breaching the NDA
  • Master Services Agreement (MSA) The MSA establishes the essential terms and conditions governing the long-term relationship between the parties. It includes:

    • Project audit procedures
    • Payment terms
    • Dispute resolution mechanisms
    • Support duration: product lifecycle vs. project lifecycle
    • General confidentiality clauses
  • Service Level Agreement (SLA) The SLA ensures software quality assurance by defining industry-specific performance metrics. It includes:

    • Key Performance Indicators (KPIs) for evaluating software quality and performance
    • Communication, reporting, and process monitoring protocols
    • Support, maintenance, hosting, infrastructure, and development provisions
    • Backup and recovery protocols
  • Statement of Work (SOW) The SOW serves as a formal project-level agreement, outlining expectations regarding deliverables. It typically covers:

    • Project overview, highlighting Unique Selling Points (USPs)
    • Software development stages and their respective components
    • Key performance indicators for measuring project success
    • Deliverables (e.g., MVPs, final products)
    • Development and deployment timelines

10. Establish Communication Channels

With agreements in place, select communication channels to monitor development progress. Popular options include:

  • Basecamp, ClickUp, and Trello for project management
  • Zoom, Google Meet, Microsoft Teams, and Webex for live meetings
  • Slack, Rocket, and Chanty for chat-based communication
  • Email for formal communication management

Common Pitfalls in Outsourcing Development

Selecting a Misaligned Company

Partnering with a company that fails to understand your requirements can lead to significant setbacks. Conduct thorough research into their expertise, capabilities, and previous projects. Obtain references from their past clients to validate their suitability for your project.

Inadequate Understanding of Development Costs

Grasping the comprehensive costs associated with development, including testing and deployment, is of utmost importance. Account for expenses related to communication and coordination with the outsourcing company.

Absence of a Well-Defined Strategic Plan

Establish a clear plan that outlines your project's objectives, schedule, and financial constraints. Incorporate contingency measures to address potential delays or unforeseen challenges.

Strategies to Prevent Scams in Software Development Outsourcing

  • Clearly Articulate Your Objectives: Prior to initiating your search for an outsourcing partner, clearly define the purpose and requirements of your software. Well-defined goals simplify the process of identifying a compatible partner.
  • Conduct Thorough Due Diligence on Potential Contractors: Perform comprehensive background checks on prospective partners, reviewing their references, portfolios, and credentials. Exercise caution when dealing with those reluctant to provide such information.
  • Foster Open and Transparent Communication: Encourage regular communication, particularly during the initial stages of the project, to ensure all parties are well-aligned and to minimize the risk of unexpected issues.
  • Prioritize Data Security Measures: Select a partner who demonstrates a strong commitment to data security and employs industry-standard practices to safeguard your information.

For further insights on the concept of outsourcing look here.

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