Top 7 Key Steps to Successfully Outsource a Software Development Project

Learn how to successfully outsource your software development project. Here are 7 key steps you can follow for effective software development outsourcing.

Top 7 Key Steps to Successfully Outsource a Software Development Project
Written by
Dynamic and agile Digital Marketing Executive with a growth mindset.
Iman Hossain
Digital Marketing Executive
Published on
March 30, 2024
Read time
6 Min

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Top 7 Key Steps to Successfully Outsource a Software Development Project

Software development project outsourcing has become a norm in today's world. There are several reasons most modern companies are choosing to outsource software projects instead of building them in-house. Software production cost, faster product delivery, and access to global tech talents are the primary reasons for outsourcing software development projects. Other factors, such as the rise of artificial intelligence, infrastructure automation, and growing interest rates, have impacted the global IT industry. All these factors helped the global outsourcing market to reach a staggering height of $92.5 billion valuation and it is still growing. However, software development outsourcing contributes more than 50% of this market. Since 2023, this value has been growing annually and is expected to reach at least $1,416.3 billion by 2031.
In this guide, we have provided an understanding of the concept of software development outsourcing, highlighted rising trends in development outsourcing, discussed the benefits of outsourcing, and outlined the necessary steps to successfully outsource a software development project.

What is Software Development Outsourcing?

Outsourcing software development services involves hiring a third-party company or individual consultant from a different geographic location. This arrangement typically encompasses various stages of software development, including product design, prototyping, development, testing, and maintenance.

What are the Advantages of Software Development Outsourcing?

  • Broader talent pool

Deloitte's study found that businesses face critical challenges in getting tech talent. Regular layoffs resulting in job insecurity and the rising demand for remote working models have created challenges for companies in their hiring process.

Outsourcing drives the company to hire skilled professionals and outsourced developers worldwide. Software outsourcing development enables the way of getting access to highly skilled engineers, such as AI engineers, machine learning engineers, cybersecurity consultants, blockchain developers, and cloud infrastructure engineers. If your in-house developers’ team lacks expertise in a specific framework, team augmentation or staff augmentation model will help you move forward with software project outsourcing.

  • Lower costs

The primary reason for hiring skilled engineers is to reduce software development outsourcing costs. There are several engagement models in software outsourcing development. Staff augmentation is one of the models popularly known as traditional outsourcing. According to Deloitte's survey, 57% of executives reported that cost reduction is the primary driver of traditional outsourcing.

Deloitte shows that businesses can save from 20% to 30% on operational and production costs by outsourcing software development projects offshore or in nearby geographic locations. The savings become huge in this upward-growing inflation rate.  It will help the business to generate desired revenue instead of substantial loss. Outsourcing software development is the key to going this far.

  • Scalability and Flexibility

An organization might have multiple projects in its pipeline, but not all of them require in-house developers. Expanding your in-house team can be expensive and impractical. It takes time and money to hire and train new staff. Instead, consider outsourcing. This means hiring another company to handle your IT needs. They can provide the resources you need quickly and without the hassle of hiring new employees.

  • Opportunity to emphasize key competencies

Software development outsourcing offers a unique opportunity to highlight and leverage key competencies. By partnering with skilled offshore teams, businesses can tap into specialized expertise, drive innovation, and achieve faster time-to-market. This approach allows companies to focus on their core strengths while harnessing external capabilities to deliver exceptional results.

Outsourcing companies have access to a pool of experienced candidates and can adjust resources as needed. This makes it easier to scale projects to meet your growing business demands. Software development outsourcing services enable flexibility for business owners. It helps businesses to focus, concentrate, and prioritize the best projects.

The Rising Trends of Software Development Outsourcing

Rising Trends of Software Development Outsourcing

Technology has changed a lot. Before, companies mostly outsourced tasks like making websites and mobile apps. Now, they also outsource things like Artificial Intelligence (AI) and Machine Learning (ML). Next-generation technologies like Blockchain, Augmented Reality (AR), and Virtual Reality (VR) demand expertise that may not be available in-house. Outsourcing seems the best option to meet the global scarcity of tech talents. Businesses outsource software projects to reduce costs and hire skilled developers they do not possess. The need to cut operational costs led businesses to software outsourcing options worldwide. Businesses hire outsourcing software developers while concentrating on core business goals. Companies want specialists in these areas to help them stay ahead. Software development outsourcing services can provide these specialists.

Benefits of Software Development Outsourcing

Benefits of Software Development Outsourcing
  • Top tech talent: Software outsourcing options will facilitate you with access to the top 1% of skilled software developers worldwide. 
  • Different time zone flexibility: Most software outsourcing companies operate on a 24-hour schedule. You can collaborate with outsourced developers and in-house developers at the same time.  
  • Innovation and trends: New technology and tech stacks are arriving in the market with every passing moment, driving software outsourcing service providers to update on a full scale. It enables you to access the latest technology and innovation beyond boundaries.
  • Save time on recruiting talent: Hiring and onboarding consume productive hours. Software outsourcing companies save time on seeking top talents worldwide. 
  • Communication: The project manager will handle and execute your queries per your deliverables and maintain the translation between business and software.

  • Full control over the project: The skilled professionals are dedicated to the project. You can control and suggest the outsourced developers the way you want. 
  • Risk Mitigation: MVP development outsourcing or MVP partnership will help you build the product's basic version to mitigate risks. 
  • Improved Efficiency: Businesses can outsource less important tasks to specialized talent to improve efficiency, enabling them to focus on managing the most critical projects effectively.
  • Improved Quality: The software development outsourcing process ensures the product is finely built. The QA testers release an error-free product for a better experience. Repeatedly hiring developers helps improve quality as they become familiar with business preferences. So it’s easy. 

Top 7 Key Steps for Successful Software Development Project Outsourcing

Steps for Successful Software Development Project Outsourcing

1. Define the Project Details Properly

Businesses or clients may require assistance in properly defining the project. They often consult with a software development outsourcing company and need to fully understand the problems or requirements. It will lead you to have an unfulfilled experience.

The following questions will help the software outsourcing company better understand the problem. 

  • What specific problem or need does the software address? 
  • What are your business objectives? 
  • Who are the end-users of the software? 
  • What features and functionalities are essential? 
  • What technology stack do I prefer? 
  • What is my budget and timeline?
  • How do you want to mitigate those problems?
  • What are the challenges that hinder you from solving the problem?

Some techniques that help in gathering information.

  • Interview with the subject matter expert 
  • Conduct surveys and questionnaires 
  • Studying existing problems of the business 
  • Analyze relevant data

If you need more resources to define the project, the software outsourcing company will identify the gaps and present what is imperative to do.

2. Choose an Outsourcing Model

Choose an Outsourcing Software Development Model

There are several engagement models. The following are the standard models worldwide in the software development outsourcing industry. 

  • Team Augmentation Model 

Outsourcing companies offer a team of developers to work with you for a project or a specific duration. You can hire individual developers with a specific skill set. If you have an existing team of developers, you can hire one or two developers per your needs. In this model, you’re utilizing human resources to complete a task that requires specific developers. The selection takes several phases.

First, businesses or clients are required to come up with a needs assessment. Primarily, they seek developers in a specific technology and expertise in working in different types of software. For example - You are looking for a Golang and Mern developer who has worked on a fintech product and has also worked with stock API.

Second, the software development outsourcing company analyzes and finalizes the requirements. Prepare a job description that outlines the additional expertise needed to complete the project. 

Third, the outsourcing service provider will show you the best talents. You arrange an interview with the developers.  From there, you can hire the most talented developers.

Fourth, you'll select the best talent and onboard them onto your ongoing project. Remember, the service provider will brief the selected developer about the project. Additionally, the service provider is responsible for the growth and improvement of the selected developer.  

  • Project Based Model

In this model, businesses will assign outsourced developers to complete a project within a specified timeline. It may take a long or short time. The outsourced developers are fully committed and determined to work with the businesses or in-house developers until the project.

  • Fixed Rate Project Model  

A software development outsourcing company is responsible for building software or a product from scratch. The project is fixed. It will remain the same regardless of the amount of work required. Associated project costs are consolidated in the fixed-rate project. It may happen in a recurring process monthly. If the business is Software As A Service (SaaS), the outsourcing team collaborates with the product team and works accordingly.  It involves several steps. 

Outsourcing software development companies assign business analysts to begin with projects. The business analyst team gathers the requirements from the business representative. The team prepares the scope of work to outline where you should work and where you should not work. It creates a boundary for the project based on the business's requirements. After that, they narrow down the process to a feature breakdown. It shows how the users start and end the journey.
It answers a few queries. 

  • How do users login to the platform 
  • How do they register 
  • What does the icon mean  

Software outsourcing companies then prepare a proposal and send it to the responsible person. The client will review and sign an MOU to initiate the project.
Outsourcing development team assigns a team lead to land the project upfront. 

3. Prepare the Scope Documents

Businesses will prepare the Standard of Procedure (SOP) officially. It will help the software outsourcing development company to have a primary understanding of the project. It is the primary document to begin with. You can share it with the following. 

  • Software development outsourcing company 
  • Individual developer ( GitHub ) 
  • Global Marketplace
  • Software development outsourcing agency 

4.   Explore the Companies that Meet Your Requirements

With technological advancement, obtaining information, researching, and comparing alternatives has become incredibly easy. You can follow the following for the initial research. You can find outsourced software development companies.

  • Clutch: A B2B platform where you get ratings and reviews of the global software outsourcing company. It will display the company's rating, profile, portfolio, market size, industry, and revenue.

    *Pro-tip: If you hire a software development outsourcing company, this is the best option for primary research.

  • Glassdoor: It shows the company's internal insights. An open community where employees can review the company’s culture and industry practices. It will allow you to give your opinion anonymously.

    *Pro-tip: This is the best platform for you if you want honest reviews about the company. Versatile opinions will help you understand the cultural fit of the company.

  • LinkedIn: A professional networking platform. Mainly for generating leads and enhancing networking with the prospects.

  • GitHub: Find individual developers with a robust portfolio. You can explore profiles related to your project requirements. 
  • Reddit: A community-based platform where you can ask for recommendations. You can get it from past software development outsourcing-related posts. 

  • TechCrunch: The leading technology media platform that publishes articles on software development companies and outsourcing trends.

5. Shortlist the Companies for Interviews or Further Evaluation

Now you gathered the information from the internet. Consider the following when moving with the shortlisted companies. We suggest having an Excel sheet where you can shortlist the software firms.

  • Relevant Experience: Search for firms with relevant experience. To develop MVP partnerships in the healthcare industry, see how many MVPs the selected companies built successfully.  
  • Quality of Previous Projects: The case studies will detail the project. You can talk with experts to get their opinions about the project. 

  • Communication Skills: Communication is the key. Figure out how the selected companies communicate with the clients.  What platform do they prefer to communicate?
    - Slack
    - Email
    - CRM
    Which one?

  • Technical Robustness: To verify the technical expertise of the developers. Evaluate the technology stack, syntax, language, and overall system robustness.

  • Cultural Fit: Cultural alignment is crucial. You will most likely begin if the selected companies align with your culture, norms, values, and ethics.

    Pro Tip: Explore their LinkedIn page to see the compatibility of the collaboration.  

These are standardized ways you can find potential software development outsourcing services

6. Evaluation Checklist

Software Development Evaluation Checklist

7. Sign a Full-proof, legally Binding MoU or Contract

In this phase, software outsourcing development companies and businesses arrange a session by contracting a Memorandum of Understanding (MoU). Here, both parties come under a mutual agreement for the project completion. The project details, objectives, clauses, development roadmap, and timeframe are written clearly and legally binding in the documentation.

These are some other legal formalities.

- NDA (Non-Disclosure Agreement )
- MSA ( Master Services Agreement )  

- SLA ( Services Level Agreement ) 

- SOW ( Statement of Work ) 

- SOP ( Standard of Procedure )

It is preferable to have witnesses.

Our Suggestion

Finding the best software outsourcing company is a challenging thing. It requires a lot of research, consultation, evaluation, and verification. Onboarding the right partners is the best decision you can ever make.
Get in touch with Ontik Technology to elevate your journey. The global software development outsourcing services offer skilled developers for your technological solutions.  It has different engagement models like team augmentation, MVP partnership, Enterprise solution (ERP), Dedicated tech team, and custom software development. The enriched portfolio and tailor-made solution make Ontik the best software development outsourcing partner. 

Final Thoughts

Wrong partnerships can have a significant impact on long-term business sustainability and development. This guideline serves as a guidebook for businesses and startups looking to begin partnerships with global outsourcing companies.