Software Development Outsourcing 101: Complete Roadmap to Success

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In the past few years, outsourcing software development has been the trend. And what drives this change? Of course, their competitive advantages.

To put it simply, software development outsourcing is a process of hiring software development companies to develop and manage software solutions. Besides, the company ensures a team of dedicated professionals, such as developers, designers, testers, marketers, and infrastructure engineers, depending on the needs.

This article aims to explore the software development outsourcing industry from different aspects. So, are you ready to voyage on this journey with us? Let’s begin!

Software Development Outsourcing Market Insights

Before we delve into more about software development outsourcing, let’s have a look at their growing market revenue.

market revunue statistics

Image Source: Statista

IT Outsourcing Statistics at a Glance

  • 66% of businesses in the US outsource at least one department.
  • The IT outsourcing market is projected to grow by USD 98 bn during 2020-2024, according to Technavio.
  • The US outsources 300,000 jobs each year.
  • 24% of small businesses outsource their requirements to enhance efficiency.
  • 70% of companies find outsourcing cost-effective
  • The US market generates $62 billion of the total international income from the $92.5 billion global outsourcing business.
  • Between 2021 and 2025, the outsourcing industry is expected to expand at a compound annual growth rate of 4%.
  • After COVID-19, 45% of businesses have intended to boost their outsourcing.

Benefits of Software Development Outsourcing

US companies have outsourced over 920,000 IT positions in recent years. So, something other than efficiency and reduced costs must compel US companies to prefer outsourcing. And what are they? Let’s decode the reasons behind the preferability of outsourcing. 

  • Access Global Talent

The prime benefits of outsourcing your projects to offshore companies can unlock top talents from the finest software development companies worldwide. So, what does it imply? This emphasizes the supreme software quality without compromising on the quality, utilizing an expert software development team.  

Additionally, geographical location is never a barrier for outsourcing specialists to companies smoothly. Besides, not only in the Eastern European region but also in the US or Australia, companies prefer outsourcing to fill the shoes of IT professionals, leading to more productivity and global talent access. 

  • Decreased Development Costs

According to a report by Deloitte, 70% of respondents consider reduced cost is one of the prime reasons to opt for outsourced software development. Having an in-house team costs companies more. However, outsourcing minimizes the upfront costs with optimized resources.

outsource software development project

  • More Scalability & Flexibility

During the software development process, businesses must expand the project with more functionalities and integrations. This, of course, requires enriching the team with more skilled developers, testers, designers, etc. And when you outsource any software company, it actually facilitates you to scale up or down the team based on the project goals at a competitive cost.

  • Boosted Development Speed

Hiring a skilled and experienced outsourcing team eliminates the need to train them and spend money on them. This allows you to connect with professionals who treat your projects as their own and meet deadlines with expected results, fostering growth.

  • Omitting Micromanagement

When you outsource a software development team, the project manager oversees the work done by team members. The manager allocates different tasks, ensures constructive feedback, and approves their work. This means you are completely free once you outsource the service provided to the team and sign documents; they work on your behalf. This ensures streamlined operations, eliminating micromanagement. 

  • Utilization of Latest Technology

Leveraging the latest robust technologies and staying updated with the latest trends is paramount for businesses to cut through the noise. Although an in-house team can practice the latest technology and trends, with an outsourced team, the chances can increase. The outsourced team utilizes their domain expertise with powerful technologies to provide top-notch software quality. 

  • Fill In-House Skill Gap

As mentioned earlier, the outsourced model allows you to hire a specialist from outside. So, opting for an outsourced development company is a great tool for completing the skills that your in-house team lacks. For example, you possess a strong and active digital marketing team; however, you need skilled developers or designers. You can easily hire dedicated developers or designers suiting your goals.

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  • Focus on Productivity

Developing infrastructure, managing the unit, and hiring an entire software development team are time-taking and exhausting tasks. However, outsourced projects help businesses save time, minimizing the time-consuming and extensive tasks. This enables businesses to focus more on productive tasks, such as engaging with customers and streamlining operations. 

Apart from these prime benefits, software development outsourcing firms include the below-mentioned advantages: 

  • Accelerated time-to-market
  • Enhanced compliance
  • Reduced risks
  • Ensuring essential IP rights
  • Faster turnaround time
  • Multiple payment options

Cost of Hiring a Software Development Outsource Company

The imperative significance of software development outsourcing enables businesses to embark on the outsourcing adventure; however, without knowing the development price this can make the journey implausible.  Although it’s hard to identify the exact number, nevertheless, the ballpark range of software development price is between $50,000 to $250,000, depending on the experience. 

Additionally, software development costs primarily depend on different aspects, such as software type, size, and specialist numbers needed in the project. Besides leveraging development tools, nearshore and offshore company selection, etc, assist in minimizing a large number of costs. Here’s a list of outsourced development costs based on different regions.

top IT outsourcing regions


Also ReadIT Project Management Challenges and How to Address Them

Outsourced IT Model Types for Software Development Outsourcing

Honestly, outsourcing supports multiple engagement models while combining with the software development company and that leads to confusion. Some companies prefer staff augmentation whereas others have a dedicated team to work on any specific client project. Let’s briefly discuss the various types of outsourcing models.

Location-based Model

First, we’ll discuss the location-based models. 

Outsourcing Location based model

  • Onshore Model

Onshore development indicates outsourcing the projects to software developers who stay in the same country. However, city, state, and region can be different. This is the most preferred option due to the same time zone, no cultural diversity, and language barrier. 

  • Offshore Model

Offshore development mainly focuses on business collaboration with the development team or company that resides in another faraway country. It offers development at reasonable prices. However, time zone differences and language barriers are constant. Fortunately, project management and communication tools are the savior, ensuring a smooth development process and handover. 

  • Nearshore Model

Nearshore development deals with software outsourcing projects to neighboring countries. The time zone difference isn’t more than 3 hours. For instance, a German business can go with Poland’s software development company for its projects.

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Relationship-based Model

Here, we’ll discuss relationship-based models. 

Outsourcing Relationship based Model

  • Staff Augmentation

This model implies when a company has an in-house team and is seeking IT specialists to expand their team or fill the skill gap, taking help from software development outsourcing is the best solution. The outsourced team fills the gap with their expertise and specific skills, and they work remotely with the in-house team, having complete stakeholder control.

Moreover, staff augmentation is best suited for both short-term and long-term projects as per the IT requirements due to their availability and competitive costs.

  • Project-based Model

This model mainly involves a process when business clients need project specifications and the software development company agrees to deliver the project within the deadline and budget, making it a standard model. Here, business clients directly communicate with the project manager who oversees the project, ensuring top-notch software quality. 

  • Dedicated Model

This model works best when business requires a dedicated team to entirely work on the project to accomplish the goals. Provided by the software development company, this dedicated developers team, independently work and managed by the IT company or business. However, they are not counted as the in-house team.

checklist outsourcing development company

Also ReadThe IT Staff Augmentation Playbook of 2024

How to Find the Best Software Development Outsourcing Partner?

Now comes the most interesting part: We’ll discuss how to finalize the right IT outsourcing partner. So, gear up, and let’s start. 

    1. Outline Your Needs

The first thing is first. Here, your first step is to clarify and outline your software development requirements. Identify and finalize your project goals first, based on extensive research. Finding the right partner is implausible without knowing your needs, becoming an aimless ship in the sea. 

    2. Search Outsource Companies

Once you’re done with finalizing your goals, you should search for the software development companies and select one. Check their credibility and reliability, and check whether they align with your project goals or not before signing the deal.

     3. Have Through Research on Your Partner

Next, you must do industry and market research that may influence your outsourcing relationship. 

     4. Track the Progress Continuously

Once the project is in full-fledged status, you should have an eye on every milestone or progress. Any gap or apathy in the project can lead you to cost more. Therefore, check the project progress and often be on a loop, streamlining the process.

     5. Follow The Right Approach

To outsource the best software development company isn’t simple. The secret sauce is to take time and follow the right approach. Well, although it sounds easy, however, your chosen partner can make or break the project. So, choose wisely. Follow these effective tips: 

  • Verify their past work. Check their case studies, blogs, and reports. However, don’t forget to verify their work from their previous clients and go thoroughly with their created latest web, app, etc projects. 
  • Check reviews and testimonials. Once you’re done with verifying their works, don’t miss out to read the reviews and testimonials from Clutch, LinkedIn and other reliable sources. 
  • Organize a team interview. Get familiar with the team’s work and culture.
  • Check their resources. This is a must step. Never overlook their board of talents. Have a thorough understanding of your partner team’s expertise and skills to fulfill your project requirements. Besides, check their process as well. 
  • Transparent pricing. Now, this is also a crucial step. Your chosen partner should offer a clear and simple pricing structure that supports extra features if needed. 
  • Security protocols. Check their security protocols and policies to stay safe and protect their privacy, preventing any threats.

     6. Active Communication & Collaboration

Your chosen IT outsourcing company should practice seamless communication and collaboration. Select a partner that streamlines the overall communication and collaboration process smoothly. Indulging in stand-up meetings keeps you in the loop. Moreover, setting smooth milestones, giving honest feedback, and encouraging an open environment must be encouraged.

     7. Less Liability

Another critical step you must expect from your shortlisted outsourcing company is whether they can minimize your outsourcing risks. By that, we mean you must take measures to lower your liability in IP protection, currency rates, GDPR compliance, etc. 

How can you manage these? You can practice drafting a detailed contract with clauses for all areas. Furthermore, you should maintain privacy protocols, which will secure your product’s longevity in the long run.

     8. Tracking & Scaling Progress

Well, you must not follow this mantra, ‘set & forget’ in outsourcing. Good with a partner who meticulously tracks your project’s progress with robust tools and shares those insights regularly, keeping you in the loop often.

     9. Adds Rigourous QA Process

It’s paramount to check your partner’s QA process, which apparently ensures your product’s quality. Understand your partner’s QA process, as they must conduct regular tests and follow up to mitigate the issues early. Besides, testing must be done across multiple devices and platforms.

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Why is Magicminds Your Best Outsourcing Partner?

The myriad benefits of software development outsourcing are making it a popular choice for businesses these days. In addition to cost-saving advantages, they include global talent in the business. In this regard, outsourcing can be the most preferred tool to innovate software solutions, increase efficiency, and boost customer engagement with a competitive edge. 

However, finding the right software development outsourcing partner is never easy, and that’s why Magicminds is the perfect solution for you. At Magicminds, loud and proud numbers speak for us: 

  • 60+ projects delivered
  • Nurtured 100+ clients’ needs across the globe
  • 100+ experienced IT professionals

Here, becoming a reliable software development outsourcing partner is the top priority for our clients. We foster a culture where teamwork is promoted and preferred, making a strong partnership and fostering growth. If you feel software development outsourcing is the go-to way, don’t hesitate to Connect With Us. We’ll be happy to help you out.

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