Software Development Outsourcing: The Ultimate Guide

High-quality software can take your company forward and give it a competitive advantage. Making your processes easier, faster, and smoother with software can significantly impact your position in the market.

When you want to create new software for your company, you’re often faced with two options: in-house development and outsourcing.

While in-house development might seem the straightforward way to go, software development outsourcing might be the faster and more guaranteed choice.

In this guide, we’ll explore the benefits of software development outsourcing, its types, and how you can outsource software effectively.

What Is Software Development Outsourcing?

Software development outsourcing is the process of outsourcing your company’s software project to a third-party company.

Companies outsource software development for many reasons. For example, some companies don’t even have an in-house development team, so they simply outsource their project to a specialised company.

In specific scenarios, the company’s in-house team might already be working on other projects at full capacity, leaving the company no choice but to outsource its requirements to a software development company.

However, software outsourcing isn’t always related to out-of-hand circumstances. In fact, more and more companies nowadays prefer to outsource software for various benefits, including risk mitigation, cost reduction, efficiency, and improved security.

Benefits of Software Development Outsourcing

Here is how software development outsourcing can be beneficial for your business:

Time Efficiency

One of the strongest advantages of software development outsourcing is time efficiency.

Software development companies have a system in place that delivers your requirements in the most seamless and time-efficient way. For example, you don’t have to waste time building an in-house team; you could actually get the whole project done in the same time span you’d have spent hiring and onboarding in-house software developers and designers.

Not to mention, you don’t have to keep tracking progress with your employees since the project’s deliverables are the responsibility of the outsourcing company.


Another perk of outsourcing software development is flexibility. Software outsourcing companies will give you a quote based on your project’s expected outcomes and the expertise you need. So no matter the size or complexity of your software project, outsourcing it won’t be a problem.

What’s more, you can outsource specific functions of your software development process. For example, if you have an in-house team of software developers but don’t have a UX designer, you can simply outsource that function to a dedicated UX/UI design company.

Sure, you can just hire more employees, but the cost of hiring more full-time employees or contractors will be higher than simply outsourcing the functions you need. Plus, it’ll be much more time-consuming.

Cost Reduction

Software development outsourcing is an excellent business strategy that lets you direct your company’s resources and manpower to core business functions rather than one-time projects. This will help you reduce costs down the line.

For instance, you’ll save the costs needed to hire new team members. Not to mention, there won’t be any extra costs related to operations, training, management, and overhead. You’ll only pay for the piece of software you’ll receive; no more, no less.

It’s also worth noting that not all companies need a dedicated in-house software development team. Depending on your industry, your software projects could be limited, so you won’t really benefit from hiring an in-house team in the long run.

Get an Entire Team to Work on Your Software Project

A software development project requires more than just developers. You need to build an entire team, which typically includes developers, UX/UI designers, QA engineers, a project manager, and a team leader.

When you outsource your software development project, you don’t have to worry about team building. Software development companies have dedicated teams ready to take on your project from day one. Everything from planning to development and testing will be handled by the company.

Minimized Risk

Reputable outsourcing companies have enough experience to minimise and mitigate risk when working on your software project.

With standardised workflow processes and periodic monitoring, software outsourcing teams are capable of identifying potential liabilities and spotting bugs and errors with specialised testing processes.

On top of that, software outsourcing companies conduct robust feasibility studies before the initiation of your project to ensure a positive ROI and validate the budget. Such studies are often accompanied by prototypes.

Access Exceptional Global Talent and Cutting Edge Technology

If you already have an in-house software development team, this doesn’t necessarily mean that they’re familiar with everything related to software. Your project might require a different technical background and set of skills than what your team is experienced with.

Software development outsourcing companies have multi-skilled teams that have expertise in the latest software trends and methodologies.

The software domain is filled with subtopics and concentrations that are virtually impossible to cover by a single in-house team. These include DevOps engineering, Artificial Intelligence (AI), machine learning, cybersecurity, and embedded systems.

Hiring an expert in each of these specialisations will be not only time-consuming but also costly. The easier alternative is to hire a software development outsourcing company to handle the project for you.

The choices are vast, and you can easily hire talent from any part of the globe in the specialisations you seek.

On-Going Support

Software development doesn’t end with the project submission. Once you start implementing the software into your existing systems, you’ll probably notice things that need to be tweaked or improved. Bugs are also a possibility no matter how good the company’s QA process is.

Many software outsourcing companies provide ongoing support for their submitted projects, ensuring that your software is regularly updated with new features, bug fixes, and performance improvements.


In the world of software development, each project has unique requirements, timelines, budgets, and constraints. This means that you need to build a dynamic software development team where you might be required to hire more team members or even fire others as your requirements change.

This can significantly drain your company’s resources and make it harder to scale your projects.

With software development outsourcing, you don’t have to worry about any of that. Instead, you have the flexibility to negotiate the requirements of the project with the outsourcing company so that they assign a team that suits these requirements.

If the scale of the project changes at any moment, the outsourcing company will easily adapt to such changes without affecting your project’s development process.

Software development outsourcing also enables you to work on multiple projects simultaneously, no matter how different they are. The company will simply give the right job to the person, sparing you the hassle of having to hire or fire employees all the time.

Forms of Software Development Outsourcing

There are multiple types of software development outsourcing. We can divide these into 2 subgroups: Location-based and methodology-based software outsourcing.

Based on Location

To outsource software, you can opt for a company inside or outside your country. Here’s how software outsourcing differs based on location:


Homeshoring is outsourcing software development from a company in your city or country. Homeshoring has the advantage of enabling you to have face-to-face meetings with the company’s representatives and the development team.


Nearshoring is opting for a software outsourcing company located in a nearby country. Companies prefer nearshoring due to time zone alignment. Nearshoring is also not as costly as homeshoring.

Not to mention, there’s a good chance that people in nearby countries speak the same language, eliminating some possible communication problems.


Offshoring is outsourcing software to overseas countries. This is probably the most cost-effective software outsourcing route to take. Due to currency differences, you might be able to get low-cost quotes for your software development needs.

Some companies also prefer offshoring to expand the talent pool and hire the best company for their budget. However, offshoring presents challenges related to different time zones and communication.


Moving a project from an offshore or nearshore company to a home-based one is called onshoring. Onshoring is usually done for direct involvement in the development process.

Partnership opportunities might also be a viable reason for onshoring.

Based on Methodology

When you outsource software development, there are 3 different routes to follow depending on your goals, timeline, budget, and involvement. These include:

Staff Augmentation

Staff augmentation is when your team collaborates with an outsourced team to get a specific project done. Collaboration can be remote or physical, depending on the project and whether you opt for a home-based or offshore company.

The advantages of staff augmentation are numerous. For starters, you’ll be able to benefit from the skills of both your team and the outsourced team. In addition, augmentation can enhance the skills of your team since they’ll be exposed to new colleagues with expertise in particular subjects.

Dedicated Team

Getting a dedicated team means that you’ll pass the full responsibility of working on and submitting the project to the outsourced company. The team will handle everything in the project, from workflow monitoring to development and project management.

However, you’ll be responsible for defining the project’s specifications and requirements.


A project-based approach is great when you don’t have the required capacity to define the project’s specifications in detail.

In that case, you’ll only have to provide the outsourcing company with basic details about your project, and they’ll take care of everything.

This approach has the advantage of taking everything off your shoulders, from specifications to milestone achievement and quality assurance.

Building a Software Development Outsourcing Strategy

To get the most out of software outsourcing, you must create a predefined strategy by following these steps:

Find Out What Your Team Is Capable Of

The first thing you need to do when planning to outsource software development is to figure out what your team can do and the skills of each team member. This will make it easier for you to decide whether you need to outsource the whole project or just specific functions.

You might even reach a conclusion that outsourcing isn’t required if your existing team can handle it. However, for complex, long-term projects, there’s a good chance you’ll need to expand or train your team members, which makes software outsourcing a good alternative.

Consider Your Options

If you decide that you need to outsource your software project, take your time researching different outsourcing companies and their reputation. Don’t restrict yourself to your geographical area since you can easily find great talent overseas.

Get multiple quotes from a wide range of companies and take a look at some reviews before deciding to work with one of them. Contacting some of their previous clients might also be a good idea.

Integrate Project Management Processes

After choosing the right software outsourcing company for your needs, it’s time to implement project management tools and processes to facilitate communication with the development team.

Most of the time, your primary contacts will be the team leaders and the engineering manager. They’ll give you updates on the development process and the expected milestones.

Communication is key when it comes to software development outsourcing, at least if you want to ensure that your project launches on time with top-notch quality and all the requirements met.


Alright, so that was an in-depth overview of how software development outsourcing works, its benefits, and when to opt for it.

Software development outsourcing can be a great solution to deliver your software needs in an efficient and timely manner.

Start by conducting a few meetings with your in-house team, and once you figure out your requirements, research a few companies and choose one that offers the best tradeoff between quality and cost.

Stavros Zavrakas

Since a very young age, Stavros has been passionate about the power of technology which pushed him to study Computer Science at the University of Crete. Throughout his career, he worked as a full-stack software engineer and lead developer and acted as a mentor tackling challenging IT problems of various industries - from healthcare to publishing.

Orthogonality is based in UK and Greece.
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© 2022 Orthogonality Ltd // UK (Companies House) Company Number: 11115046

© 2022 Orthogonality Hellas Single Member Private Company // GR (GEMI) Company Number: 165193340000

© 2022 Orthogonality Ltd // UK (Companies House) Company Number: 11115046

© 2022 Orthogonality Hellas Single Member Private Company // GR (GEMI) Company Number: 165193340000