How to Successfully Outsource Software Development

To stay ahead of the competition it is essential that your software is both cost effective and up to the task at hand. By ensuring your software is top notch, you ensure that your processes are both efficient and effective, ensuring that you receive a good return on your investment. That is why many  businesses go down the route of using a software development team.

But, there’s lots of different models of outsourced development teams including extended, near shore and offshore so how do you know which to use? In this article we are going to compare in-house and outsourcing your development team and reveal why outsourcing could be the best option for your business.

Continue reading to discover what outsourcing model would work best for your business.

What Is Software Development Outsourcing?

Software development outsourcing is the practice of delegating development tasks or projects to a third party outside of your business. Unlike in-house software development which requires an internal team, typically employed over long-term contracts, outsourced teams are hired on a per-project basis. So, with more flexibility and lower hiring costs, how does outsourcing a software development team compare with hiring an in-house team?

Outsourced vs. In-House

There are benefits and drawbacks to both outsourcing a development agency and hiring an in-house team. Overall, however, outsourcing comes out on top; here’s why:

• More Cost-Effective: While outsourced software development teams may ask for an initially high fee, as they are paid on a per-project basis, you save money in the long run. If you were to hire an in-house team, you’d be committing to a team of multiple people each on hourly wages, for a long period. Eventually, the cost of an in-house team will add up, quickly surpassing that of an outsourced team that works for a single hourly rate. What’s more, you’ll also save money on hardware and development software, as your outsourced team will already have access to the necessary tools.
• Cohesive Team: When you outsource your software development to a team with a proven track record, you’re getting the benefit of a team that’s already working together. This means workflows are more efficient as the team understands each other’s working style. Hiring a new in-house team means employing people who have never met and are not used to working with one another. This is likely to negatively impact efficiency and development time.
• Customer Service Options: When you hire an in-house software developer, you’re not employing them for their customer service skills. When you outsource a software development agency, they typically have predefined customer support procedures and systems, helping you get the information you need when necessary. Meanwhile, an in-house developer is too busy focusing on development to spend time taking you through the software development process. In other words, with an outsourced software development agency, comes greater access to resources.

While in-house developers have their advantages, such as instant availability, long-term commitment, and loyalty, the benefits of outsourcing to a software development agency far outstripped in-house teams.

Initial Steps and Strategic Planning

As with anything, properly outsourcing a software development agency begins with proper planning. Spending some time thoroughly understanding your business goals and researching software development teams puts your business in a better position for success. So, without further ado, let’s explore the initial steps behind outsourcing a software development team.

Identifying Needs and Goals

Start by identifying your needs and goals. An excellent way to do this is using the SMART goals framework – this helps you to set achievable goals relevant to your project. SMART goals are used by businesses of all sizes, from start-ups to large enterprises, thanks to its linear yet effective approach.

So, let’s break SMART goals down:

• Specific: Make your goals clear and well-defined so that they’re understandable by all parties involved.
• Measurable: Your goals should be measurable so that you can track project progress throughout development. Discussing development milestones with your developer is a good place to start.
• Attainable: Set achievable goals. It’s best to break your SMART goals down into small goals that satisfy your overall objective. There’s no use setting a goal that’s unrealistic.
• Relevant: Your goals should be relevant to your project, meaning that they should not be misguided. For example, focus on priority issues, not feature additions that could be built in version two.
• Time-Bound: Set a timeframe in which you’d like to see your goal completed. Your timeframe should take into account all the above steps and be realistically achievable.

Scope Definition

Once you’ve determined your goals, the next move is to define a scope, i.e., write a project specification. Your project spec will outline all essential information about your software and how you expect it to function. You’ll need to outline your project objectives, deliverables, and any constraints.

Generally, it’s an excellent idea to outline functionality through user permissions. This means making a list of user types, such as admin and regular users, and bulleting the functionality each user type will have access to. You can then elaborate on specifics with your chosen software development agency.

The scope, or project spec, is a vital part of software development and can make or break your project. A poor project spec inevitably leads to a misguided development. As a result, you might consider asking your development team for help outlining a project scope – with their expertise and understanding of software development, they can more accurately create a spec with achievable functionality.

Choosing the Outsourcing Model

Now that you’ve defined your project scope, you’re in an excellent position to start searching for a software development team. However, you’ll first need to choose between software development outsourcing models, each of which comes with positives and negatives. Choosing the right outsourcing model is essential – you want to work with a team that fits your business model and needs.

There are three outsourcing models to choose from. They are as follows:

• Onshore: Onshore outsourcing is where you hire a third-party software development team that operates in your country or state. The main benefit of onshoring is that your development team is bound by the same laws and regulations as your businesses, meaning there is less chance of IP disputes due to their being a clear avenue of legal recourse. Additionally, onshore teams work in the same time zone as your business, making communication simple and management of the software development team more streamlined. This biggest drawback, however, is that onshore teams tend to be more costly, but this means better quality work.
• Offshore: Offshore software development outsourcing is where you employ a third-party software development team from overseas. For example, a US company might hire a Taiwanese development team. Many businesses choose to offshore their development thanks to the reduced cost of foreign developers. However, this, of course, depends from which country you hire – a UK-based development agency is going to cost significantly more than an Indonesian development team. While offshoring can lead to lower costs, it can also result in lower-quality software due to your local industry standards not being followed or fully understood.
• Nearshore:As the name suggests, nearshore software development outsourcing  refers to the practice of hiring services from neighboring countries. For instance, a UK-based business might nearshore their development project to a German agency. These two economies and industry standards are similar, however, the UK’s currency remains more valuable than the Euro. As a result, the UK business gets onshore quality at a reduced rate. However, the savings compared to offshore are negligible, but the product quality is much more reliable. You might also choose this model if your aim is to reach customers in neighboring countries.

Ultimately, your choice of outsourcing model will be largely influenced by your software development budget, with offshore teams typically the cheapest. However, onshore development is recommended due to the quality of development. Generally speaking, your development team will be happy to build a project that suits your budget – simply, ask about developing a minimal viable product (MPV) for more affordable options.

Selecting an Outsourcing Approach

Your chosen outsourced team will have their preferred management and integration approach. However, there are three models to consider regarding integrating your outsourced development team with your existing workflows.

• Staff Augmentation: Staff augmentation is where a third-party development agency loans their employees to you usually on a time and materials contract basis. So, instead of completely outsourcing your software development, you’re able to bring temporary workers on board until your project is complete. This is an excellent option if you want complete managerial oversight, but does require to have some existing development infrastructure in place – it’s also a time-consuming option and can become costly if multiple developers are needed.
• Managed Teams: The managed team approach essentially makes your chosen development company act as your extended development team, functioning as a recruitment team that provides your workforce. In this model, your business hires the software development agency and directly manages the development team. This gives your business complete control over the development process, but, of course, requires you to have a technical understanding of software development.
• Project-Based Option: The project-based option is the simplest model for outsourcing a software development team, with the most hands-off approach. Here, you provide your development agency with a project spec and leave them to manage themselves. We recommend this model to our clients, as it tends to lead to a more efficient and cost-effective development process unhindered by colliding workflows and expectations.

The outsourcing approach you choose will depend on how much control you want over your project’s development. Oftentimes, however, businesses make the mistake of being too involved which can reduce development efficiency – generally, it’s best just to let your outsourced development agency get on with it!

Shortlisting Companies

Once all the above is in order, it’s time to start shortlisting software development agencies you’d like to consider working with, especially those providing custom software development services. Finding companies to shortlist might seem like a daunting task, but it’s as easy as a Google search. Simply search for “software development agency near me” to find teams in your local area, or for a broader approach you can search “software development agency USA.”

Alternatively, you can search through consumer trust websites like Clutch.co which provide lists of popular development agencies in America. Either way, there are a few things you should look out for:

• Portfolio: The best place to start when identifying and choosing a potential development agency is their portfolio. You should take note of their project types and if they have experience building the type of applications your business requires. However, if the agency doesn’t have any relevant portfolio items, this doesn’t mean they don’t have the skills to satisfy your needs – you should also look for any information regarding the technology they use.
• Reviews: Checking out reviews and testimonials from a development agency’s previous clients is essential for identifying quality. Generally, development teams list their top reviews on their website, but for a more in-depth and balanced view, you can view their Clutch.co page or their Google My Business profile.
• Defined Development Procedure: Experienced software development companies should have a clearly defined development procedure outlined on their website. This procedure allows you to better understand their development process, how the agency operates, and where your involvement is needed. Failing to display a development procedure on their website is usually a sign of inexperience. Still, don’t be afraid to reach out and ask.
• Post-Support Options: When your software is developed, you’re probably going to need some ongoing support – that is, if you want your application to provide a continuously positive user experience. As a result, you should shortlist development companies that offer post-release support options. Again, this might be something you need to reach out and ask about.

Evaluating and Selecting the Outsourcing Partner

Once you’ve created a shortlist of potential software development partners, it’s time to thoroughly evaluate each candidate in order to choose the right company for your project. In this section, not only will we discuss essential developer criteria, but some of key considerations too including advice on initial consultations and legal documentation.

Provider Evaluation Criteria

We’ve already explored some evaluation criteria such as post-release support options and previous client reviews. Now, let’s dive a little deeper and discuss some additional criteria you need to consider before outsourcing software development.

• Company Size: How big is the software development agency and is their team size big enough to handle your project scope? For example, if you’re looking to build a large, complex project with long-term development prospects, you must ensure that the team you’re working with has sufficient resources to handle your project. Likewise, are you overpaying for a large team when your project could be completed with a smaller agency? It’s best to talk with your potential development agency to gather insights on this information.
• Experience: Looking into your prospective developer’s portfolio is an easy initial way to gauge their experience level. For a deeper understanding, consider looking into their projects themselves if available. For instance, if the development agency has built several SaaS platforms, navigate to one of them, sign up, and try the platform yourself.
• Technical Skill: Does the development agency have the technical knowledge to successfully deliver your project? For example, if you want to build an AI chatbot you should work with a company that’s experienced in AI development and integration. Otherwise, you risk an inefficient project while your development team learns how the technology works. Technical skills will be evident in portfolios, blog posts, and client reviews.
• Industry Knowledge: How well does the software development agency understand your industry? While industry knowledge isn’t essential, it’s certainly helpful as it means your development team will understand any relevant software conventions and regulations. Ultimately, this will lead to a better product.

Consultation and Discussion

Once you’ve found a potential development agency to outsource your software build to, you’ll need to set up an initial consultation. If you’ve never done this before, you may feel a little unsure regarding what to talk about in this call and how they generally flow. Let’s clear this up for you. Here are some key talking points to discuss during your initial consultation.

• Your Business and Goals: Outlining the goals and objectives you hope to achieve with your software helps your development team to better understand the product’s purpose, leading to a clearer development process.
• Software Requirements: You should discuss your software requirements in detail and pass along the project spec you earlier wrote. During the consultation, you can clarify any details regarding software functionality and ask any questions you may have.
• Costs and Resources: The cost of development is likely a major concern of yours. The initial consultation is an excellent place to talk about development fees and your budget. However, you should expect the development team to go away and create an accurate cost estimate based on your project spec.
• Development Strategy: Depending on how involved in the development process you wish to be, you might want to inquire as to the agency’s development strategy. How do they plan to build your software and is it the best, most efficient way to do so?
• Timeframe: You should outline your expected development timeframe with your development team and determine if it’s achievable. Like cost, your developer may wish to take some time to further review your spec and come up with an accurate time estimate.

Legal Documentation

A solid legal framework is at the center of every successful business, yet many people forget about legal documentation when it comes to outsourcing a development team. There are many reasons for this, hiring a team through Upwork, for example, comes with some legal protection by default while good recommendations encourage a high level of trust. However, there are several types of legal documentation to consider exploring when hiring a development team.

• Service Level Agreements (SLAs): A service level agreement determines the level of support the development team is required to provide you and your project. For example, if you have an SLA that states the development team must provide customer service and support within a 48-hour period, then they are legally bound to do so. Having an SLA in place gives your business, and software, protection against unexpected bugs and issues. This is not an essential contract but is advised when building customer-facing applications.
• Non-Disclosure Agreements (NDAs): Non-disclosure agreements compel the software development agency you work with to exercise extreme discretion while building your application. An NDA means they are not able to reveal details about your project or business during the active terms of your contract. Implementing an NDA helps to protect your business’s unique selling points and sensitive information that could put you at a competitive disadvantage.
• Intellectual Property (IP) Contracts: Generally, when working with an onshore team, IP contracts aren’t a huge issue due to local copyright laws and reputational concerns. Still, it’s good to get all your ducks in a row. An IP contract between you and your development team will ensure that your ideas are legally safe, as well as ownership of the deliverables.

Effectively Managing the Outsourced Development Process

By this stage, the foundation of a successful outsourced development project is in place. So, now we need to discuss how to effectively manage the development process. Of course, your involvement in the management of your development will vary depending on which outsourcing approach you select. Nevertheless, there is much for you to consider.

Communication and Management Tools

Your development team will likely have their own project management tools. For example, here at Idea Maker, we use ClickUp. However, there are several project management tools available for you to choose from including ClickUp, Trello, Asana, and Notion. If you’re taking a hands-off approach, it’s best to sign up for your developers existing management tool so you can connect with their team and monitor progress.

In terms of communication, by now you’ve likely used Zoom and Google Hangouts, both of which are excellent options for remote consultations. You may also consider familiarizing yourself with industry favorite messaging platforms like Slack and Discord so you can more immediately connect with your development team without having video calls.

Establishing Communication Channels

Whatever management and communication tools you and your development team settle upon, it’s vital that you also establish regular meeting times that work for you both. Whether this is weekly consultations or bi-weekly email updates, it’s essential that you keep in the loop with your project progress.

Generally speaking, development agencies will provide you with regular progress updates to keep you informed about progress – this is where that clearly defined development process comes in that we discussed earlier. Transparency is a key tenet of any quality development team.

Project Monitoring and Management

Sure, a general update about your project is great, but how do you actually track its progress and success? This is where key performance indicators (KPIs) come in. Here are some to consider:

• Project Milestones: Before starting the development process, you and your development team should outline several milestones you’d like them to hit by certain dates. Your project can be broken down into as many stages (milestones) as necessary. This way, if you see that your team is delivering milestones by the agreed deadlines, then they are making good progress. If they’re consistently missing milestone deadlines then it’s probably worth talking with them and understanding what’s holding them back.
• Features Built: To take an even more micro approach than milestones, you could track individual features built. Again, outline the data by which you expect each feature to be delivered and check in with your team on those dates to ensure the features are created. This approach does border on micromanagement which might not be appreciated and slow the development process down. So, keep this in mind when choosing this approach.
• Hours Worked: Hours worked don’t necessarily show you progress, but it’s a good indicator to hold developers to account. Your outsourced development will have given you an hourly time estimate for project completion. Checking this estimate against their worked hours gives you a general idea as to where they are in their process.

The above are broad KPIs that help to give you a general overview of your project’s progress. However, each project and business are unique, meaning that your KPIs are likely different. Speak with your development team about managing and monitoring KPIs.

Handling Changes and Challenges

No matter how good your development team is, there’s no such thing as a perfect project – you’re likely to encounter some challenges along the way. The best thing you can do in these situations is talk with your development team and ask the following questions:

• Why has this issue occurred?
• How do you plan to rectify this issue?
• How much does this issue set the project back?

Ultimately, you should try to avoid giving up on a development team as it means starting the entire outsourcing process again. You should only consider this option if you have little confidence in the development team’s ability to successfully deliver your project.

Quality Assurance and Testing

Your outsourced software development team will have its own quality assurance procedures in place to test beta and alpha versions of your application. However, there’s no reason you can’t ask to be included in the process and given access to an early version of the software. When testing your application, here’s what you should consider:

• Usability: How easy is your software to navigate and use? Is the user interface simple to understand or is it overly complex? Usability testing is key to creating a positive user experience – if you can’t get to grips with your software, then everyday users aren’t like to either.
• Functionality: Does your software function correctly? That is, does your software function as you intended? In early versions of software, you may find that some features are broken or buggy, or that they have been changed to act as a placeholder.
• Endurance: Is your software easy to break? You should literally try to break your software to ensure that it is durable. Use it as a normal user would then throw some curveballs at it and see what happens.
• Does It Fit the Brief?: Most importantly, does your software fit your brief? Is your development team accurately following your project spec or have they gone off on their own track without your approval?

Ensuring Successful Project Completion and Future Collaboration

When your software project is reaching its completion there are a few more things for you to consider before moving forward. These considerations will help you to properly maintain your software in the long term and provide a positive foundation for you to work with the development team in the future.

Project Finalization

So, your project is drawing to its completion and your software development team is preparing for deployment. What should you do? There are a few things:

• Test Again: Before signing off on your software, give it one final test to ensure there are no obvious bugs that remain and so you can make any last-minute minor changes. It’s probably not the time to request large-scale feature overhauls and modifications, but if you’ve had a new idea, there’s no harm in talking with your developer about version two.
• Request a Walkthrough: Before your software is delivered, you should ask your development team to give you a walkthrough of the application. This walkthrough will serve to give you a clear understanding of how your software works and how its functionality satisfies your project spec. A live walkthrough provides an excellent opportunity for you to ask questions and familiarize yourself with your software.
• Server Deployment: Finally, you’ll need your software deployed to your servers so you can take full control. This may look different depending on your type of software. For example, if you’ve built a SaaS platform, your developers will be deploying to a web hosting server, while for mobile apps, they’ll be submitting it to app stores.

Post-Project Review

Once you have your software in your hands, it’s time to conduct a post-product review. This is where you access the success of your project, as well as pitfalls, challenges, and what you could do better next time. During your review, you’ll need to take a look at the quality of your software and whether it fits your project spec, allowing you to decide if you’d like to work with the development team again. You should also consider how well you worked with the team and the flow of your communication.

Long-Term Partnership Considerations

If you’re happy with your software, you should consider a long-term partnership with your outsourced software development team. This could mean that they develop the next version of your software or provide post-release support and maintenance. Ideally, it’s best for you to continue working with the same team because they already understand your business and product. Hiring a new team of developers to provide post-release support or update your software means that they’ll first have to reverse engineer your software to fully understand its functionality and architecture.

Final Thoughts

In this article, we explored how to successfully outsource software development. By comparing outsourced vs in-house development teams, we concluded that outsourcing offers more flexibility and lower costs. Key steps covered in this article include:

• Identifying project needs and goals using the SMART framework
• Defining the project scope and specifications
• Choosing an outsourcing model (onshore, offshore, nearshore)
• Selecting a development company based on factors like portfolio, reviews, processes
• Having an initial consultation to align on requirements, costs, timelines
• Using legal agreements like SLAs, NDAs, and IP contracts
• Managing communication, setting milestones, and monitoring progress
• Conducting quality assurance and testing for usability, functionality

Overall, proper planning, communication, and setting clear expectations are key to effectively outsourcing software development.

Software Development From Idea Maker

If you’ve made it this far, you’re obviously looking to outsource a software development company. Well, you’re in the right place. Not only does Idea Maker give good advice, like this article, but we also provide exceptional software development options.

Our team is dedicated to building software that exceeds your expectations and elevates your business. Simply schedule a free consultation with us today to get started.