Software Development Outsourcing represents an easy way for businesses and startups to build their custom software solutions while avoiding the burden of hiring and managing the in-house development team.
There are different outsourcing models to choose from, and it is important to understand the pros and cons of each to determine which one is best for your particular business needs and goals.
Dedicated Team
The Dedicated Team model involves hiring developers who work exclusively on your project. This model provides a high level of control and flexibility, as you can manage the team directly and make changes to the project as needed.
It is suitable for long-term projects with evolving requirements. However, it requires a higher upfront investment and may not be cost-effective for short-term projects.
Managed Services
In the Managed Services model, the outsourcing provider is responsible for delivering the software solution, including project management, quality assurance, and maintenance.
This model suits clients who want to focus on their core business while leaving the technical aspects to the outsourcing provider. It provides a high level of expertise and support but may be more expensive than other models.
Choosing the Best Model
The best outsourcing model for your business depends on several factors, including:
- Project scope and complexity
- Budget and timeline
- Flexibility in requirements
- Level of control and involvement desired
- Expertise and experience of the outsourcing provider
It is important to carefully evaluate your business needs and goals and then select the outsourcing model that best aligns with them. Additionally, it is crucial to choose a reputable and experienced outsourcing provider who can deliver high-quality results and provide excellent communication and support throughout the project.
What Is Software Development Outsourcing?
Outsourcing software development means delegating software development to an external third-party company like SPD.Tech that can either completely or partially do your software creation work for you instead of doing all of it in-house.
It helps you to access the best and the brightest people from all around the globe to cut costs without compromising on the quality of the output.
These are the most common outsourced activities, e.g., programming, coding, software architecture design, software testing, software maintenance, and so on. The most common outsourcing destinations are India, Eastern Europe, the Philippines, and Latin American countries.
Key benefits of outsourcing software development include:
- Cost Savings – Significant savings on developer salaries and overhead
- Access Specialized Talent – Leverage talent globally that you may not find locally
- Focus Internal Resources – Refocus your team on core competencies
- Faster Development Cycles – Scale up/down more quickly to meet demands
- New Innovations – Leverage new technologies and methodologies
For startups and smaller businesses, outsourcing provides affordable access to high-quality software developers who can get an MVP built or augment internal teams.
Types of Software Development Outsourcing Models
There are three primary models for software development outsourcing: Location-based models, project models, and relationship-based models. Every model falls into one of the model categories, and within these, there are more particular strategies that have various tradeoffs between cost, communication, quality, and control.
Location-Based Types of Outsourcing
Offshore Outsourcing:
Outsourcing offshore is about setting up a collaborative relationship with a supplier in a cheaper country, such as India, China, the Philippines, Eastern Europe, or Latin America. This model gives you a chance to use vast, cheap talent pools.
While such time zone differences can be the main barrier to collaboration, travel costs, which are often high for in-person meetings, are also among the drawbacks.
Usually, the typical offshore outsourcing project timelines are 3-12 months in length and generally have a team size ranging from 10 to 50 developers. This model suits large and complex software projects where the cost savings are more than the extra effort needed to work with offshore teams effectively.
Nearshore Outsourcing:
Nearshore outsourcing refers to hiring development talent based in close geographic proximity, such as in a neighboring country or regionally aligned time zones. Popular nearshore locations include Canada/Mexico for U.S. companies or Eastern European talent for Western European companies.
The nearshore model minimizes collaboration challenges with time zone overlaps, cultural affinities, and easier in-person visits. However, cost savings are not as substantial as offshore locations. Engagements typically last 6-18 months using smaller teams of 3-25 developers. Nearshore fits mid-sized application development or multi-phase initiatives.
Project-Based Model
In the project-based model, software is developed according to fixed scope, budget, and timeline commitments. Projects may be funded on a fixed-bid or time-and-material basis. This transactional approach is common for short-term, small-scale needs without recurring obligations after project completion.
Project outsourcing provides flexibility in ramping vendor resources up or down but requires considerable effort for requirements gathering, design discussions, status reporting, quality testing, and stakeholder communications. It can work well for prototyping, small enhancements, or experimental emerging technology R&D.
Relationship-Based IT Outsourcing Models
Dedicated Offshore Development Teams:
A dedicated team model provides on-demand access to a specialized offshore group exclusively assigned to focus on your software projects long-term. Teams typically range from 50-100+ offshore developers working under multi-year contracts aligned to your roadmap.
This model allows tight integration with in-house staff through the reliable availability of vendor team members. However, dedicated teams have high minimum commitments that may not suit smaller or highly dynamic software needs. There can also be significant ramp-up time to get teams fully productive.
Staff Augmentation Model:
With staff augmentation, individual offshore contractors are hired for specific skill sets and durations to complement in-house developers. For example, a DevOps engineer could be added for support, or a senior architect could lead migration planning. Teams range from 1-20 augmented staff.
This flexible, scalable model easily expands capabilities without the overhead of full-time hires. However, constantly changing resources can impede productivity over the long term. Also, financial savings are generally less than those of dedicated team models.
Choosing a Software Development Outsourcing Model for Your Business
There are some key factors to evaluate when selecting an outsourcing approach:
- Budget – Balance cost savings with the level of effort needed for management
- Project Scope & Duration – Short-term versus multi-year projects
- Communication – Ability to collaborate effectively despite geographic distance
- Level of Control – Customization versus relying on vendor best practices
For example, a startup on a tight budget may first want a very hands-on project model before transitioning some work to dedicated teams for stability.
Make sure to thoroughly vet vendors, check references, develop accountability standards, and foster strong relationships no matter the model chosen. Be ready to adjust approaches over time as needs evolve.
How to Assess a Dedicated Software Development Team
Once you have prospective partners in mind, here is how to evaluate dedicated teams more deeply:
Experience
- Years of experience: Look for seasoned teams averaging 5+ years per member coding in relevant languages and building similar products
- Request CVs detailing individual experience: Assess hands-on expertise across front and back-end, quality processes, security, design, etc.
- Vet examples of live products built: Tangible deliverables validate capabilities better than claims
- Ask for client references: Speaking with current customers carries more weight than promises.
Specialization
- Review key focal areas: The best teams specialize deeply in a few technology and product niches rather than generalize.
- Assess evidence of continuing education: Look for things like public code repositories, speaking sessions, and hackathon entries showing developers keep skills current.
- Ask about proprietary IP: Some partners build their tools, components, and accelerators that can be leveraged.
- Understand bench depth: Large firms with specialist networks excel at matching niche project needs.
References
Speaking directly with 1-2 existing clients via calls or messages provides invaluable perspective. Among other things, ask about:
- Overall satisfaction level
- How responsiveness, communication, and collaboration have been
- Examples of contributions and value-add beyond basic execution
- Ability to deliver complex milestones under tight timelines
- Whether they would hire the team again for future projects
Client references often provide nuanced qualitative insights that documents or demo calls cannot reveal. The right match depends heavily on collaborative rhythms and trust, in addition to pure technical ability.
Summary
Outsourcing software development provides a range of benefits for companies seeking to create custom solutions at an affordable cost. Opting for location-based outsourcing, project-based engagements, or relationship-based dedicated teams allows tailoring approaches based on priorities like cost, communication, and control.
Carefully evaluating vendors, setting clear expectations, and nurturing positive working relationships are critical to making any outsourcing software development model fruitful over the long haul. As needs grow and change, be open to revisiting the balance of outsourced versus in-house work to maximize business value.
Outsourcing also brings the advantage of accelerating time-to-market. By leveraging external expertise and additional resources, companies can speed up the development process, ensuring that their products reach the market faster than if developed solely in-house.
This agility allows businesses to stay competitive, adapt quickly to market changes, and respond to customer needs more efficiently. Furthermore, outsourcing can provide round-the-clock productivity, especially when working with teams in different time zones, enabling continuous progress and quicker turnaround times.
