Outsourcing software development has become a popular way to create applications, games, and websites without investing in your in-house development team.
According to Krusche & Company, only 22% of the global market was occupied by IT or software outsourcing in 2020, and it’s expected to rise to 25% by 2025.
The outsourcing sector is believed to continue to grow in 2023 and generate a sizable profit and market value.
But it can be challenging to find the right outsourcing partners or companies if you don’t know what you’re looking for or where to find them. So, what do you need to know before you start outsourcing? Find out here.
Table of Contents
Why is Outsourcing Software Development Important?
Outsourcing software development enables commercial companies to meet the difficulties of lowering overhead costs, swiftly assembling a remote tech team, and accelerating the product’s time to market. The following are some pros and cons of outsourcing software development:
Pros of Outsourcing Software Development
Lower Development Cost: The significant reduction in development expenses drives organizations to outsource their development projects. Businesses can grow and scale their operations efficiently and meet customer demand by cutting costs and adhering to a budget. Cost saving is the key benefit of outsourcing software development for enterprises.
Additionally, by hiring a third party to complete the task, businesses can reduce their labor costs, including those for a range of employee benefits like insurance, training, leave, and more – all while paying the outsourced teams fairly.
Outsourcing vendors determine their development cost based on the hourly rate of developers, following their seniority level, without considering the aforementioned expenses. Eventually, Increasing business organizations’ interest in the outsourcing process.
Flexibility: The clients can interact with software outsourcing vendors whenever needed.
Contrary to permanent employment, customers have the flexibility to pay for outsourcing while the project is being completed because there is no legal requirement to retain a long-term contract. This is especially advantageous compared to hiring year-round full-time in-house developers, whose skills may not be as crucial once the project is finished.
Additionally, cloud computing technology makes it simpler for people to work remotely, eventually establishing remote working as the standard. The focus of remote offshore working is shifting away from micromanagement and toward the interaction between humans and machines. In today’s world, the location of remote developers is less important. Hiring remote IT professionals to work on software projects is more appealing than ever.
Focused Strategy: Working with an outsourced development team gives new possibilities as businesses are exposed to a variety of cutting-edge, disruptive technologies like Blockchain, AI, and more, which enables internal teams successfully transmit knowledge and best practices.
Clients can implement their projects effectively while having more time to concentrate on their core strengths, thanks to quick access to an immense pool of IT expertise on a wide scale, which is advantageous, especially if the client companies are not in the IT sector. Employees’ time may be better focused on duties that increase income, such as sales and marketing, leading to increased business growth and productivity.
Faster Development: Since the outsourced staff is already experienced and knowledgeable in the tools and technologies, there is no need to spend extra time on training and onboarding. It saves customers time to speed up the development process. This is especially helpful for huge international corporations where the approvals and decision-making process may take much longer.
In addition, any adjustments will be corrected right away to ensure projects can move forward as planned. The remote development team is driven to work hard and complete projects on schedule, giving clients an advantage over rival businesses.
Cons of Outsourcing Software Development
Low-Quality Standards: When hiring offshore software outsourcing companies, the allure of low labor costs is frequently undermined by inadequate quality standards. There’s an inherent risk when business organizations hire an outside company to create software projects at a lower price than the local market.
Additionally, it is difficult to have complete visibility into the process, handle issues, and provide comments and guidance to drive the project ahead when you cannot directly oversee the people working on it.
Language Barrier: Language and cultural issues might sometimes make working with IT professionals in a remote location difficult. Due to differences in the time zones of the outsourced team, there might be delays in receiving timely project progress updates from them. The cumulative impacts can gradually impose stress on both parties and expose the project to the risk of missed deadlines and/or prolonged timelines, which could result in rework or failure.
Establishing frequent online meetings between clients and the remote team to keep the lines of communication open and provide input during each stage of the project’s development is essential to avoid this potential risk.
Security Risks: Data is a new asset in today’s economy. Thus, firms may risk giving their data to a third-party software outsourcing company. Data leaks are a major worry since many software development projects handle sensitive and private information belonging to clients, including intellectual property.
It’s crucial that companies considering outsourcing carefully weigh data security risks and choose the right software vendor who understands and values security and has all the tools required to protect clients’ data following security laws and regulations.
How to Outsource Software Development Effectively?
Once you have decided on outsourcing, it is essential to understand its process to start your software development journey effectively. Here are a few key things to remember when outsourcing software development:
Let’s discuss further the step-by-step guide on how you can outsource software development effectively:
Identify the Best Approach to Outsourcing
A successful outsourcing plan is desirable yet attainable. You are in charge of defining corporate objectives. If you don’t know where you’re going, it will hardly get you success.
First, break down your objectives and discuss them with the various departments in your business. Next, discuss your objectives with the software development outsourcing company you have hired. Make a questionnaire related to your goal to start your process. The questions can look like this:
- What is your company’s need?
- What are your outsourcing goals, such as budget and timeline?
- Why should you employ outsourcing services for software?
- How can you identify the best way to get the desired results?
It is simpler to identify the ideal outsourcing software firm once you have determined which duties you want to outsource.
Look for Countries to Outsource
It is equally vital to determine which nation has skilled workers who will uphold its standards for goods and services. The major concerns you should have are a developed, low-cost IT industry supported by a top-notch educational infrastructure. It’s also important that they converse with you in your native or official language.
Ideally, you should pick an outsourcing software development company with employees well-versed in English. You can choose from a huge pool of highly skilled developers produced by these nations. The time zone is another aspect of outsourcing to take into account. Find the best strategies to collaborate with your team members, considering the significant time difference.
Asia is home to a large number of software outsourcing businesses, and this number has been steadily increasing over time. India and China are two of the top outsourcing destinations.
Find Company to Outsource
To find potential partners, you might start with a Google search. Don’t forget to shortlist businesses offering the highest caliber of outsourcing solutions. You can take the help of platforms like GoodFirm, Clutch, and LinkedIn to hire software developers for your project.
Check Project Experience
You must first research the types of tasks that the outsourcing software development business has completed. Choose the best partners who meet your criteria by scrolling through the ratings from different platforms.
Maintaining solid communication is another choice for an ideal outsourcing partner. Although Zoom, Skype, and Google meet can help you keep maintaining contact, no piece of software can break down a language barrier. To make sure the personnel involved are a good fit for you, requesting conference calls with everyone involved is preferable.
Find out how flexible your software development company is. You must take this matter seriously if urgent support is needed, even in other time zones. Support should also include any upcoming software updates and bug fixes.
Do not look for the cheapest outsource developer. Also, do not let software outsourcing companies charge you additional or hidden costs. Keep the size of the project and budget in mind.
Now you know how to outsource software development effectively but to outsource software development is still an important decision to make.
Top 6 Countries to Outsource Software Development
The most popular locations among different countries to hire outsourced software developers worldwide are Central and Eastern Europe, India, China, and South America. Here, we have listed them based on their costs and programming languages.
Eastern European Countries
As per UpWork, the rates for Eastern European Developers vary from $20 to $50 per hour. The country has a large talent pool with technical university backgrounds. There are about 16,000 technical graduates in Ukraine alone.
As per a recent report, Poland has more than 100 enterprises and 255 thousand highly educated software team specialists. According to Kearney Global Services Destination Index research last year, Poland was ranked as the twelfth most desirable outsourcing location.
The price range of outsourcing software development in Poland varies between $25 – $100 per hour. The country has developers in programming languages like Java, SQL, Python, and C++.
In 2022, Romania joined Ukraine as a desirable location for outsourcing. By 2025, it is anticipated that Romania’s 14.3% active information technology industry growth will have doubled. A well-organized educational system helps to foster this high-quality growth. 7,500 new software developers will graduate this year.
The first high-tech software unicorn, UiPath, and numerous offices of major international software firms, including Microsoft, IBM, HP, Oracle, Intel, Luxoft, and Amazon, are all located in Romania.
The population of India represents 17.7% of the world’s population. Recent studies show that India’s software business is expanding by 60% annually.
Over the past three decades, India’s market for software development has expanded by more than 30%. Up to 100 countries are already receiving their software services exports. The Software Sector Analysis Report claims that developers from India are highly qualified technical graduates. India’s software market is five times less expensive than, say, those in North America.
India prices its hourly services at around $10 – $25 in popular programming languages like Java, C++, and Python.
China, alongside India, is the top-ranked location for outsourcing enterprises. It offers qualified software engineers with excellent English skills at affordable pricing.
Software developers in China typically charge up to $50 per hour. Python, algorithms, and functional development are common programming languages the country provides outsourcing.
The Philippines is a great for outsourcing software development due to its low expenses, competitive market, and strong software history. According to the Philippines IT Market study, software development in the Philippines has developed into one of the more well-established sub-sectors of the nation’s information technologies industry.
The prices range from $25 to $49, and the average hourly wage ranges from $15 to $35. The popular programming languages they use are PHP, ASP.NET, Ruby on Rails, and ASP.NET.
Cost of Outsourcing Software Development
After knowing the process, the next question is how to estimate the cost of an outsourced software development project, given that we are discussing money here. The answer would depend on a wide range of variables and measurements we can only describe once the specifics of your project’s scope have been established.
Let’s assume that the average developer makes $60 per hour and that a project that lasts six weeks requires the services of six developers. Six developers can build a minimum-value product in under six weeks if they have the necessary skill set and experience, but let’s stick with that timeframe. Simple math reveals that a working MVP will cost around $86,000.
The outsourcing software development cost would vary greatly based on the team’s size, the developers’ experience level, the deadline, the technology stack, whether or not support and maintenance are required, and many other factors. Also, remember that some projects could cost hundreds or even millions of dollars.
The likelihood that you will have to spend twice as much for the poorly designed code increases the cheaper you go. The best course of action if you want to save money and hassle is to work with a trustworthy vendor who charges affordable prices and delivers a product that meets your highest expectations and industry standards. You should be sensible here and work with the best to achieve the best outcomes without a hassle because the cost of going too cheap can be higher than you’d anticipate.
Successful Software Outsourcing Case Studies
Post the COVID-19 pandemic, the world has started most of its work remotely. There have been discussions over the advantages and disadvantages of working remotely. It is undeniable that outsourcing and remote work are practical ways to keep your business in the global market.
A study found that 87 percent of businesses intend to outsource IT services, and roughly 75 percent already doing so. Due to the lack of talent, outsourcing is becoming more appealing. It also addresses several issues, such as reducing the cost of software development.
The businesses listed below represent some of the best examples of outsourcing success stories. Take a peek at how they use remote teams to build their companies and beat off rivals on the worldwide market.
WhatsApp is the most widely used messaging app with more than 1.6 billion users, surpassing WeChat with 1.1 billion users and Facebook Messenger with 1.3 billion. It has outsourced its core development, particularly iOS development.
After Facebook turned them down, Brian Acton and Jan Koum founded Whatsapp in 2009. They engaged a skilled team from Eastern Europe to do all the core development since they wanted to save costs. The project successfully launched to the top positions on Google Play and the App Store.
Later, Mark Zuckerberg, the founder of Facebook, bought WhatsApp in 2014 with a bid of $16 billion.
In 2005, Unilever had some 200,000 people worldwide. The company soon expanded its operations into dozens of nations, needing to combine many ERPs across their domains. They decided against outsourcing because they are a non-tech company and wish to expand and streamline procedures.
A project to integrate an ERP system is essential for a business like Unilever. If Unilever chooses to proceed otherwise, hiring a full-time IT engineer and investing in training may have damaged the business’s internal focus. Implementing an ERP solution is a difficult task.
Thanks to the choice to outsource the construction of the ERP system, Unilever’s operations are currently running smoothly.
Skype founders outsourced the backend development for the platform to Estonian professionals. The video chat, instant messaging, and file transmission capabilities started with Skype.
Later, eBay purchased Skype for $2.5 billion after only two years and Microsoft for $8.5 billion in 2011. This inspiring story has highlighted the IT talent pool in Eastern Europe.
In 1999, Jack Ma founded the Chinese Global eCommerce Technology Corporation, Alibaba. The company hired American web designers to establish a website that would appeal to domestic and foreign customers, particularly those in English-speaking nations.
Alibaba’s brilliant decision to hire an English-speaking team to localize the online material rather than merely translate it makes the company successful. Jack Ma’s prominence and Alibaba’s current worldwide income level were made possible by the idea.
We hope you now have a clear idea of outsourcing software development effectively. As a software development outsourcing company, we have helped thousands of businesses, CTOs, and organizations of all sizes develop their software and advance in the digital process.
We have demonstrated our skills and won a lot of praise, whether their goal was to save expenses, create cutting-edge software, or expedite development. You can hire our software developers to help you take your business to the next level.