Outsourcing Software Product Development: Is It Right for Your Business?

Jeffery Thompson
Innovative Leader in Custom Software Solutions: Jeffery Thompson, Founder of BIT Studios
Software Development
16 min read
Published: Mar 3, 2023
Updated: Mar 3, 2023
Outsourcing Software Product Development

Many businesses choose to outsource software product development and IT services. After all, outsourcing offers access to global talents and is less expensive than hiring an in-house team.

But outsourcing has drawbacks, such as a lack of control over quality and security issues. So how do you determine if outsourcing is right for your project?

This guide discusses the pros and cons of outsourcing software development. We’ll help you decide whether this strategy suits your budget, timeline, and company goals.

Software Development Outsourcing in a Nutshell

Software development outsourcing involves hiring an external team of developers. This software development partner is usually located in another country. This strategy gives you access to more people who are experts in their field. And it usually costs less than having your in-house development team do the work.

About one-third of businesses in the US outsource at least one function. And software application development takes the lion’s share of these outsourced functions. Moreover, according to a recent study by Grand View Research, the outsourcing market is growing. Experts predict that it will reach 682.3 billion by 2027. The increase is due to business process automation and cost reductions that come with outsourcing IT projects.

Many businesses hire outside help to manage their infrastructure and maintain their apps. Others outsource to manage their cloud services, data security, and disaster recovery.

Software development outsourcing is a great strategy to free up your internal IT team. Your staff can then focus on growing the business and developing new ideas. You can also use the third party’s knowledge and resources to make great solutions at an affordable cost.

Many businesses outsource software product development to save money and be more efficient. You don’t have to spend time and money training, managing, and keeping specialized staff. Outsourcing helps you focus on creating new products and services while still meeting deadlines.

What Is Software Product Development?

Software product development involves designing, coding, and testing a software program or application. It involves creating user interfaces and back-end systems to ensure the program works correctly.

The software development process also requires integration with existing apps and databases. Hence, the design process can be complex and time-consuming. Outsourcing software development can speed up development projects while maintaining quality standards.

Which software development services can you outsource?

1. Website Development

Website development includes designing and creating websites and coding web applications. It also involves making user interfaces, databases, and back-end systems.

2. Mobile App Development

Mobile app development means designing a unique interface for mobile devices like smartphones. Then the developers code the application and connect it to other apps or databases.

3. Software Testing

This service verifies that a software program works exactly how it was designed. It also identifies potential problems before developers push the program into production.

4. Database Design/Development

This service helps create data storage systems that facilitate seamless information exchange. To do this right, you need experts in designing databases and testing them to ensure they are reliable.

5. Data Integration Solutions

Businesses hire outside help to connect different components without changing the original ones. This solution makes it easier and cheaper to move data between databases.

Outsourcing software development can help you save money and hire the best professionals. Still, it also means having less control over quality and security. When deciding if outsourcing is the best for your business, think about budget, timeline, and what your company wants to achieve.

Advantages of Software Product Development Outsourcing

If you’re considering outsourcing, you must understand its advantages and disadvantages. Here are the benefits of working with software development outsourcing companies:

Cost Savings

One of the essential benefits of working with a software outsourcing company is cost savings. Many software development companies offer lower hourly rates than in-house teams. Outsourcing can save on costs related to recruiting training and benefits for in-house employees. It can also reduce overhead costs, such as office space and equipment.

Here are ways IT software outsourcing saves you money:

1. Lower hourly rates than in-house teams

2. Reduced costs for recruiting, training, and benefits for in-house employees

3. Reduced overhead costs such as office space and equipment

4. Increased scalability of operations

5. Access to skilled professionals with specialized knowledge

6. Flexibility to adjust resources according to changing needs

Access To Specialized Skills

Outsourcing software development can help businesses access professionals with unique skills and knowledge. This strategy can help the business stay ahead of its competition. It also allows them to scale up or down quickly if they need more or fewer people working on the project.

Improved Time to Market

Outsourcing software development can help businesses reach their goals faster. Outsourcing companies have teams of experts who specialize in the project and can complete tasks quickly. Outsourcing allows products or services to be released faster than if the business did it. This strategy could give them an advantage over competitors.

Increased Efficiency

Outsourcing software development is a way for businesses to become more productive. It means they can get help from outside experts with experience in this field. This way, they save time and money and focus more on their core operations. Outsourcing can help businesses simplify tasks and remove unnecessary activities. This way, you can concentrate on the things that will make your business more successful.


Outsourcing development allows you to adjust your plans and timelines by hiring fewer people. It makes it easier for you to start bigger or smaller projects than you initially thought. Plus, outsourcing helps you stay flexible and change quickly with the market.

Risk Management

Outsourcing software development can help businesses manage risks. Companies that outsource have ways to ensure the quality is good and things don’t go wrong, like technical problems. Working with an experienced software development outsourcing partner helps avoid costly mistakes. This way, you can ensure that your software meets industry standards.

Improved Quality

Outsourcing software development can lead to improved quality. The specialized processes ensure that the final product meets performance and quality standards. Working with an outsourced company helps businesses produce better products faster. They reduce the amount of costly rework or delays in getting them to market. By outsourcing, organizations can take advantage of experienced professionals at a lower cost.


Software development outsourcing helps companies be more innovative. Outsourcing companies get access to new technology to help businesses stay ahead of their competition. By outsourcing, companies can explore new and advanced ideas and keep up with the latest trends to stay ahead of their competitors.

Global Market Expansion

Businesses using outsourcing companies in other countries can expand their business. Outsourcing gives them access to new customers and new talent. It also allows them to reach a more extensive customer base. And it could lead to the business having more success and saving money.

Improved Customer Satisfaction

Outsourcing software development can help businesses improve customer satisfaction. By outsourcing, companies can free up time and resources to focus more on customer service, support, and communication. It also leads to better customer relationships and higher customer loyalty.

Types of Software Outsourcing Relationships

Different software development outsourcing models offer different levels of control and cost savings. It means you get access to varying amounts of access to unique talents. Let’s look at the differences between these models.

Onsite Teams

Onsite outsourcing means the outsourcing company sends developers to the business’s office. This setup is an onsite outsourcing arrangement and is ideal when projects need to be done quickly and accurately. It is helpful for companies that need fast turnaround times, like custom software development. This model gives the product owner control over deadlines and helps ensure that the quality of their project results is good.

Offsite Teams

Offsite outsourcing is an excellent option for those that need specialized skills or a larger team than they can provide in-house. It allows you to access the expertise of professionals from anywhere in the world. This model saves money and resources usually spent on hiring in-house staff and office space.

Offshore Teams

Offshoring is when companies hire a software development outsourcing company in another country to do the work. This setup is suitable for businesses that need resources not available near them. The different laws in other countries can also help you save money and gain advantages. By outsourcing, companies can use foreign markets without moving there and setting up operations.

Fixed Price Engagements

In a fixed-price outsourcing arrangement, the development company agrees to do the project for a fixed fee. This agreement works for projects with well-defined scopes and deadlines. It is also ideal for short-term projects where the outcome is evident from the beginning. Such an arrangement ensures that both parties understand the deliverables and timelines equally. This way, any changes can be accounted for in terms of time or cost. It is a great way to manage risk and ensure that businesses receive the quality service they deserve.

Dedicated Team Engagements

When outsourcing software development, companies hire experts to manage the project. It is helpful for complicated projects that take a long time. Companies don’t have to worry about finding and hiring their experts. The outsourcing software development company provides access to industry-leading professionals. It also helps organizations save money in the long run and makes it easy to respond quickly when market conditions change.

How To Choose Your Software Product Development Partner

When outsourcing software development, choosing a partner that meets your needs is essential. It should have expertise in the technologies used by your project and should understand your goals and timeline. Here are some considerations for choosing the right outsourcing developers:

Identify Your Needs and Goals

Before outsourcing, understand what your business needs and goals are. Find the right partner to give you the necessary technology, meet project deadlines, and stay within your budget. Look at a potential partner’s experience level and customer reviews to ensure they have what it takes to do the job well. It is also a good idea to check their portfolio. It will give you an idea of what the outsourcing company can do.

Research Potential Partners

Once you have identified your needs and goals, it’s time to start researching potential partners. Look for a partner with experience in the technologies used by your project. Check whether they have a good track record of delivering successful projects. When researching potential partners, requesting references from past clients is essential. Ask for a portfolio of the outsourced company’s work to get an idea of their skills and experience.

Evaluate the Fit and Compatibility

Before outsourcing software development, check if the outsourcing company is a good fit for your business. You want to ensure that you and the outsourced company agree on how to proceed with the project. Also, look for any potential problems or risks before signing an agreement. It will help avoid confusion later on and help create a trusting relationship.

Challenges To Overcome When Outsourcing Software Development

Outsourced software development also comes with some challenges that businesses need to consider. These include:

Communication Barriers

When outsourcing a software project, it’s crucial to ensure no communication barriers. It includes language differences and time zone differences. Establishing communication between your team and the partner helps address any issues quickly.

Time Zone Differences

Before sending a software development project to another company, consider time differences. It can cause problems with meeting deadlines and responding to issues quickly. For example, suppose the people working on the project are in a different time zone than the business. In that case, coordinating schedules and communication will take more work. But if you allow for time zone differences, avoiding confusion and meeting deadlines will be more manageable.

Quality Control

It’s also crucial to ensure that the software outsourcing company meets your quality standards. Set clear expectations and review the software developers’ work to ensure it meets your requirements.

Working with a reliable outsourcing partner like BIT Studios is crucial. With our expertise and experience, we can help you develop the best product possible. We offer a comprehensive range of outsourcing services tailored to your needs.

Security Concerns

Security concerns may arise because of a lack of control over the outsourcing company’s processes. Data leaks and unauthorized access can have serious consequences. Ensure that the outsourcing company has strong data security measures to protect your data. As much as possible, choose an ISO-certified partner.

Intellectual Property Concerns

Remember to draft a contract when you pay someone to make software for you. This contract should say who owns the software and any other materials. It should also say that the person making the software will not tell anyone else about it. The contract should also include the payment schedule and what will happen if either party wants to change the agreement later.

Managing Expectations

When hiring someone to do software development for you, it is vital to set clear expectations. You should agree on a timeline and what the goals are for the project. Creating a project roadmap detailing all milestones and deadlines is also helpful. This way, everyone knows what to do and when to complete it. Checking in with the team can also help ensure everything is going according to plan.

Lack of Control

It is hard to control a software project when you’re working with a team that is in a different place than you. It’s essential to ensure that the team understands what you want and meets your expectations. It might mean talking to them often, setting milestones, and providing clear goals. Having someone on your team who oversees the project can help make sure everything is done on time. Giving feedback is also an excellent way to hold both parties responsible for getting results.

Cost Management

When you outsource software development, it’s essential to manage costs. It means setting a budget and ensuring that the agreement includes monetary expectations. It’s also important to negotiate payment terms in advance. Ensure that the partner understands potential scope changes that could impact the cost. Performance-based payment structures can also motivate the partner to deliver high-quality work.

Legal and Compliance Issues

The outsourcing vendor must follow all laws and regulations when outsourcing software development. Read and understand the outsourcing agreement before signing it. Make sure to know the labor laws in both countries to know potential liabilities. Let a lawyer check the contract before signing it to avoid any risks or issues.

Best Practices for Ensuring Successful Outsourced Software Projects

How do you ensure a successful outsourcing experience?

1. Choose Carefully Between In-House or Outsourced Solutions

Consider the pros and cons of outsourced software development versus developing in-house. Consider various factors like cost, timeline, quality control, scalability, and expertise when deciding.

2. Identify Key Performance Indicators (KPIs)

Establish key performance indicators that outsourcing partners can use to measure their success. These KPIs will help you monitor the partner’s progress and ensure they meet all requirements.

3. Develop a Mutually Beneficial Relationship With Your Partner Company

A good relationship with your partner is imperative when outsourcing software development. Ensure you understand the contract and that both parties know the tasks and the project timeline. Provide detailed requirements and expectations to ensure the outsourcing partner understands your needs. Communicate often and provide feedback when necessary to ensure the project is progressing according to plan.

4. Establish Clear Expectations and Outcomes

You must clearly understand what you want and expect when outsourcing software development. You need to tell the outsourcing company precisely what the project includes and the processes involved.

Keep the outsourcing team in the loop on any changes or issues. Open lines of communication with the partner help maintain a strong working relationship and ensure smooth project execution.

On the other hand, you should also know how much it will cost and the expected quality of work. It helps ensure that everyone knows what to expect so that the project can be successful for both parties.

5. Identify Risks Now to Avoid Problems Later

When outsourcing software development, it is crucial to consider potential risks. You need to assess the outsourcing company’s processes and procedures for data security and quality control. Check their intellectual property protection regulations to ensure a successful outcome. Failing to do so could lead to issues that can be difficult and costly to solve.

Final Thoughts

Software development outsourcing can help businesses that need extra skills or bigger teams. It offers cost savings and access to more qualified professionals. Companies can also get fixed-price deals and dedicated teams for outsourcing.

But outsourcing does have some challenges too. Companies must pick the right partner and manage costs, expectations, and risks for successful projects. If planned well, outsourcing can save money while helping the business stay competitive within the budget.

If you’re still on the fence about outsourcing, BIT Studios can help you make an informed decision. Book an appointment to discuss your project today.

Originally published March 3, 2023, updated March 3, 2023

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