April 9, 2024

Outsource IT: Basics of Software Development Outsourcing

Nadya Bakhur

Researcher, Technical Writer


Software Development Outsourcing: Key Points Explained
April 9, 2024

Outsource IT: Basics of Software Development Outsourcing

Nadya Bakhur

Researcher, Technical Writer


Software Development Outsourcing: Key Points Explained

As digital transformation becomes a competitive edge and survival imperative, software development outsourcing becomes an integral part and driver of advancement and growth.

The practice is adopted by companies around the world, from start-ups to huge corporations, to satisfy the demand for technology expertise within the budgetary limits and complete more work in less time.

We have gathered the key benefits that software development outsourcing brings to businesses and the main points to consider before you outsource your project.

Let’s get started.

Introduction. Software Development Outsourcing Before 2020 & Now

The global contract value of the information technology outsourcing (ITO) market last year (2019) amounted to $66.5 bln, according to the data from Statista. Software development outsourcing services have never been losing popularity over the past decade. Now, with the increased level of remote work worldwide, the ITO market is expected to grow exponentially.

We’d want to introduce you to the major benefits of software development outsourcing so you can see the value that these services offer to businesses.

In addition, below we provide useful tips to help you outsource web and mobile development in the right way and team up with professionals.

Software Development Outsourcing Services in the Nutshell

Outsourcing a Software development project or just a part of it is basically hiring a vendor company to provide services related to software development within your requirements. Outsourcing partner provides you with its specialists with hands-on experience fitting your specific project.

Software Development Outsourcing vendors deliver quality services and an opportunity to save time and budget on recruiting talent to:

  • establish web or mobile development in-house;
  • overcome delays in product delivery;
  • get rid of bugs;
  • accelerate your growth in digital.

NEKLO has been in the technology industry for over ten years and seen many businesses that demand software development without fully realizing its challenges and great rewards.

We’ll start by clarifying the essence of the most common engagement models that software outsourcing vendors offer.

Types of Outsourcing. Cooperation Models

custom software development company

Custom web development and other types of information technology outsourcing have 3 basic models: staff augmentation, project-based model, and dedicated team.

We’ve made a brief overview of them to help you map out your software development outsourcing strategy in advance.

the final decision is postponed due to uncertainty of which engagement model to choose

Staff augmentation

Staff augmentation (also referred to as team extension) as a model of IT outsourcing means attracting remote professionals to augment the staff of your company for a certain period of time.

Staff augmentation makes sense when:

  • your existing staff is not enough to complete the project or the development process is slowed down;
  • you need specialists with advanced or rare expertise to plug the skill gap in your team;
  • you are looking for an experienced consultant to train your staff members or to lead your software development project requiring specialized skills.

Project-based model

You might have also come across this model being called as managed IT services and full-process outsourcing.

In the case of a project-based cooperation model, the outsourced development team takes responsibility for your project from start till launch, including team organization, project management, and quality assurance. Your management efforts can be minimized and time liberated to focus on core business activities. However, other models provide a much faster setup.

Project-based model is your choice to opt for if:

  • you need full-cycle development for a small-scale project or a project that you don’t have development expertise for;
  • you can’t monitor project development stages due to being overloaded with other projects, etc;
  • all the project requirements are clearly defined and are not likely to change.

Dedicated team

Dedicated team model implies hiring a team of IT specialists needed to satisfy the requirements of your project. The model allows you to fully control the work in progress as well as the intermediate and ultimate results.Your hired dedicated team integrates with your in-house team or your another vendor to work on an outsourced part of the project

Having worked with quite a big number of clients, we have identified the common need in having rapid access to development process expertise and expert practices.

That’s why at NEKLO we offer the dedicated development team engagement model as a standalone service. We have several pre-assembled teams ensuring accelerated project development ramp-up and delivering all the important features that this cooperation model incorporates.

The dedicated team model will suit you in case you have:

  • an established development team but lack resources or essential expertise;
  • flexible project requirements and a team that is supposed to scale during project implementation;
  • limited time or budget to hire and train an in-house team for the project.

Major Benefits of Software Development Outsourcing

Outsourcing web and mobile development projects broadens horizons for business owners as it makes it possible to access and take aboard high-class talent from all over the world.

Below we’ve outlined the 5 software development outsourcing benefits that reinforce project pipelines.

1. Optimal price-quality ratio

For businesses opting for software development, value for money is one of the primary considerations. Work outsourcing is the right way to receive quality results at reasonable costs. Vendor companies’ rates are stated clearly in most cases and vary according to a specialist’s seniority level.

No need to recruit new employees, buy equipment, and spend money on insurance and training.

2. Access to domain expertise and latest tech

US software development companies and outsourcing vendors from all over the world provide specialized services, such as web and mobile development, AI and IoT app building, ecommerce development, and other industry-related software tools design.

Software development outsourcing gives businesses a chance to cooperate with professionals who know the niche very well and keep an eye on the latest technology.

Companies appreciate their reputation that is based on the success of their projects. So they aim to learn and advance the knowledge to deliver solutions that stand out.

3. Flexibility to change strategy

custom ecommerce development company

Outsourcing your software development project saves time on recruiting, training, and housing specialists that you lack at the moment. In addition, it cuts off your concerns about scaling your staff in case the number of tasks changes project-to-project.

Developers with the experience of implementing various projects, which results in their flexibility and adaptability to changing requirements and technology stack.

4. Accelerated project work and productivity

When you outsource a software development project, you significantly reduce its time-to-market. Outsourced technology vendors are skilled with the tools and frameworks that help speed up the development processes.

Improved performance of the software developers and project managers will help you get the ultimate solution on time or even faster.

5. Minimum resource and technical risks

When NEKLO managers discuss project specifications and must-haves with our clients, we deal with concerns like losing control over the development process and having security issues. Taking responsibility for a project you have little to none expertise in can be stressy.

In fact, through outsourcing solution development to professionals you:

  • ensure it is tested thoroughly to be fully functional and stable;
  • migrate responsibility for the final product quality to those who know software quality standards;
  • secure your product, as well as its development processes and related information.

Challenges & Risks of Software Development Outsourcing

Risks are bound to arise unless you prepare in advance.

We’ve made up a brief review of the common IT outsourcing challenges and how to reduce them and launch a seamless outsourcing initiative.


When hiring from abroad, you might face challenges like language barriers, time zone differences, as well as cultural peculiarities. Communication with an outsourced team located halfway around the world becomes complicated as negotiations might take hours.

To avoid the issue and give a boost to performance:

  • use advanced project tracking and communication tools like Jira or Slack to help you follow and handle the development process;
  • introduce an interpreter to remove language barriers;
  • agree to hold weekly calls with your outsourced team manager to keep the lines open and stay updated on the progress.

Distress about data hacking

For ecommerce and any business, private and financial data is above wealth. Entrusting your business software creation to a third-party company often seems risky and uncertain.

Here is what you can do to prevent problems with security and confidential data leak :

  • Draw up a non-disclosure agreement (an NDA) to sign before the work starts. This document legally limits the business data that your vendor company will have access to and restricts the use of data outside the project environment;
  • Make sure to include a clause clarifying any copyrighting issues in your contract with the vendor, so that you can protect your intellectual property rights;
  • Use specialized tools like TimeDoctor to monitor and track accesses that are currently open to your software vendors.

Abandoned quality standards

Software development outsourcing is tempting at times as the practice has proved to significantly lower software development costs. However, you can put your business at risk of compromising on the quality of the end product.

To make sure you collaborate with adepts in software engineering, consider:

  • asking your potential outsourcing software development company for references, studying existing reviews from the company’s clients on the work done to get objective opinions;
  • offering a test task to check if the skills of the potential outsourced team suit your project requirements.

How to Outsource Software Development Projects the Right Way?

If you are thinking of starting web / mobile development for your business or already have a similar project running, it involves turning to software development services as a rule.

The question that is always in the air is how to find and choose a reliable technology partner and outsource software development in a proper way?

We have made up a list of what you can do before making a decision to win in the end.

1. Shortlist the candidates

Make up a list of 5 to 7 software development companies and draw up a table to structure the information collected about them.

Here is an example:

Company NameRates (possible discounts)Solution OfferedReferences from the former ClientsCompany 1Company 2

Organizing information in a table will help to easily compare and correlate proposed conditions, see every detail clearly, and evaluate each company’s offer faster.

2. Take time to check reviews on the potential partner

You can’t trust your business to a company that is not able to sustain itself financially or lacks clients.

Carefully study the information on a company’s website and social media, check if the followers’ engagement is well organized.

Building a strong social media presence takes time and effort from a company, so if the most of feedback is positive and your potential partner is competent at building relations with their followers, it’s a sign of proficiency and stability.

3. Define product requirements and draw up specifications

What you can do to get the product the way you see it?

To allow your potential partner to easily grasp the idea of what your solution will serve for and how it should function:

  1. Gather product requirements. It will help to specify what your solution needs to do.
  2. Draw up a detailed specification. It will serve to clarify how your end product meets the requirements.

Ask the outsourced team to participate in defining specifications to help make it a valuable guide on how to design and develop your solution. The vendor company can bring new ideas on what your product should look like and what strategy to adopt so that your solution can deliver benefits continuously.

Wrapping Up

The Internet and a vast variety of communication and management tools available today make it possible to outsource the development of your innovative web or mobile solution to an expert from any part of the world. Just try googling “custom software development company US” or the like to see some of the leading technology companies that can help you.

The practice of software development outsourcing is one of the fastest ways to get your software product delivered by an experienced team and on time.

Our team welcomes you to consider NEKLO as a candidate to take over your project and empower the development process pipeline. We’re ready to assist.

If you’re interested and looking for a dedicated team of qualified software developers, QA specialists, and business analysts, talk to us. We provide a free consultation.

Or else, reach out to our sales rep Alex Mokievets through the LinkedIn page directly to discuss the details of your five-star solution.