Many decisions must be made when outsourcing software development, including which software development outsourcing partner understands your technology needs, where to find a reliable software development agency, and which outsourced team will fit your unique business goals, among others.
Statista shows that the outsourced software development market will reach a value of £482 billion this year, with a steady projected growth projection of 8.28% annually until 2029. However, knowing how to outsource software development projects to a reliable company will save plenty of time and money.
What Is Outsourced Software Development?
Outsourcing software development involves hiring a third-party service provider to develop software or handle specific parts of the software development process. Startups to multinational enterprises regularly outsource to a software development company or freelance development team to gain access to external expertise, implement rapid development, or leverage specialised skills.
The Benefits of Outsourcing Software Development
Various software development services provide access to a range of benefits when developing a software project with an external development team. Partnering with the right software development outsourcing company can bring many benefits, including:
- Core Business Focus: Outsource future projects to focus on core business activities and operations while an external team handles the entire development process.
- Cost Efficiency: Outsourcing is a cost-effective solution that doesn’t require long-term salary commitments, hardware purchases, and internal team benefits.
- Cross-Functional Teams: Gather cross-functional teams with a diverse range of skills to infuse internal teams with the right technology expertise.
- Dedicated Team Access: Use a dedicated team to work exclusively on your software project without having to hire full-time developers for more cost-reduction benefits.
- Effective Communication: Selecting the right outsourcing company will streamline communication within the software development team and throughout the software development life cycle.
- Faster Time to Market: A reliable outsourcing company provides the right talent from the start, allowing a software project to hit the market faster.
- Flexibility and Scalability: Scale your internal team with external resources as projects require more attention, allowing the flexibility of temporary augmentation services.
- Global Talent Pool: Open your product idea to a diverse talent pool, leveraging cutting-edge technologies and choosing the right fit to infuse your internal software development team.
- Risk Mitigation: The right outsourcing partner uses prototyping and contracts to protect product ideas and test the proof of concept, reducing software development risks.
- Specialised Skills: Gain access to specialised technical expertise from external teams when building complex projects or developing cutting-edge solutions.
- Zero Micromanagement: Benefit from the effective project management and methodologies provided by a trusted outsourcing partner to reduce micromanagement.
Possible Risks of Outsourcing Software Development
Despite massive outsourcing benefits like cost-efficiency and diverse talent, the software development outsourcing market contains some risks if you don’t partner with the right company:
- Choosing the wrong outsourcing software company from the beginning is a mistake that could cost more money, waste tons of time, and result in delayed projects.
- Losing control over the objectives and development process when partnering with a team that doesn’t provide a contract or scope can mean the software fails to meet expectations.
- Ensuring data security in the final product is pivotal, and choosing an outsourcing partner focused on data security following the GDPR standards will protect digital assets once launched.
- Hidden costs involved with unreliable outsourcing partners are another risk, and companies must request upfront project scopes defining the timelines and budgets before project commencement.
How to Outsource Software Development Projects Successfully
Let’s ensure every business knows how to outsource software development, focusing on a step-by-step process designed to protect the software project idea, concept, and development process. Use our complete guide to software development outsourcing to ensure project success.
Step 1: Discover Your Technology Profile
Talk to digital strategy consultants to understand your technology profile, what your software project needs, and which technologies and resources may fit the product better. That way, you’ll make a list of resources for software development projects based on competent advice from a trusted vendor.
Step 2: Clearly Define Your Project Goals
Building software aligned with business goals is the way forward. Clearly define the project’s goals, which may include what the software does, who it should target, and what benefits your business aims to achieve. Indeed, an outsourcing partner provides streamlined requirements but it begins with goals.
Answer these questions to define the project’s initial goals:
- How will the product serve my business?
- Who will the product appeal to as end users?
- What existing technology inspired the software project?
- Is the product an innovatively new concept?
- Does the product idea have a proof of concept?
- Are there any problems the software project aims to solve?
Step 3: Write a Scope Statement
The project scope will develop more comprehensively in later steps. However, successful software outsourcing begins with an initial scope statement. Consider the following criteria before choosing a statement to match the upcoming scope, which will outline each of these parameters in detail:
- Project objectives like high-level goals, target audience, and business advantages.
- Project deliverables like sprint cycle results or minimum viable product MVP development.
- Project constraints like software development milestones, timelines, resources, and budgets.
- Out-of-scope ideas like what the product won’t do and what features will be excluded.
- Stakeholder approvals like buy-in from other company executives to ensure shared visions.
Step 4: Choose Onshore, Nearshore, or Offshore Outsourcing
The next step is to decide whether your software project requires a nearshore, onshore, or offshore development team. Choosing the right outsourcing team for your project depends on a few factors. Discover the key differences between the models and how to choose one.
Onshore vs. Offshore vs. Nearshore Outsourcing Model
Nearshore software development describes partnering with a team from a parallel continent or country, ensuring some alignment with time zones and languages, typically keeping the time zone differences to about two hours. Clients have the opportunity to communicate mostly within business hours.
Outsourcing to an onshore developer team means companies hire external resources from an outsourcing partner in the same country, aligning culture, language, and business hours. It’s the ideal outsourcing model for staff augmentation services when collaboration with an in-house team matters.
On-site outsourcing is the fourth model that allows companies close by to hire our teams to infuse an in-house team on the business premises. The on-site outsourcing model is popularly implemented with our staff augmentation services, which are available to clients within our region.
Finally, the offshore outsourcing model describes how businesses outsource IT needs to a software development company in India, Latin America, and other destinations further than two hours out of the desired time zone. Offshore outsourcing often costs less but has time and communication challenges.
What to Consider Before Choosing an Outsourcing Model
Know how to choose a software development company based on an outsourcing model that fits your business needs. Consider the following factors before selecting an onshore, offshore, or nearshore outsourcing model:
- Time Zone Alignment: Outsourcing to a team that can collaborate with an in-house team during business hours will ensure steady development progress.
- Cultural Alignment: Outsourcing to an offshore partner that doesn’t understand cultural nuances could create project delays and overruns.
- Communication: The communication channels used and language barriers with offshore teams can cause development progress delays and misunderstood project requirements.
- Costs Involved: Offshore teams can cost £40 per hour in Latin America or £20 per hour in Asia, but consider the other factors before choosing a model based only on cost-effective solutions.
- Project Management: Nearshore or onshore teams typically use the same management tools an in-house team understands, streamlining progress, communication, and collaboration.
- Development Methodologies: All outsourcing models may use leading methodologies, but aligning an in-house team with nearshore or onshore companies guarantees a mutual understanding.
Step 5: Choose an Outsourcing Engagement Model
Every company offers different engagement models, with some companies offering the full range of options. Discover how each model works before reviewing companies to understand what each partner brings to the table when building software for outsourced clients.
Staff Augmentation Services
At Pulsion, we provide staff augmentation services, a popular engagement model that allows businesses to scale teams as they need technical expertise. We provide a contact service level agreement (SLA) based on the development project’s needs, whether for on-site or onshore services.
Project-Based Model
The project-based engagement model is simple. A client or business outsources to a software development company and project manager for the project duration alone. Clients won’t worry about learning how to manage a software development team but will still partake in all product decisions.
Time and Material Model
The time and material model allows organisations to pay for the time and resources used to develop software with an outsourcing partner. You maintain a lot of control over the development project with a flexible engagement model that welcomes approved changes to the software requirements.
Fixed Price Model
The fixed-price model is what it sounds like, allowing businesses to agree on a budget before the software development life cycle. The engagement model can restrict flexibility if previously identified market gaps are found. Still, it provides cost efficiency for clients knowing what they need.
Dedicated Team Contract
Outsourcing to dedicated software development teams allows business clients to maintain a lot of control and sign agreements that protect intellectual property. Companies pay a monthly retainer for the dedicated team, resources, and time spent on the project. The model also provides a lot of flexibility.
Step 6: Shortlist Software Development Outsourcing Companies
The right software development outsourcing partner understands software development projects must align with business objectives. Shortlist an outsourcing agency list with some research to ensure your software solution lies in the hands of a professional team.
Review the Company’s Portfolio and Clients
The most cost-effective outsourcing agency isn’t always the right fit. Review the company’s portfolio, clients, and case studies to understand how they served companies with the right software solution, solving real-world technology problems and delivering software that aligns with objectives.
Consider Freelance Developers From Trusted Sites
Shortlist a freelance developer or team from a trusted site based on reviews, portfolio entries, and industry expertise if seeking to expand to offshore or nearshore services for product development. Some trusted sites include Freelancer, TopTal, UpWork, Fivver, and Gigster.
Step 7: Evaluate the Outsourcing Company
Once you have an outsourcing agency shortlist, it’s time to dig deeper, review more, and consider other factors that influence whether the team of software engineers will suit your project needs. Consider the team size, years of experience, technology options, methodologies, and certifications.
Development Team Size
The development team size needed for a development project depends on whether companies already have in-house development teams or require a dedicated team to handle the entire process. Consider software outsourcing to an agency with the right team, enabling flexible and scalable teams.
Experience With Broad Technologies
The technologies and expertise of the software engineers within a company will reveal whether the development company can meet expectations and deliver the requirements. Choose a software development company proficient in multiple cutting-edge technologies to ensure success.
Extensive Service Options
Partner with an outsourcing provider that offers extensive services to develop all kinds of projects, including custom software development tailored to business needs, full-stack development for back and front-end solutions, and web design and development services for web-based products.
Software Development Methodologies
Experienced developers from a trusted outsourcing software development company will use the following methodologies to deliver excellence in every product:
- Agile Methodology: The Agile software development process is an iterative approach to developing solutions with incremental lifecycles to easily adapt to changing requirements.
- DevOps Engineering: The execution of continuous integration/continuous deployment (CI/CD) models throughout the software development process to enhance constant improvements.
- Waterfall Methodology: A 5-stage development process, with each project workflow stage cascading into the next, allowing software engineers to focus on one stage at a time.
Industry Expertise
Outsourcing software development projects to a team with industry expertise is ideal, especially if your business is within a high-risk sector like finance or insurance or a highly competitive sector like e-commerce or social media. Choose an outsourced team with industry expertise to match your sector.
Compliance Certifications
Finally, ensure your business is outsourcing projects to a certified team. Look for companies with ISO/IEC 27001 certification for data security before choosing an outsourcing partner. Also, work with a certified AWS partner or Microsoft Azure partner for cloud-based solutions.
Step 8: Request an Initial Consultation
At Pulsion, we welcome clients to contact us for an initial consultation to understand our company, which also helps us understand your needs. Request a consultation to ask questions, bounce ideas around, confirm expertise, seek advice, or get the ball rolling with the right agency.
Step 9: Set the Collaboration Expectations
Present your initial scope statement and objectives to help the agency or developer design a contract detailing the collaborative efforts, deliverables, and expectations. Discuss communication channels, project management tools, and how the team must update you on the progress of development projects.
Step 10: Draft and Sign the Paperwork
Knowing how to outsource software development also requires businesses to understand the contractual obligations and paperwork to protect intellectual property, product ideas, and business processes a company may share with the development team to gather requirements.
Master Services Agreement (MSA)
A master services agreement (MSA) will stipulate the basic terms and conditions of the collaboration between clients and the agency. The contract will include elements like a dispute resolution process, confidentiality terms, support terms, development process conditions, and project management tools.
Non-Disclosure Agreement (NDA)
The non-disclosure agreement (NDA) protects the intellectual property of any product idea or software vision. Software developers and clients agree not to share sensitive data or information about each other’s processes and outline the consequences of contractual breaches on both ends.
Services Level Agreement (SLA)
A services level agreement (SLA) outlines the contract details between clients and agencies in greater detail, including the budget, initial requirements, milestones, deadlines, deliverables, and quality standards. Trusted companies also include key performance indicators (KPIs) and monitoring details.
Statement of Work (SOW)
A statement of work (SOW) contract is a low-level agreement that outlines specific project requirements, deliverables, milestones, and costs. Freelance software developers typically use the contract as a low-level version of the SLA or MSA agreement.
Step 11: Collaborate to Define the Project Scope
Outsourcing software product development projects in a collaborative environment is ideal. Be a part of defining the general scope to outline the budget, timeline, and deliverables the development team will use to create your end product. Here are the primary scope areas a project manager defines:
- Project Objectives: What problem will the software solve, and who must it target?
- Project Deliverables: What results do clients wish to see at the end of each development cycle?
- Project Constraint: What is the estimated timeline for launching an MVP and the final product?
- Out-of-Scope Details: What features or functions should engineers not develop or integrate?
- Price Estimates: What hours are required to complete the project at what hourly rate?
- Stakeholder Approval: Which stakeholders approve, and what designations are assigned?
Step 12: Choose the Right Technology Stack
Work with a team that recommends cutting-edge technologies like Ruby on Rails, Python, Laravel, TypeScript, JavaScript, Django, and Docker to deliver software that exceeds expectations. Consider adding machine learning app development and artificial intelligence for innovation and competitiveness.
Step 13: Request a Project Requirements Document
Reliable outsourcing companies provide a project or software development requirements specification document (SRS). Professional agencies know how to create software development requirements specification document that defines every detail, technology, feature, and even interface design.
Step 14: Approve the Requirements Document
Review the SRS document to approve or request changes, but it will be pretty technical. A project manager typically uses requirements analysis for software development to ensure the SRS document aligns with business objectives, market trends, user needs, customer demands, and client expectations.
Step 15: Collaborate in the Development Process
Reliable teams welcome clients who collaborate when outsourcing product development. However, it helps to understand how the process works before requesting progress reports and making recommendations that may change the scope, SRS document, or minimal viable product testing.
How the Software Development Process Works
Here’s how the typical development process works when using the Agile model:
- Requirements Engineering: A project manager defines the software’s specifications, business needs, and project requirements with requirements gathering and analysis techniques.
- Planning the Project Scope: The project manager will combine the draft scope with an official scope outlining the entire process, milestones, deadlines, budget, and deliverables.
- Designing the Elements: A design team will design a wireframe or the elements, layouts, and features of the product for prototyping and user acceptance testing.
- Prototyping for Proof of Concept: The team will launch a prototype into a live platform for validation from real-world users and to prove the concept.
- Software Development: The developers write the code using the chosen programming languages and integrate the preferred technologies and APIs.
- Quality Assurance Testing: Quality assurance (QA) engineers will test the product using multiple software testing methodologies to provide assurance and security.
- Software Deployment: The team deploys the software into the live or cloud-based environment once all iterative cycles prove quality assurance, security, and user acceptance.
- Maintenance and Support: A leading outsourcing software company will provide ongoing support and maintenance services to keep software secure and updated.
Outsourcing vs. In-House Development Overview
Ensure an outsourcing partner understands your needs, and you’ll have more benefits than expected. Our outsourcing vs. in-house software development article explains the key differences in detail. However, we’ll reveal essential differences to consider before investing.
Outsourcing vs. In-House Development Costs and Core Business Focal Points
Hiring an in-house team to develop software, maintain IT infrastructure, and upgrade outdated systems can become costly due to businesses having to supply the IT infrastructure, hardware like laptops, desktops, and smartphones, or the costs involved in recruiting, training, and continuously paying staff.
Many companies outsource software projects for cost-effectiveness, enabling them to reduce the long-term costs of recruiting in-house developers, especially when development projects are temporary. Here’s a breakdown of the typical hourly rates for an outsourced team in different regions:
- Developers in North America cost £50-£120 per hour and provide extensive expertise, often working on enterprise-level applications and software products.
- Developers in Western Europe cost £40-£95 per hour and provide secure and high-quality engineering results with a strong focus on meeting global standards for innovative solutions.
- Engineers in Eastern Europe cost £20-£50 per hour and provide specialised expertise for mobile, web, and software applications aimed at competing in their markets.
- Engineers in Asia cost £12-£35 per hour and provide affordable development solutions for startups with an extensive pool of talent available, but the quality standards aren’t tops.
- Developers in South America cost £16-£40 per hour and provide good expertise for simple mobile and web development projects as a nearshore option.
- Developers in Africa cost £16-£35 per hour and provide emerging skills from an affordable talent pool spread across the continent.
When Outsourcing Software Product Development Is the Better Option
Choose outsourced development under the following circumstances:
- A complex or custom project needs specialised expertise or experienced developers.
- Cost reduction is the primary goal of developing and launching a new product.
- You have limited in-house development resources and need more talent and skills.
- Your business needs rapid prototyping and development for scalability and competitiveness.
- You must focus on core business goals, strategies, and activities without overseeing projects.
When to Choose an In-House Development Team
Choose in-house development or recruit an in-house team for the following use cases:
- You wish to maintain full control, oversight, and management.
- Your business can obtain long-term investment in an in-house team.
- The project needs dedicated focus and improved community in-house.
- A core business objective is developing in-house team expertise and skills.
- You wish to guarantee control over intellectual property rights.
Choosing the Right Outsourcing Partner for Software Development
Knowing how to outsource software development is a start. Partnering with the right outsourced development company can streamline the entire process, ensure high-quality software delivery, and protect all intellectual property rights. Our outsourcing software development services tick all the boxes.
At Pulsion, we’re an accredited company with certified developers who understand the latest technologies and provide all kinds of development, consultation, and maintenance services. Some of our extensive range of professional outsourcing services includes:
- Custom software development
- Digital strategy consulting
- Full-stack development
- MVP development
- Enterprise software development
- Custom CRM development
- Artificial intelligence consulting
Learn more about us, and visit our clients page to see the work we’ve done for startups and enterprises. Our teams complete multiple case studies, and our company stands nearly 30 years strong. Contact us today to ask any questions, or feel free to use our consulting services to assess our company better.
Conclusion: Outsourcing Software Development
An outsourced team for software development can open many opportunities, but knowing how to choose the right agency, freelancer, or even location will make all the difference to your final product. A trusted software development outsourcing partner leads without removing your control.
The ideal partner also welcomes collaboration and can communicate with your in-house team during business hours. Reimagine what you considered to be outsourcing when outsourcing software product development to the right teams. Contact us today for an initial consultation or expert advice.
How to Outsource Software Development FAQs
How do I choose the right outsourcing partner?
Selecting the right outsourced team is about considering objectives, locations, costs, and development methodologies. It’s also about reviewing past clients, understanding the company’s services, and aligning the entire process with business strategies to maintain stakeholder buy-in for new products.
How can I manage an outsourced development team?
Discover how to manage a software development team, particularly if using nearshore, offshore, or onshore services. Some best practices include setting clear communication protocols, goals, and expectations. Business leaders can also benefit from using Agile methodologies and project management models designed to streamline collaboration.
What are the future trends in outsourcing software product development?
The latest outsourcing trends include emerging destinations, shifting objectives, and scalable insurance. Companies are using an outsourced development team to achieve new goals and remain competitive in the ever-evolving digital landscape. Here are some outsourcing trends in 2025:
- Companies worldwide are outsourcing to Western Europe because the region has a strong focus on innovative solutions and high-quality standards.
- Businesses are enhancing cybersecurity and data protection with remote outsourced teams providing updated technical expertise to ensure data security.
- Organisations are outsourcing projects to integrate cutting-edge technologies like artificial intelligence, data analytics, process automation, and machine learning.
- Nearshore and onshore outsourcing are proving more effective with cultural alignment and time zone differences being the biggest challenges with offshore options.
- Scalability and security are key objectives for healthcare, finance, banking, insurance, retail, human resources, and manufacturing industries outsourcing more projects.
What are the challenges of outsourced software development?
Outsourcing projects to the wrong team can create the following challenges:
- A lack of quality control, assurance, and testing.
- Communication breakdowns during the development stages.
- Unprotected intellectual property rights without signing contracts.
- Hidden costs involved in the development lifecycle.
- Data breaches caused by unskilled and uncertified developers.
- Cultural variations that may hinder the progress or quality of products.
How much does an outsourced team cost in the UK?
The cost of outsourcing app development can range, depending on project complexity, engagement model, project requirements, and team size. For example, a small team with 1 project manager, 1 QA engineer, and 2-4 entry-level to mid-level developers will cost £3,200 to £19,000 per 40-hour week.
What types of software development projects can I outsource?
Opt for outsourcing software development services that offer various services and technologies to ensure every project will be completed successfully. Some examples of outsourcing services include custom CRM development, enterprise software development, and custom software development.
How can I ensure data privacy and security for sensitive data?
Partner with an outsourced team that provides contracts like a non-disclosure agreement (NDA) and services level agreement (SLA), ensuring the agreements detail all deliverables and expectations. Working with an ISO 27001-certified outsourced team also enhances data security.
Can an outsourcing product development partner train an in-house team?
Yes, our dedicated software development teams or staff augmentation services can provide training and infuse in-house teams with the right skills and expertise to tackle any project. Our teams will help an in-house developer team complete complex projects easily with a range of technology expertise.
