Software Development Outsourcing in 2022: A Complete Guide
Learn more about the advantages of outsourcing software development and what to look for in a development partner.
Jan 26, 2022
Software development outsourcing allows you to rapidly complete IT projects without the delay, expense, and hassle of hiring more staff. Many businesses have found outsourcing to be an excellent way to gain a competitive advantage.
According to the Deloitte 2021 Global Shared Services and Outsourcing Report, cost reduction and process efficiency and standardization have been outsourcing’s most tangible and attainable benefits. Of the executives surveyed, 88% reduced costs through outsourcing and 78% improved efficiency.
The goal of this white paper is to help you determine if software development outsourcing is right for your business. We share what to look for in a custom software development company, how much outsourcing costs, and the benefits it delivers.
Software development outsourcing is the practice of hiring an outside company to consult on, build, test, implement, and support a software product. Unlike SaaS products, there usually are no recurring costs or licensing fees associated with the resulting software. You own it.
Technically speaking, software development outsourcing can be staff augmentation, a dedicated team, or a project-based contract. The difference between the three types boils down to who’s responsible.
Staff augmentation involves hiring a team of outsourced software professionals to perform a specified task. They may work offsite or in your office, but they report to you either way. You’re responsible for managing the software project.
When you engage a dedicated team, your in-house team and the outsourced team share responsibility for project deliverables. The dedicated team may work onsite or offsite, but either way, they focus solely on your project for the length of the contract period.
In a project-based contract, the custom software development company manages the entire process and establishes periodic updates on their progress. They are responsible for the design, development, testing, and delivery of your software product.
We will focus on project-based arrangements for the bulk of this discussion.
Advantages of Software Development Outsourcing
Outsourcing the development of your custom software or application delivers several benefits over hiring or expanding an in-house development team.
Tailored to Your Needs
The first advantage is that you get software customized to your business and built to your specifications. Rather than “making do” with off-the-shelf solutions that only meet some of your needs, your tailor-made software has all the features and functions you’re looking for.
Lower Cost Over Time
Ready-made software may come with a lower initial price tag, but recurring monthly or annual license fees can quickly drive the cost higher than what you would pay for a custom solution. Bespoke software development costs more upfront, but you own the software at the end. No recurring fees or buying additional seat licenses as you grow.
Easier Maintenance and Support
When you have your own software built, you bring maintenance and support in-house. While this may sound like a downside, think about the last time you needed support for ready-made software. How long did you have to wait for a reply? How long before your problem was fixed? With in-house support, you get a response much sooner. At worst, you have to contact the software development company that created it for you for fixes or upgrades.
You Own It
We’ve already mentioned the advantage of not paying recurring fees or licenses, but that’s not the only advantage to owning your software. You’re also not limited by someone else’s rules of use. You can add as many users as you want, no matter where in the world they’re located.
And if the software is something you only need to use once or twice a year or for a specific, one-time use, building your own application may be cheaper.
Better security is another significant advantage of custom software. No software is entirely secure; given enough time, criminals can breach just about any software package—commercial or custom. They try to break into commercial software solutions because it’s a bigger payoff—millions of users’ private data spread across every business that purchased the breached software.
Custom software is small potatoes by comparison. The risks and penalties for hacking your custom solution are just as dire, but the rewards are far smaller. Bespoke software also has the advantage of being new to hackers. They’re familiar with commercial solutions and know the weaknesses to exploit. But with tailor-made software, they have to start from scratch.
What to Look for When Outsourcing Software Development
When outsourcing a software development project, the three most important factors to consider are experience, cost, and culture.
Find the Right Blend of Experience
Experience is important, but the right experience is critical. A software development company that’s been around for several years may have experience, but how familiar are they with the technologies necessary to build your product? This question is particularly crucial to ask if your product depends on newer or rapidly advancing technology, such as artificial intelligence and machine learning. Have they worked on similar software development projects? How familiar are they with your industry?
Check out their published case studies. Look up their reviews on Clutch.co, TrustPilot, GoodFirms, and similar sites. Get references from them and ask those references about the technology used. Try out the software they’ve built, if you can. Is the design intuitive and easy to use?
A software development partner with experience building products like yours will be better positioned to create a high-quality solution for you.
Consider Cost Carefully
No one wants to spend more than they have to—especially when budgets are tight. And budgets are always tight, right? But while the lowest-cost partner might be alluring, keep in mind the cost if they deliver a low-quality product. You get what you pay for, after all.
If the product fails to meet your needs, will you have enough funding left to hire someone else to fix it? Will your customers give you a second chance?
Take a close look at what you get for the price they quote. Is there a limit to the amount of change they permit? How about bug fixes and support after the project is complete?
If you want a quality software product that meets your customers’ needs, choose a partner with the best mix of experience and knowledge and avoid the bargain-priced shops.
Ask About Communication and Transparency
When working with an outside vendor, communication and transparency are paramount. A steady flow of project information keeps you updated on the project’s status and allows you to make course corrections when needed. Staying in the loop prevents unpleasant 11th-hour surprises.
To ensure they provide a high level of transparency, ask them how they communicate during project development. For example, what’s the cadence of communication—daily, weekly, or other? How is communication handled—over a messaging app like Slack, via video or conference calls, through email, or all of the above?
Working with an outsourced development company involves a high level of trust and collaboration. Therefore, make sure you are comfortable with how they communicate.
Explore Their Development Process
The software development methodology a company uses can tell you much about them. Most development teams use some form of Agile or an Agile-Waterfall hybrid, but each team adapts the methodology to the way they work.
Ask your potential vendor to explain step-by-step how their software development process works. How do they handle change? What project management tools do they use? Will they prototype your product before they begin development?
Will they develop a Minimum Viable Product (MVP)? An MVP is a simple but functional version of your product that solves a single, significant problem for your users. MVPs are highly useful for identifying flaws in product design and making critical development decisions. You might even release an MVP to gain feedback from early adopters.
As you learn about their development process and methodology, weigh it against your own process and needs. If you see a lot of crossover and similar thinking, that’s a good indicator that you’ll work well together.
Reasons Not to Outsource Software Development
So far, we’ve looked at the reasons you may want to consider outsourced software development. In some situations, however, you should probably not hire a custom software development company.
You Want a Cheap Solution
Custom software development can be cost-effective, and it can save you money in the long run, but it’s not a cheap fix to a problem. If you don’t have the funding to hire a top-tier software development company, you might want to find additional investors or make budget cuts in other places.
Hiring a bargain-basement company will likely result in a low-quality solution that won’t recoup even a meager investment.
It’s Your Way or the Highway
You already know how the final product should look. You can see the design in your mind’s eye and know the features and underlying technologies. The product you envision is exactly what your users want, and no amount of market analysis or user feedback will change your mind. You’re not interested in collaboration; you just need people to build the software the way you tell them to.
While your conviction is admirable, you’re not likely to get high-quality software that way. Most experienced developers know that quality requires collaboration, and without it, they’re doomed to disappoint you.
You Want to be Hands Off
You don’t need to know the details; you just want to get the project out the door. Updates don’t concern you, and you don’t want to be involved in demos and sprint reviews. You hired an outsourced team to handle all that for you, right?
That’s not the way it works. Without regular input and feedback from you, development can get off track or go down the wrong path. Regular communication and collaboration are essential for any project’s success.
How Much Does Software Development Outsourcing Cost?
Estimating the cost of custom software development is like pricing a car. The cost of a vehicle depends on the make and model, what features are included, local taxes and fees, and even which dealer you buy from.
Likewise, several factors influence the cost of an outsourced software development project—the number and type of features, product complexity, the technologies involved, amount of data, and so on.
For example, outsourcing the development of a mobile app could cost you anywhere from $20,000 to $500,000, depending on the app’s complexity.
If that seems like a lot, consider the cost of adding the needed talent to your staff. According to Payscale.com, the average software developer’s annual salary is $73,000. For a small development team—say, a few developers, a project manager, a QA specialist—you’ll end up spending roughly $370,000 per year to develop a fairly simple app. And that’s before you buy the equipment, pay for software license fees, and so on.
On the plus side, hiring a team gives you the ability to keep refining and improving your software application for many years. However, for that same dollar amount on outsourcing, a custom software development company could deliver a reasonably complex, custom-built software solution in less than a year.
Which approach is better? Again, that depends on your unique needs.
If you want to avoid the delay, expense, and hassle of hiring a development team, software development outsourcing offers an alternative. For example, startups often lean on outsourcing to get a product to market before their competitors.
As the title says, this is an almost complete guide to software development outsourcing. While it touches on everything you may need to consider for custom software development, you’ll want to explore the most relevant points in greater depth.
In particular, you’ll need to research custom software development companies specializing in the kind of software you want to build. We hope you’ll include Taazaa on that list.
Taazaa means “fresh.” Think new. Not canned. Tailored to you. We work with like-minded people and organizations looking for a fresh experience around creating and unleashing great software—including mobile apps.
Since 2007, Taazaa has helped hundreds of businesses like yours stay relevant in a world of relentless change. Leveraging custom software solutions and emerging technology, we follow design-based development practices that promote rapid delivery and a tailored fit to your business.
We’re agile. We’re high-empathy and low-friction. And we make great software.