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Every aspect of life is digitalized nowadays: from buying a new Tesla to setting up a trust fund – everything is done online, by means of special software and applications. No wonder that 70% of businesses already have their digitalization strategies. Luckily, the market of apps is enormous; Google Play Market alone gets filled with about 3,700 applications a day while Apple App Store hosts 1.96 million apps in total! However, many owners understand that the existing offer does not entirely satisfy the company’s specific needs. And this is where custom software development steps in.
In-house software development is a perfect process since it allows a company to design and produce the solution they exactly need. Yet, as practice shows, development requires time, expertise, and quite large budgets; in most cases, one of these elements becomes a blocker for in-house projects. Luckily, there is a service called customer software development outsourcing; it can make the dream solution come true within a tight deadline and with a limited budget.
This article is dedicated to explaining the whole process of software outsourcing in detail. You will find tips and checklists to get the right team for your development project. Should you be interested in a particular aspect of outsourcing, just click on the link from our table of contents below and access the information you need.
Table of content
Let’s start by defining software outsourcing meaning before getting into details of the process.
Outsourcing is a business strategy of delegating a task, process, function, or any part of the business to an external vendor. The vendor in this context can be an individual or a company, depending on the task scope. Today, outsourcing is most frequently adopted in the IT sector. The total value of IT services outsourcing may exceed $413.72 billion by the end of this year. The reason for such an increase is the cost and efficiency of the practice in general.
If you are wondering what is outsourcing in software engineering, the answer is simple: the idea remains the same – to hire an external company or an individual who will complete a set of tasks on behalf of the client. The difference here is that some companies can outsource the complete app development (for instance, in case a non-tech company needs a new app to track their check-ins or working hours), while others would hand over only part of the process to a third party.
In software development, outsourcing has become one of the top trends in the past couple of years. Non-tech businesses look for expert knowledge outside of their team, while 60%+ of software development companies outsource at least part of their development processes. Most frequently, QA/testing stage is handed over to the experts in this field. Project management and planning are also common in development outsourcing. In 2021, the trend is expected to go for cybersecurity outsourcing. This means that even established software engineers will consider getting external help from outsourcing developers to secure their projects from any data breaches and minimize the possibility of hacker attacks.
The concept of delegating some work to a third party exists in all industries. Thus, automotive corporations outsource manufacturing of their parts to external vendors, educational centers outsource content creation to external writers, famous brands outsource sewing to overseas factories. In fact, about 67% of services worldwide were outsourced in 2019-2020. The common stereotype is that software developer outsourcing is undertaken when a company needs to cut costs regardless of the service quality. The truth is, outsourcing does save money, but there are much more important reasons to consider besides financial profitability.
Since all companies outsource particular services, let’s start by defining the general reasons for outsourcing.
On-boarding of a new team member is a complicated and lengthy process. The new employee needs to learn about the organization’s internal rules, project specifics, contacts in the network, current tasks, workflow, etc. Most often, it takes about a month or two to get the new team member up to speed. In this knowledge-transfer period, a company pays the salary for two employees (the newcomer and the leaving specialist). By hiring a specific firm or individual for a particular task, all this on-boarding can be minimized to the essential knowledge only. Moreover, since outsourcing means bringing a professional into the team, they tend to require less time to understand all the specifics.
External look on the process and experience in the industry make software outsourcing services invaluable. The outsourced human resources can spot the missing elements of a manufacturing line or bring new ideas to the table from their past experiences. These experts might actually provide much more benefits than the completion of an isolated task.
It is common to give a trial run for an employee but companies cannot extend it forever. Outsourcing allows working with a brilliant mind in the field to try out one’s expertise in real-time for an indefinite period of time. It helps businesses avoid the hassle of permanent employment contracts and high taxes in many countries. However, the assignment of individual tasks with a fixed term and price is a perfect way to vet the industry and create a pool of potential candidates for full-time recruitment. Of course, outsourcing development is about the avoidance of full-time hiring. Still, it would not go amiss to have a backup list of excellent workers and a contact list of industry experts for future recruitments.
Whenever the budgets are low, and you do need a professional in project management with experience in your field, outsourcing can be a great way out. You might not have the budget to hire one full-time, but even temporary service of an industry superstar will streamline the process and set an excellent foundation for the upcoming work. Add to that the contact list of the superstar’s influence and audience, and you get one more reason to go with this option.
Small tasks must be done, but they might occupy all of your time, leaving none for what really matters. Just like families hire housekeepers, companies need to outsource some services to focus on their primary goals and targets. By paying such a housekeeper, a company gets clean floors while making money on production, for example. Free up time to do what you do best and let the outsourced team care for the small tasks.
All the reasons for outsourcing described above are also applicable to the services of outsourcing development software. However, since the IT industry is one of the leaders in task delegation, there are particular reasons to consider this service if you own, run, or work in a company within this market.
Software development is about making a company’s life easier. A good app can increase an organization’s efficiency, boost customer loyalty, and generate new revenues. Very often, the need for such an app appears urgently, here and now. Hence, the company often lacks the time and knowledge on how to transform its current tools or bring a new one to the market fast. Outsourcing software development companies help bridge this gap in resources in a matter of days and can deliver the end-product significantly faster than the in-house development process would.
Every new software or app development is a risk in its own right. Accumulation of all processes in one place, for instance in house, increases chances of app failure, on-time delivery failure, process stagnation, etc. By outsourcing several parts of the development process to external vendors, a company can mitigate those risks. If one team fails, another will pick it up.
Responsiveness of an app is among the fundamental requirements for any software these days. Failure to adapt leads to significant revenue losses and brand failure in general. Once an urgent need appears, like during COVID-19, when businesses had to add new features for deliveries, take-outs, etc., an in-house team might not have enough capabilities and human resources to effectively provide these new features on time. Software outsourcing solutions offer a reliable hand and the possibility to reduce the time required to deliver new features to the market. The client here dictates the terms of delivery while the outsourcing team adapts so you have full control over the release deadlines.
In continuation of the previous idea – whenever you need to deliver a new feature here and now, there is no time for considerations; it is high time to act. Outsourcing gives the extra hands and minds to a development team to attain the new goal faster. And the good news is that you get the additional help only for one task, one sprint, one project, etc. Once it is complete, the cooperation with the software outsourcing team can be immediately terminated on the same day. It is a perfect way to avoid urgent development crises.
An outsourcing team can be considered a universal patch for your in-house development. Whenever you lack hands in testing, you can arrange a team of QA to work for you. Once you need a DevOps for a new project, you can get one. A software outsourcing company has a wide range of experts available, so you can get them on board at any time, depending on the current project needs and specifications. Flexibility in the use of assets and assignment is a great advantage for every software development company.
Remember that the reason for outsourcing should not be savings only. In this case, you risk getting the cheapest team onboard and then suffering from the unpleasant consequences. Of course, price should be taken into account, but you can benefit from the services best if among the top reasons for software development outsourcing you have one of those described above.
One can find multiple types and models of outsourcing software development online. This diversity is based on the factor chosen for the classification. For some, this will be the location that divides outsourcing into onsite, onshore, nearshore, and offshore.
Others would focus on the type of relationship that the hired help would have with the client; they would divide the models into staff augmentation, dedicated team, and project-based outsourcing. The type of contract can also be the criterion for differentiation, fixed-price contracts or time/materials-based payment agreement.
The latter classification is self-explanatory, just as the location-based one. Selection depends on the client’s goals, existing talent in the market, and budget (offshore teams cost significantly less than the UK/US-based software outsourcing services). Meanwhile, the important classification that is worth a more detailed explanation is about the client-outsourcer relationship. Let’s examine it in more detail.
This outsourcing model maximizes efficiency of the in-house team while retaining full control over the outsourcing development process. Here the client “borrows” the development team or its part from a vendor for the required period. In this case, the outsourcing team works as an integral part of your process only completing the assigned tasks. As a result, the whole responsibility for and control of the project’s success remains within the client’s company.
When you have an in-house team and lack a couple of hands.
When you have a strong project manager in place to control all team members in all locations.
When you need a particular talent for a specific task and do not have time/budget/skill to on-board them permanently.
When you need urgent help with a specific task and cannot go through the full recruitment process.
This software product outsourcing model is the middle ground between staff augmentation and a fully delegated project. A dedicated team of external experts works on a particular project (or its part) that is not connected to the in-house processes. The outsourced team is also managed by their outsourced Project Manager (PM), so the whole development is undertaken outside the company’s walls. The PM regularly reports to the client on the progress and consults about the strategic decision. With this model, both the client and the dedicated team are responsible for the success of the end-product.
When you have an experienced manager who would make the decisions together with the outsourced PM (it can be a Product Owner, a CTO, and even a CEO for startups).
When you need particular knowledge and expertise in a specific area of development.
When you don’t have time/human resources to develop software in-house, yet you want to have the decisive role in its development and final version.
Whenever a company has its goal and software requirements but no team to get the task done, a project-based outsourcing IT development model is the perfect solution. In this case, a client signs off the whole development process to a third party. The vendor then manages and oversees the project agreeing to deliver the ready-to-use product by the deadline. Here, the client has no say in the process or methods selected for the development; the outsourcing company controls everything. The updates on the progress are regularly delivered to the client without much detail to avoid time-wasting. As a result, the full responsibility for the project delivery and progress is assumed by the outsourced company.
When you have a big company dealing with the core product and need to develop a supporting tool, update a DB, or create a small side project.
Whenever the in-house team effort is limited, and you can hand over the whole development process to an external team.
When the new project has all the specifications, it is simple and not expected to require many alterations in time.
When you have no time to manage and control the development but need some application or software ready.
There is no better or worse outsourcing model; each one exists to serve a specific purpose for a particular goal. So the primary step in selecting the right approach comes from defining your central problem and major goal. Next, consider the flexibility of your future development in terms of budget, timing, scalability, etc. Definition of these points of compromise can also help select the right model (for instance, if you do not want to have early/late meetings, then the offshore model would not fulfill your expectation). Then think of the in-house expertise you have on the table; if you have none, go with the project-based outsourcing to avoid complications and budget misuse. Time dedication is also essential because augmented and managed teams would require your active participation while project-based application development outsourcing will only be sharing updates once a month, for example.
Another crucial factor is control over the project that you are (not) willing to have. If you’ve devised a detailed plan with every step and role defined but still lack the employees, then go for staff augmentation to reinforce your in-house team. If you are willing to have the final “yes” or “no” on the new features and the development process, then a managed team would be your choice. Should you need just to have an app delivered in three months not having any particular interest in the process, hire an outsourced project-based team to remove the burden of application development outsourcing management. However, keep in mind that for high-priority projects where details and scrupulous control are essential to keep software unified and suitable for the market, the augmented and managed teams would work better.
If you know that you need to delegate some tasks but don’t know which model will work best for you, start from the simplest – onshore/nearshore augmented team with a time/materials-based payment model. It is the safest way to examine the outsourcing method while keeping all your technology in-house, working with like-minded people in your time zone, and paying precisely for hours spent on your project.
The software development process would look the same whether you conduct it in-house or outsource all its elements. If you are interested in the details, learn more about it in our app development guide here. Below we will focus on the specific aspects of software development when it is partially or fully outsourced.
First and foremost, you need to be ready for outsourcing. A decision to go for it should be based on the careful analysis of your current state of affairs, the existing goals, planned budget, and the overall picture of cooperation with the outsourcing company. Before you get on to seeking extra help, define the strategy of development you consider appropriate. A clear definition of all these elements will help in deciding on the outsourcing model and further tactics.
At this point, you will need to evaluate the available offers in the market and pre-select about 10-15 companies that will comply with your preliminary demands. You can read about hiring the right software development outsourcing team below but what’s important about this step in terms of process is time. Of course, the decision to outsource frequently comes due to an urgent need; nonetheless, do not overthrow the crucial moment to find and hire the right team. Take your time and do not fall for the first or the cheapest offer.
A legally binding document that defines the commitment and obligations of both sides is essential. Yes, some single-worker companies might opt for contractless cooperation, but it is highly advised to have everything written down. A contract should include duties of both sides, details on the deadlines, particular technical requirements for the project, and payment specifics. Regardless of the software outsourcing business model you selected, contract is a crucial element of any collaboration.
Once the legal part is completed, it is high time to begin the actual software development. This is the moment you start getting outsourced team members up to speed. If you’ve selected a project-based team as your outsourcing ally, then at this point, a project launch will be undertaken. Most often, this stage lasts for no more than a month until the final details are discussed and settled, while new developers are on-boarded.
Monitoring, in fact, is carried out together with the cooperation step. For completely outsourced projects, monitoring will include only control of the progress and updates from the development team. For augmented or managed teams, monitoring means a continuous observation of the efficiency and performance of the new team members in your project.
Once the contract scope is delivered, or some software gets released, the project development comes to its end. It is the time when final payments are made, evaluation of the cooperation is handled, and future cooperation options are discussed. This is common that as one outsourcing contract ends, the client extends the requirements further and instantly signs a new contract with an offshore software development outsourcing team. Such cases are evidenced when the requirements of the initial agreement change, new features are needed for the software, or a client is generally satisfied with the existing arrangement.
This section stresses that software development outsourcing has both advantages and disadvantages, which should be considered in the process. Yet, at Saigon Technology, we actually believe that a carefully planned and executed outsourcing can run without drawbacks at all. Of course, we do not claim that there are no possible risks or pitfalls. We just say that with the cautious approach, the number of such risks can be minimized. See below what good software outsourcing can offer and how to mitigate any potential dangers on the way.
As it has already been mentioned, budget-saving is probably among the top benefits companies find in software outsourcing development. The major savings include lack of on-boarding, absence of equipment purchase, and avoidance of extra IT perks commonly used to retain employees. Besides, the average salary of a software developer in Vietnam, for instance, is around $10/hour, while in the US, it is $100-$250/hour for a mid-level dev, and $18-$24/hour for the UK interns. Considering that mostly these are several developers who work on a project or its part, the cost-saving perk is plain here.
Since the outsourcing and shared services market will continue expanding in leaps for the foreseeable future, money is not the main reason why companies seek external help; expertise and time-saving opportunities are. An outsourcing firm can offer valuable insights on a mundane issue and deliver the solution within a minimal timeframe. Moreover, adaptability and speed of response to the market demand will remain crucial factors in the industry, so it is only through outsourcing that software outsourcing services can efficiently reach the amended goals.
Following the tendency to scale, many teams, especially startups, often need to dismiss some of their team members. For small companies with a limited budget, frequent changes in the workforce are challenging, mainly due to strict labor regulations in many countries. Outsourcing offers perfect flexibility when it comes to team size. Whenever a new project is on the line, you request more developers, engineers, designers from an outsourcing company; once the project ends or a task is completed, you simply terminate the contract, and that’s it. No extra spending on dismissal pay or several months notice of contract termination; all these expenses do not exist in the outsourcing framework.
Add to the above the possibility to continue work seamlessly due to the time-zone differences (the work on a project never stops), the opportunity to exchange a non-fitting employee in a matter of days, avoidance of long recruitment processes, forced scrupulous planning, and improved precision of the whole development, and you will get the whole picture of what can be achieved with the right software development outsourcing company by your side.
Now, while all the benefits of outsourcing might mesmerize, beware that there are still risks in this process. Below you can find the top outsourcing risks we faced and tips on how to prevent or mitigate them.
Miscommunication due to time zones and differences in culture is a common risk. This is why strong leadership, as well as initially established communication, reporting and negotiation channels, should be determined upfront. Remember that it is the client who decides what is more appropriate and comfortable for their in-house team, and the outsourcing company will have to adjust but the customer should not play in dictatorship. It’s essential to ensure a comfortable environment for both parts of the team for the enhanced team effort.
Security of copyright information, as well as user data, is a risk for all development companies. This is why NDA agreements must always be on the table with an outsourcing workforce. Besides that, you should carefully plan which work parts, systems, and processes the outsourced team will have access to. Try to limit it to the essentials but do not restrict them too much, creating more walls than bridges. Should you decide to go with outsourcing developers for the complete project, plan the transition of all types of access, database materials, and systems upon receiving the project.
Quality of the final product might be at risk if your in-house and outsourced teams are not synchronized. For instance, they use different coding languages, architecture, database, or framework. To guarantee the good quality of your end-product, decide upon all the technical specifications of your software and select a company with a positive reputation in the field.
Hidden costs are, unfortunately, common among unreliable companies. You get a perfect deal and end up paying extra for non-included services or extra hours of work. To avoid hidden costs, you need to specify the number of hours paid for or the scope of the delivered project in your contract. And remember, offers that sound too good to be true are generally unreliable.
Post-release issues such as bugs, lost or mismatching code can also occur. Make sure that you work only with the code guarantee practice. In this way, should any bugs or other issues be found after the product is delivered, the client retains the right to request code alternations free of charge. It is also beneficial to set up some ‘trial’ period for the completed work to ensure that within this timeframe, you get all the support required from the offshore software development outsourcing vendor.
Disputes resolution is one of the greatest fears of any client outsourcing their software development. The process is usually vague and takes much time, which results in money loss. To avoid the risk of any disputes, hire an experienced lawyer working with digital solutions who is conversant with the laws in both countries: yours and the outsourcing company’s one. Then conclude a contract that clearly provides all the conditions of the termination clause and the consequences both sides will face should either fail to fulfil their part of the agreement. You need to always have the law on your side so take care of the paperwork from the very beginning.
Outsourcing can bring many benefits to a company and guarantee a wide range of positive outcomes but only if the process is implemented correctly. Of course, there are common risks to any new setup, but you already know how to deal with them. By avoiding risks, a business can utilize about 40% of all the perks offered by custom software development outsourcing; the rest lies in the best practices. Here are some tips from us on how to handle your outsourcing right.
Select the right task to outsource. Do not try to push for the tasks you do not want to complete. By doing so, you risk missing the essentials of development hence losing the outsourced part completely. Review your current processes and goals and, based on this, decide which part of the project should be outsourced for the best results.
Select the right model. It is simple. Everything depends on the scope of control you have and the time you are willing to spend on managing the outsourced team. Scroll up to check outsourcing models and our tips on which one to choose.
Maximize your presence in meetings. Regardless of the management part, you are the main stakeholder in the client-outsourced team relationship. You might delegate the whole project to an external team, yet you need to always stay on top of the development progress, issues, pitfalls, blockers, etc. Always communicate with your outsourcing IT development vendor to resolve uncertainties as early as possible in the development process.
Stay calm and unbiased. Everyone has the right for a mistake, so even if your outsourcing software development company has failed to deliver a feature on time once, it does not mean that they are bad and not professional. Life happens. Try to avoid being too emotional in your business communication. Emotions lead to prejudice and high-pitch discussions that bring no result, only aftertaste. Focus on the good and talk about the facts; never let your personal feelings get in the way.
Set up progress visualization. It is much easier to monitor and control software development when you visualize the process all the time. Agile boards like Kanban offer clarification on the completed, in-progress, and not-started tasks. Every dev team has its own tools but consider selecting one unified solution to get both in-house and outsourced teams up to speed together.
Break the process into milestones. It is psychologically hard to work for the greater good and a far-fetched goal. Simplify the process for your team members by breaking all development into shorter cycles that are easy to follow, monitor, control, and complete.
Control security. Yes, cyber breaches and data leaks are among the top security issues encountered by software development companies. Hiring software outsourcing solutions only increases the risk. This is why constant monitoring of the internal processes and data management from both sides of the team is crucial. Set up audits and regularly test your data security protocols.
Be realistic. Flexibility is the foundation of good cooperation. There is always a human factor in software development that may intervene with your plans and postpone some software elements. Do not panic when this happens, it is normal. Just establish realistic goals and, at the same time, leave some space, time, and budget for amends should they be needed.
Test and double-test. The retention rate for an application is about 5%, which means that 95% of newly signed-up users will abandon it in the first three months. Lack of testing leads to a great number of unaccounted bugs that will only increase the percentage of lost customers. If you want your software or application to succeed, always test it thoroughly before releasing it to the market. This has nothing to do with software outsourcing services per se, but it is an essential element of software development.
The selection of a reliable software development company for outsourcing is half of the work done. A good partner who will report in time, fit into deadlines with tasks, and generally be open to cooperation and communication is an important element in the project’s success. Before you get into searching for the right individual or team, make sure to create an RFP (request for proposal) document that includes all project details and specifics as well as your expectation from the upcoming cooperation with a vendor. Send such RFPs to several outsourcing software development companies and receive back their feedback regarding the cost and more detailed answers on the potential cooperation. Upon comparing the results, pay attention to:
Quality: Check testimonies on the company’s website, go through their achievements, look for projects within similar industries in their portfolio.
Working hours: 24/7 working hours are crucial but only if you outsource support services. In software development projects, verify that you have working hours overlap so both teams could meet comfortably. Ensure that urgent meetings will also be possible if needed.
Certification: Industry standards of ISO 9001 for Quality Management and ISO 27001 for Information Security Standard are the essentials. The certification proves that an outsourcing development company cares about its reputation and complies with the industry standards.
Insurance: The pandemic times showed that projects get delayed, and companies lose a lot of money due to this outcome. Therefore, it is highly advised to select an outsourcing team with liability insurance that can cover breaches in the timeline.
Technical fit: Select a company that works with the same tools, programming language, frameworks, and workflows as you do. Otherwise, you risk getting many communication troubles and even a mismatching part of the project.
After-project support: Some software outsourcing companies may offer after-project support to fix the code or help during the adaptation period. It is not a must-have feature but definitely should be checked for.
The last yet not least important factor is the price. It is critical that you not make the cost of the company’s service determine its quality and value. Consider where to outsource software development rather than its actual price. The per-hour rate highly depends on the country, as we’ve mentioned above. The tip here is to compare quality-price proportions. Companies with a $10 rate might set 100 hours to complete the task, while another team that charges $75/hour can do the same scope of work in 12 hours. Look at the price but search for the value! And remember that offshore software development outsourcing can save the budget while delivering the same result as the local outsourcing options.
Saigon Technology is one of the leading outsourcing software development companies. Not to make unsubstantiated statements, be informed that we:
became one of the 50 best software development companies in Vietnam.
received an award as the Top software outsourcing company in Vietnam
are certified as the top 15 Agile software outsourcing companies in Vietnam
In 2020, we enlarged our staff to 160+ team members to satisfy the needs of our current and new customers. Today we offer expertise in Java, ASP.NET, PHP, AngularJS, NodeJS, React JS, iOS, and Android/React Native application development services. However, if you cannot see your technology on the list, we may always hire other experts in the field and will be happy to find the right specialists for your project.
Our mission is to make your project thrive. Whether we help with planning or managing the development, participate in its part, or take over the complete project development, our team works well for you. We are flexible with tools used in any project and can adapt to the current specification of your software plan. Having clients in Australia, the United States, and Europe, Saigon Technology can work in all time zones and be ready for a meeting or emergency call at any time of the day.
If you wonder whether we have done something like your project before, check our portfolio or just contact us with your project details. We will review your questions and requirements and present our proposal on a software outsourcing business model in a few business days.
Congratulations! You have reached the end of this software development handbook. Now you have all the tools, tips, and knowledge to find and hire the right software outsourcing services for your project. It is high time to write your first RFP to the potential candidates and begin your search for a new partner. Mind the risks, pay attention to the selection criteria, and outsource!
As a Leading Vietnam Software Development Outsourcing Company, we dedicate to your success by following our philosophy:
YOUR SUCCESS IS OUR MISSION.