The Complete Guide to Outsourcing Software Development

When an entrepreneur takes an idea and turns it into a profitable business, it's a cause for celebration. But, in this highly competitive world, continued success depends on different and evolving strategies, and when it comes to starting a business, success equals growth.
Outsourcing Software Development

When an entrepreneur takes an idea and turns it into a profitable business, it’s a cause for celebration. But, in this highly competitive world, continued success depends on different and evolving strategies, and when it comes to starting a business, success equals growth.

Generating a revolutionary idea is only the beginning of the entrepreneurial software development journey. In order to scale up and grow in a big way, business owners have to prioritize a growth to-do list that leverages outsourcing their software development.

With limited resources, outsourcing software development allows you to shift focus from peripheral activities toward serving your customers and your team and ultimately reaching your end goal.

Making smart investments to prioritize business activities and decisions that lead to revenue-generating results and meet your business goals is imperative for growth, especially in the fast-paced world we live in.

In-house software development allows a company to design its product according to its needs. Yet, development requires time, expertise, and large budgets; in most cases, one of these elements becomes a road block for in-house projects. Here is where custom software development outsourcing comes in; a process that can help you achieve your goal within a tight deadline and with a defined budget.

Have you considered outsourcing software development?

What is Software Development Outsourcing?

The global outsourcing market is estimated to be worth around US$90 billion, and with good reason.

Outsourcing software development is a business practice in which an organization hires an external software development agency to effectively carry out all the tasks of a software development project instead of doing them in-house.

Software development companies like Vantageio specialize in custom software development services, software integration, and data analysis, including all phases of the project: concept development, design, architecture, coding, and testing using proven methodologies to guarantee results.

A company seeks external help or support to perform some of its business activities, especially in areas where its members and stakeholders lack extensive experience and expertise, to stay focused on core business goals and save time and money.

In this article, we will review:

Types of Software Development Outsourcing

Outsourcing models can be usefully defined by how they align across these three attributes:

  1. Location: Onshore/Nearshore/Offshore
  2. Relationship: Staff Augmentation/Dedicated Team/Project-Based
  3. Contracts: Time & Materials/Fixed Price

When business owners decide to outsource software development services, they weigh different outsourcing location possibilities, which narrow down to offshore, onshore, and nearshore.

The difference between nearshoring, offshoring and onshoring software development is:

Offshore: is when you hire a team abroad to perform the work remotely and virtually. The advantages of this approach include:

  • It is usually associated with a lower price tag, although not always the case.
  • On the other hand, an offshore company presents time zone differences and language barriers, and limited references, which lead to higher risks.

In the end, the project management responsibilities and efforts required to reduce risk may outweigh the cost savings.

Onshore: is when you hire local software developers in your area, which is convenient. For example, if you do business in Florida, hiring a local team in your state would be considered “onshore outsourcing.” The advantages of this approach include:

  • Face-to-face meetings.
  • Working in the same time zone.
  • Eliminating language or cultural barriers that could jeopardize communication efforts.
  • Higher possibility for referral and less risk.

Nearshore: known as the “in-between” choice, and it’s when you hire local software developers in your same country with similar time zones or minimal differences in time.

Relationship-based outsourcing models describe the balance of ownership and responsibility held by the client and the outsourcer. The three primary relationship-based outsourcing models include:

Staff Augmentation: this model places the majority of the responsibility on the client and maximizes the efficiency of the in-house team while retaining complete control over the outsourcing development process. In this scenario, the outsourcing team works as an integral part of your process for an assigned task.

This model is beneficial when you lack the resources internally and need an extra pair of hands or if you need a particular talent for a specific task and do not have time, budget, or in-house skillset to complete it. It’s also a useful strategy when you need an extra boost of talent for a specific project but want to remain fully in control of the development process.This is the relationship model in which the client retains the most amount of control, yet remember that with higher control, greater responsibility.

Dedicated Team: in this case, the client and outsourcing provider share responsibility for ownership of development projects, agreeing on which responsibilities belong to whom, and deliverables, timelines, and service-level agreements are set from day one. With this model, both the client and the dedicated team are responsible for the success of the end product.

This is particularly helpful when you need knowledge and expertise in a specific area of development, and while you still remain in control it does allow space for flexibility and increased productivity on your end.

Project-Based: In this model, the process or methods selected for the development are under the control of the outsourcing company. The updates on the progress are regularly delivered to the client without much detail to avoid time-wasting. As a result, the outsourced company assumes full responsibility for the project delivery and progress. The outsourcing partner fully manages the development process, responsible for delivering the final product according to the agreed-upon specifications and timeline.

Although this is a model where the company holds the least amount of control, there is still frequent contact with the outsourcing partner and the decisions of your project are highly dependent on your specific project and its requirements.

This model is a good fit for businesses with limited in-house engineering/IT capabilities, as the responsibility and process are owned by the outsourcing provider or when you have a simple, straightforward project with pre-determined requirements that are unlikely to change.
When it comes to deciding which type of contract is best for you, the best thing to do is to have an open conversation with your outsourcing company and discuss your unique requirements and constraints and evaluate how their services can best be customized to fit your needs.

The benefit of utilizing an outsourcing provider is that they have probably been down this road many times and can use their past experience and expertise to create a contract perfectly aligned to your project.

Time & Materials: in this case, the project is billed at an agreed-upon rate based on actual resources used and time spent by developers. This is the model that offers the most flexibility, and it’s often used in projects in which scope and requirements are not set and/or likely to change.

Fixed Price: in this case, the project is billed at a flat rate, regardless of the time spent or resources used. This model is often used in small, straightforward projects with limited scopes and fixed budgets, but aren’t as widely used primarily due to their inherent lack of flexibility.

If you’re considering software development outsourcing services, you’re probably questioning whether your project’s quality, budget, and deadline are at risk.

Let’s take a look at the 6 advantages of outsourcing software development:

Advantages of Outsourcing Software Development

  1. Increase Productivity
  2. Reduce Time to Market
  3. Minimize Business Risk
  4. Reduce Costs
  5. Talented Software Professionals
  6. New Perspectives

1. Increase Productivity

With one less thing in your hands, you gain time and mental clarity to work on your vision of where your business is and where it needs to go in the future.

When you delegate software development and allow your outsourced team to assume and manage the risk in their areas of expertise, you clear space and time to generate new ideas focused on quality and perhaps even innovation.

Your in-house team may have to deal with more than one project at a time. As a result, you will have to compromise on the quality and sometimes delay some projects. However, when you outsource software development, your staff can focus entirely on the project you provide them and deliver high-quality outputs within the deadline.

Expanding your business requires targeted growth, and being too opportunistic can waste precious resources, as well as take focus away from what made you successful in the first place.

2. Reduce Time to Market

The key to a successful software development product is getting a quality product to market fast. While you can’t rush complex software development, an outside company can typically involve more experts with more experience and expedite the process.

Outsourcing software development can decrease your time to market, ensuring your product reaches your customers before your competitors do.

A great way to win time and save money in the process is to select a software development company with a track record of delivering quality software to market on time because the process can be time-consuming. That’s why working with an experienced outsourcing custom software development partner like Vantageio can help reduce timeline and deliver the quality you deserve and envision.

3. Minimize Business Risk

Working with a skilled multidisciplinary team can help you execute projects with minimal risks. When you’re in the hands of experienced, trained, and professional software developers, not only do you delegate risk, but you also minimize room for error when you engage with professional developers, entirely focused on your project.

4. Reduce Costs

Reducing costs is the number one reason why companies outsource. Why? Outsourcing tasks to trained professionals allows you to only pay for what you need, a far more cost-effective solution than hiring a full-time employee, which involves recruiting and onboarding time, training and housing costs, and benefit expenses.

5. Talented Software Professionals

Engaging in the opportunity to outsource software development with a team with extensive knowledge of the product line and possibilities for future product innovation while keeping the customer top of mind is a precious asset.

You might be a fantastic entrepreneur, but that doesn’t mean you’re a great software developer. If you embrace outsourcing, you don’t need to be. Not only will you meet deadlines, but also you will exchange knowledge with the outsourcing company and learn one from another.

As it becomes increasingly difficult to attract and retain quality developers, companies can find and secure the specialized talent they need without sacrificing quality by looking to outsource a portion of the development process.

6. New Perspectives

Sometimes we are so immersed in our work, determined to reach our goals, that we miss the big picture.

Outside experts can give fresh perspectives and push you to rethink your underlying models and assumptions, and bring new ideas to the table from their past experiences.

As you search for your custom software development partners, make this one of your key selection criteria. Surround yourself with people who will speak from experience, ask the tough questions, and face the hard facts, but who are willing to fully get behind the decisions your company later makes on these tough calls.

What factors to consider when outsourcing talent for your business?

Every company that decides to outsource skills has doubts mainly related to trust. Things like: lack of control, hidden costs, risk of exposing confidential data are all valid concerns that need to be addressed.

In order to form successful partnerships with external teams it’s best to define an outsourcing strategy from the beginning and only engage with a trusted software development company for outsourcing.

Take into consideration the following key factors, which will ultimately help you make informed decisions about who you’re partnering with:

  1. Define your goals: describe your goals in detail and the process, service, or product that you want to outsource to define the technology, skill set, and profile of the outsourcing company.

If your goal is to allocate more time to other business tasks, make sure the outsourced team can also operate with minimal supervision to reduce the time you need to invest in making sure everything is running smoothly and giving you more time to focus on your core business functionalities.

  1. Background check: it’s important to check references and portfolio to verify the company’s experience and its ability to deliver the project. Be prepared to ask questions regarding the technology they use and meet deadlines without compromising quality.
  2. Reduce operational costs: outsourcing needs to improve your business bottom lines through reduced operating costs. If you don’t see this happening anywhere in the near future, the chances are that you’ll end up spending more than you end up saving. At the same time, you will also need to maintain a balance between the quality and quantity of the services provided by the outsourced company.
  3. Know your points of contact: make sure you have a clear and trusting relationship with the main point of contact from your outsourcing company. This person will serve as the intermediary between your needs and the results you get, so feeling comfortable, understood, and valued as a client is crucial from the beginning of the relationship.

The Big Picture

Even though outsourcing can be a scary thought to some entrepreneurs and startups, in most cases, it just makes sense.

Outsourcing specific areas of your work is a strategy that can help your business allocate your budget more efficiently, assign specific work to specialists, save time, and expand your offering, and all this leads to business growth.

In many cases, it may not be feasible to give more responsibilities to your team or hire new members as they may be operating at total capacity, so outsourcing comes in as an efficient solution to speed up time to market without sacrificing quality.

When you outsource resources, you also gain the opportunity to learn early in your endeavor that for incremental growth to exist, you must delegate skill-based tasks to specific experts.

Choosing both the right outsourcing partner and the right type of outsourcing engagement are central to long-term business success. Making the right choice can drive competitive advantage and make the road to success an enjoyable one.

If you’re looking to increase capacity, expand your offering, or improve your skill set, there’s no easier or more affordable way than through outsourcing.

Here, at Vantageio we’d be happy to discuss your goals and help you develop a plan specific to your needs. Our team is ready to help you, get in touch!

Schedule your free consultation with a software expert today.

Samuel Morhaim

Samuel Morhaim

Samuel Morhaim is Founder and CEO of Vantage IO which creates custom software, web/mobile applications and cloud solutions in addition to staff augmentation, consulting and advisory services. Samuel has over 20 years of experience developing software for startups and enterprise clients. His experience includes Healthcare IT, InsureTech, Marketing Automation and Rapid Application Development strategies.

About Vantage IO

We create custom software, web/mobile applications and cloud solutions for startups and well establishes companies looking for quality and performance.

Recent Posts


Let’s talk about the many ways you can get your project completed by a team of expert software architects.

Thank you!

An expert software consultant will contact you within the next few hours.

get your own copy of the ultimate guide for developing software

We have analyzed 83 of our own projects to identify for you exactly what makes a great and successful project and what we have learned about the few that didn’t make it.