There are many reasons to outsource software development, and the Brights software agency discovered that it’s more than just potential savings.
Alibaba, the huge Chinese e-commerce company, outsourced its website development when they were just starting out. They hired a U.S. company to do the job. It worked out for them, and now they’re one of the biggest in the world.
A report by Accelerance indicates that companies will be spending a ton of money, like $133 billion, on outsourcing software development by 2025. So, who knows, maybe there’s another Alibaba out there waiting to happen!
But did you know that a huge percentage of this expected investment backfires?
Some projects won’t succeed, and the most common reasons are poor communication, a weak outsourcing process, and working with the wrong outsourcing partner. Overstock.com is a good example. The company decided to outsource the development of its new platform to an Indian organization called HCL Technologies. However, due to a perceived cultural mismatch and a shortage of in-house IT experts, the project failed, and today, Overstock is no more.
How do you save your company from being part of this failure statistic?
Plan everything in detail and research your options for the right software development partner. This guide will walk you through the main steps to outsource software development in 2024.
Successfully Outsource Software Development Projects Using These 7 Steps
Follow these steps to improve your odds of successfully outsourcing your software development project today:
1. Make Sure You Know Exactly What You’re Building
You need to know everything about the product you want to develop before you present the idea to a developer. It’ll be easier for you to communicate your needs and your development partner won’t have to ask too many questions about the project.
These questions will guide you:
- Is this a completely new idea, or has it been tried before?
This question will help you determine how much risk and effort your project needs, which method will be used to build the software, and who your competitors are.
- Do you have a basic version of the software already built (Proof-of-concept) to prove the idea works?
Proof-of-concept is a test run to help you catch project issues early and better explain your idea to your development partner.
- What technology will you use as the software’s foundation?
Your choice of technology will determine how easy or complex your software is, the skills the development team needs to have, and whether your software is scalable.
- What problems will your software solve for the target market?
You need to identify the market gaps your product will fill so you can focus on creating something valuable for users and building the right features to solve these issues.
Knowing these problems will also tell your development partner what matters about your software.
2. Clearly Define What Your Software Will Do
You need to know your project’s goals, tasks, deliverables, costs, and timelines. In other words, the project scope.
A scope will show you what your development partner can and cannot achieve during the project lifecycle, so you have realistic expectations of the final product.
You also need clear and concise scope statements to ensure you and your developer are on the same page.
A scope statement is a documented project scope and has the following details:
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- Introduction: A broad overview of the project, why it’s important, and when it needs to be built.
- Goals and Objectives: What the project needs to achieve to succeed.
- Deliverables: The results at the end of the project development life cycle.
- Exclusions: Unattainable objectives in the project and their reasons thereof.
- Constraints: Factors that could limit project management, such as budget, timelines, and regulations.
- Milestones: Key achievements in the project’s lifecycle.
- Budget: How much can you afford to pay? (Define a price range)
- Approvals: A list of the stakeholders, their designation, and approval status.
3. Choose Between Onshore, Offshore, and Nearshore Outsourcing
Your developer’s location can affect the project’s price, communication, efficiency, and overall quality.
- Onshore Outsourcing: Working with an outsourcing partner within your country.
- Offshore Outsourcing: Choosing an outsourcing developer from a distant country (sometimes continent)
- Nearshore Outsourcing: Picking an outsourcing partner from a neighboring country.
Here’s a table comparing Onshore, Offshore, and Nearshore software development outsourcing based on time zone differences, cultural differences, and costs.
| Factors | Onshore | Offshore | Nearshore |
| Time Zone Differences | Minimal to none | Huge difference | Some overlap in the time zone |
| Cultural Differences | Shared cultures | Possible cultural barriers | Similar cultural practices |
| Cost | Higher due to the local workforce | Lower cost | Competitive rates compared to onshore |
4. Choose Your Outsourcing Strategy
There are three models associated with relationship-based outsourcing, namely:
- Staff Augmentation
- Managed or virtual teams
- Project-based model.
Let’s take a closer at each model to help you pick the best option for your project requirements, budget, and long-term goals.
Staff Augmentation
This is outsourcing staff from another organization for a short period to complete a project.
Staff augmentation is the best choice for your project if:
- You already have an in-house development team but wish to increase developer capacity to meet deadlines or maintain a sustainable pace.
- You want to hire offshore talent to save costs.
- You need to bridge the skill gap by searching for staff with experience in disruptive technology.
The outsourced staff will follow your lead and work with your team to complete the project on time.
Managed Teams
This model combines staff augmentation and the Project-based model (discussed below).
It involves hiring professionals like business analysts, QA engineers, designers, and front-end and back-end developers to handle parts of or the entire project.
Unlike staff augmentation, this team will work under your in-house project manager, so you won’t have to check in on individual employees.
Project-Based Model
In this model, you’ll hand over team management to the outsourcing partner’s project manager, who’ll also work with you to develop deadlines and communicate project goals to their members.
While you won’t have as much control over the team, you’ll still participate in decision-making, such as feature development and prioritization.
5. Research Potential Software Development Partners
Once you decide on the location to outsource your software development, research your options and create a list of the companies you wish to shortlist. Thorough research will help you find the right company for your project’s needs and goals.
Consider these factors when creating your list:
- Company size: How big is the firm, and does it have enough skilled personnel to deliver what you need?
- Business longevity: You need a company with years of experience to lower the risk of giving up before the project ends.
- Tech stack experience: Is the company experienced in the technology your software product needs?
- Software development strategies: Do they use software development models suitable for your in-house teams, like Agile or Waterfall?
- DevOps: The company needs experience completing projects using the DevOps model.
- Time zone: Is your partner willing to adapt to your work hours if the need arises for outshore outsourcing?
- Industry experience: Does the outsourcing company have prior experience with projects similar to yours?
- English proficiency: You’ll need to discuss strategy, design, planning, and execution with your outsourcing development partner, so a language you both understand, like English, is essential. It’s especially important for offshore or nearshore outsourcing.
- Portfolio: Does the company have a portfolio of clients it’s willing to provide for reference?
- Pricing: Do they have a transparent pricing plan, or will you encounter hidden charges?
- Business continuity plan: Does the company offer post-development support in emergencies, and how available will they be?
With the above factors, you can compose your list and contact your options directly.
6. Request a Free Consultation
Once you’ve shortlisted about five companies, you can request free consultations, ask for a work portfolio, and discuss the following topics:
- Product requirements
- Collaboration timeline
- Development method and roadmap
- Cost estimates
- Validation and feasibility
Some software development companies will even give you a limited free trial to prove their skills, and this feature should be a bonus on your list.
7. Sign the Contract
No one wants details about their projects leaked to third-party sources, so you have to develop contracts to protect your organization, employees, customers, and data.
The following agreements/ contracts will keep your data safe for the entire project life cycle:
- Non-Disclosure Agreement (NDA): An agreement between two parties stating that none will share confidential information with a third party.
- Master Services Agreement (MSA): This contract indicates the terms and conditions of the long-term relationship between the two parties to prevent future renegotiation.
- Services Level Agreement (SLA): A software quality assurance contract that measures the overall product performance based on industry-specific metrics.
- Statement of Work (SOW): A formal project-level contract that sets expectations on deliverables.
Conclusion
Outsourcing software development may seem tedious and complicated, especially when there’s a risk of dissatisfaction with the final product or failure to launch. Many companies have had negative experiences with outsourcing their product development. But that doesn’t mean you’ll also end up unhappy because the benefits will always outweigh the risks just as long as you pick the right partner for the job.
Outsourcing is the right way to save money on software development and still access a pool of technical experts. At Brights, we believe in building reliable and long-term relationships with our clients and not just formal project contracts. Contact us today for a consultation.
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