How to Outsource Software Development – A Step-by-Step Guide

In 2024, outsourcing can help your business quickly enter the target market with minimal expenses. This statement holds true for a startup and a large-scale software development company.

According to Precedence Research, the total value of the IT services outsourcing segment, particularly software outsourcing, is expected to reach $1.149 trillion by 2032. This indicates a demand for offshore software development, support, or digital solution modernization services.

Learn from experts at Lampa Software how to quickly and effortlessly obtain a successful outsourcing experience.

Outsourced Product Development vs. an In-house Team

If you're still debating between outsourced development and in-house development, the former option is more advantageous due to many factors:

• Labor costs. You don't need to pay salaries.

• Development costs. The cost of work depends on the volume of work done and time spent.

• Business value. You can focus on core business processes without being distracted by project management.

• Business objectives. An outsourcing partner always focuses on the needs and goals of your business during development.

• Talent pool. You can assemble an outsourced team of any format and scale.

• Expert tips. A software development outsourcing partner will execute the project and help you improve it.

• Business growth. With software development services, you'll have the opportunity to grow your brand rapidly.

Outsourcing can help you get lower cost trusted software, accelerate market entry, and focus on key business needs.

How does outsourced product development help?

You cannot and should not try to cover all aspects of the business at once. It's unnecessary, especially if you entrust the right software development partners.

Team members from an outsourcing software development company will adhere to the project scope, ensure cost savings, and timely release of the digital product. Thus, you'll only need to work on project requirements, periodically check the development progress, and promote IT solutions online.

It is recommended to choose experienced potential outsourcing partners like Lampa Software.

9-Step Process for Successfully Outsourcing Software Development Projects

Let's dive into the key topic of the material, namely answering the question "How to outsource software development?". Next, we will demonstrate how, in nine steps, you can find the right software developer, build an outsourcing strategy, and launch the project.

Please note that this guide is designed for all types and scales of businesses, so you may need to adjust the stages to fit your specific case.

Develop clarity around what you’re building

Start by assigning the task to an in-house project manager and a business analyst to develop a clear vision of what you should achieve. Formulate an initial concept, corporate style, general development guidelines, and the solution's functionality.

This will help you navigate the later stages of transferring the project to outsourcing and overseeing the development processes.

Write a scope statement for your software project

The software development team must understand what they are implementing and why. It is important to create focal points that cover all key and secondary goals. These guidelines should be based on the business goals of the company and the needs of its target audience.

You will provide convenient project management and simplify the software development process because all participants will clearly understand what they are creating, how it should look, and function.

Decision time: To outsource or not to outsource

When you have an approximate scope of work and its complexity in mind, you need to decide on outsourced development or forming an in-house team. This is a difficult choice that affects your time, money, and overall project success.

We recommend choosing outsourcing because it will give you the flexibility and freedom of action you definitely won't get with in-house development.

Decide between onshore, offshore, and nearshore outsourcing

If you choose to outsource, review the options:

• Onshore outsourcing. Software developers are located in your country. This option is optimal for constant project control, but only if you work in India, Eastern Europe, etc.

• Nearshore outsourcing. Software development partner is based in your region. This model reduces potential risks but is unsuitable for the USA because the project cost will be high.

• Offshore outsourcing. Opportunity to build a successful outsourcing relationship if you want to save. Providers from Eastern Europe, including Ukraine, will suit you.

Why these regions? It's simple: their development cost is insignificant, but the quality can compete with Western Europe or even the USA.

Choose an outsourcing model

You can outsource your software development in various ways. Focus on your priorities, as there is no universal case. Next, we will talk about collaboration models.

Staff augmentation

You engage the expertise of outsourcing partner's professionals who join your team online. You get the necessary experience and access to specialized skills without spending time searching, recruiting, and onboarding in-house specialists.

This is convenient when the project requires, e.g., an AI Engineer, who is quite difficult to find on freelancing or recruiting platforms.

Managed or virtual teams

A model where you get several professionals or a full team who work for you remotely, possibly in cooperation with in-house specialists. It's beneficial because it provides you with a resource that enhances your team's capabilities and remains under your control.

Project-based model

Perhaps the best model for Agile software development and outsourcing in general. You hand over your software projects to the partner, communicate periodically, track progress, and receive ready software products at the end.

Convenient, fast, effective, and budget-friendly. All because you can choose one of the payment models that suits your project type and budget.

Evaluate providers

There are thousands of outsourcing software development companies, but you only need the one that can handle your complex project without bringing you hidden costs. Additionally, the wrong outsourcing can change your opinion about this type of development and even harm your business.

We will show you the optimal way to select a service provider right for your business.

Company size

On one hand, the more employees in the organization, the more successful it is. On the other hand, your expenses increase.

Choose a provider with a staff of 30 to 120 professionals. This way, you will get access to a talent pool that covers all project needs and pay lower fees for their services.

Business longevity

Startups die within a year. If a company has been on the market for over 2-3 years, it is already considered stable. It certainly deserves trust if it's in the range of 5-10 years.

Experience breeds trust in outsourcing, so avoid working with beginners, even if they have potential.

Experience with the technology

A list of 100 technologies in the "About Us" section doesn't demonstrate the real level of skills and experience. Always focus on the tech stack you need for your project. Review the portfolio and the feedback.

Software development process maturity

Ask the manager about the cooperation process, development, and project management. If you get vague answers, switch providers.

A company with sufficient commercial experience will present you with certain cases and explain the nuances of the processes in detail.

Software development methodology

In 2024, almost everyone works through Agile and frameworks related to the methodology. The only exception is when you need a specific development model, such as the outdated Waterfall or RAD. 

In that case, clarify the skills with the company's manager you want to work with.

DevOps maturity

Pay attention to how DevOps processes are structured in the team. To clarify this point, consult with a representative of the IT Outsourcing Company.

English proficiency

Nowadays, all IT companies use English as their corporate language. So you definitely won't have any problems with that.

Time-zone flexibility

If you work with offshore outsourcing and a company based in a distant time zone, you and the development team will have to adapt meeting times and compromise. Not too high a price for the benefits you get from cooperation.

Industry/Vertical experience

Experts exclusively in your field and format don't exist in outsourcing. However, diverse experience enables professionals to quickly master new knowledge and apply it effectively in practice.

Therefore, if you don't work with very specific segments, any developer will handle your project. The main thing is the presence of a concept, focus points, and priorities.

Pricing structure

Pay attention to the provider who offers you the most options for forming the service budget. These may include project-based payment, time and materials, periodic payments, stage-by-stage payment, etc.

Choose what won't drain your budget too much and will provide an adequate result.

Work portfolio

Look at what and how the company has implemented for previous clients. The information is available on the provider's website and various portals where real reviews of performers, their experience, skills, work quality, and organization are published.

Compliance certifications

Check the provider's experience and certifications to ensure their skills match your industry and IT needs.

GitHub contributions

Ask to demonstrate practical confirmation of experience by showing the company's contribution to OSS projects. Typically, code from GitHub is distributed under GPL 3 and is not covered by NDA, so they are unlikely to refuse you.

The other side of the coin is when the number of lines of code on this portal exceeds tens of millions. This may indicate that the team only works with OSS and has no commercial experience.

Business continuity plan

Ask about the future fate of your digital product. Will it be provided full technical support, or will a self-recovery system be deployed? This is not very interesting at the early stages of development, but these questions will definitely concern you after the release.

Request a free consultation

Once you have found a company that meets your requirements, it's time to communicate. Contact the provider's manager and discuss the nuances of cooperation.

Draft and sign the paperwork

Legal matters are crucial in outsourcing. Especially if you want to receive a proper level of service, reduce risks for your business, and guarantee that the project will be completed on time.

You will need to sign four documents.

NDA

A non-disclosure agreement that ensures your corporate data, project information, and sensitive data will not be disclosed to third parties. It doesn't eliminate leaks and abuses, but the responsible parties will be punished and obligated to compensate for any financial or reputational losses.

MSA

A framework for measuring productivity. It's needed for proper project control and its stages of completion. Modern providers highly appreciate its impact on productivity and development efficiency.

SLA

A contract that outlines cooperation boundaries, project timelines, responsibilities, scope of services, desired results, and conditions.

SOW

A standard cooperation agreement that outlines deliverables and project goals. It's created to keep everyone on the same page about deadlines, scope of work, and project expectations.

Choose a communication tech stack

Last but not least is communication. You can choose your own solutions, but usually, the subcontractor already has a ready-made stack, for example, Slack, Jira, or Jenkins. It's a standard set that is always relevant.

Things to Consider When Outsourcing Software Development

Following the previous recommendations, perform additional optimization of software outsource and take several important steps. They will help you better formulate a working framework and prioritize tasks. Ultimately, you will get an optimal outsourcing model that meets the project's needs.

Analyze your problems and requirements.

Identify the aspects that potentially affect the outcome of your development. Define and thoroughly describe the requirements, possible nuances, and alternatives in case of issues arise.

Select the suitable model.

Pick the model that fits your project type and budget. Even if you don't implement all the functionality at once, you will still have a robust foundation for scaling the product.

Select an agency or freelancer.

Choose a responsible partner who will implement the project for you fully. For example, the Lampa Software team has a stellar reputation in the IT outsourcing market.

Create a design and software specification document.

Outline the requirements, specifications, typical user stories, and design. This will help the contractor execute the project correctly and reduce risks.

Manage the project effectively.

Use a combination of in-house and external project managers to synchronize the product vision and timelines and focus on goals.

4 Tips for Not Getting Scammed When Outsourcing Software Development

Even in 2024, some teams can truly harm your business. Choose your contractor carefully, following our next recommendations.

Know your goals

Set goals and stick to them no matter what. Even if the service provider tries to convince you to change the format or type of the product, stay focused on your goals, even if it means changing the provider.​

Thoroughly vet a contractor’s background

Examine the contractor's work history to ensure that their experience aligns with your business needs. Pay attention to project cases similar to yours.​

Be thorough in communication

When speaking to the executor, be concrete about your needs, implementation, and functionality.​

Ensure that data security is a top priority

Demand that the contractor comply with the NDA and ensure product security systems. This allows you to work with critical and sensitive information without worrying about potential issues.

The Value of Outsourcing

The value of outsourcing lies in being able to delegate your project or part of it to external contractors. This reduces costs, accelerates product launch to market, and mitigates several risks.