Software Outsourcing

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What is Software Development Outsourcing? Basics, Types, Comparisons, Costs

More and more companies are outsourcing be it Amazon, WhatsApp, Facebook, etc, or a small enterprise, why so? Software outsourcing is a real game changer and the most talked-about business strategy.

Not only can it save money but you get quality software delivered fast. Also, augmenting the temporary capacity of an organization with full time highly qualified, and highly paid developers is not a wise choice.

Do you know the number of startups opting for software outsourcing will elevate to 70% by 2023 – State of Tech Staffing report from Commit

We’re CodeNinja – an international software development company offering Software Outsourcing Services in almost all industry niches and winning big in terms of growth and revenue.

In this blog post, we will cover what is software outsourcing, its types, comparison with in-house development and freelancing, finding the right vendor, and the cost of software development outsourcing and regions for getting the best software outsourcing services.

What is Software Outsourcing? – Definition

Software development outsourcing meaning a common practice where a third party or an external vendor is hired to fulfilling the skillset gap or resource scarcity in-house. Although there are different types and models of outsourcing depending upon the project need.

Like many, you may be thinking about what sort of software development services you can outsource here is a brief list:

1-Development: Whatever language or framework you are choosing, we make sure it would turn out to be an optimal software solution with the best ROI.

2-Design: Front-end development, UI/UX design for desktop, web, and mobile with a seamless experience across platforms/ devices.

3-Product Feasibility: Often times clients are confused if their product is worth every dime they pay, we conduct feasibility testing, proof of concept, and user testing to minimize early-stage risks.

4-Architecture: Designing fundamental structures of a software system.

5-DevOps/Testing: The full range of software testing services and DevOps practices for quick product delivery.

Software Outsourcing Types

Offshore Software DevelopmentOnsite Software DevelopmentNearshore Software Development
Offshore Software development takes place in another country and that country may not be even in your region. A cost-effective option as you get lower labor costs and immense communication channels have made managing software projects remotely and daily updates easier. Get high-quality technology solutions with a diverse cross-cultural team with the ability to deliver on time.  Onshore development takes place in the same country and there is typically little to no language barrier with having an external team. However, among all types of software outsourcing, this could be the priciest option. Communication is effective and there is no time zone difference.  Nearshore outsourcing or development is one where the project is developed in neighboring countries. Also, nearshore teams work in almost similar time zones and the language barrier is not an issue most of the time. Again, it’s cost-effective in comparison to onshore development.  
Software Development Outsourcing Types

Software Development Outsourcing Models

1-Dedicated development team

An outsourcing model is where a team is allocated to one exclusive project for a dedicated amount of time. Such a team acts like an in-house team and can be managed directly. This dedicated development team model is best for companies who want to quickly embed skillful resources. Complex and advanced-level projects can better be catered to with dedicated development.

2-Team augmentation

Augment the resource capacity of your organization and reduce the advanced skill gap by hiring highly qualified developers. This model can work best for short-term projects. Also, the team augmentation model acts like a bridge where if you get a good resource from one vendor you can later opt for a dedicated development model.

3-Project-based model

Usually, fixed price and time and material come under the project-based model. A fixed price model is where you get a fixed number of resources and time for the completion of a certain project. The scope is clear and solid whereas the time and material model is where scope evolves with time and there is no fixed project completion time. Clients are billed on pre-defined milestones in both cases.

Comparison: Software Outsourcing vs Freelance vs In-House Development Teams

ComparisonSoftware OutsourcingFreelancingIn-House Development Teams
DefinitionSoftware development is conducted by another company that cannot be performed in-house.  A working agreement is where the developer works independently for a client or a company.Building software development team following company structures without seeking third-party/vendor help.
DurationDepends on the complexity of the project. Outsourcing can go long way or ends after a few months or a year.Developers work on short-term projects usually.Developers are hired for long-term development operations within the company.
ManagementAn outsourcing company can create tasks and milestones besides completing deadlines.A freelancer only works on the assigned tasks and is responsible for their delivery.The project is managed with close monitoring and team collaboration.
Cost-effectiveThe most cost-effective option amongst the others too.No need to set up the infrastructure, just need to hire.Costs on hiring resources and setting up the infrastructure.
Kick-off timeYou get instant hiring (pre-vetted developers) and can start the project quickly.Vetting the right resources takes time and effort.Filtering applicants, conducting interviews, and technical assessments. Takes a lot of time.
Talent AcquisitionAcquiring talent is easy since the approach is global.Irregular working hours and attitude could be a concern.Searching for talent isn’t easy, especially in the same city/state/country.
Working HoursTime zone differences will exist if you opt for offshore development.Depends if you hire from another region.No time zone difference.
Comparison Between Software Outsourcing vs Freelance vs In-House Development Teams

Top 6 Reasons Why You Should Start Software Outsourcing

1-Get your hands on top talent – don’t restrict your company from hiring from the same region rather if you opt for Ukraine, Eastern Europe, and Asia, you get high-quality software at reasonable rates.

2-Cut cost and development time – hiring and training software developers can cost you a lot plus you need proper infrastructure in place. Also, hiring in-house can take time whereas if you get an outsourced team, it’s pre-vetted and can start working right away.

3-High-quality Software – you may think of low-quality software from regions outside Europe but that certainly is not the case, you get high-quality software when you outsource from regions like Eastern Europe, and Asia.

4-Diverse skillset – you get able to hire diverse software development teams having different skill sets which sometimes are rare. Niche experts help companies understand technical perspectives better.

5-Save hiring time – not just cut costs but cut time on hiring. The software outsourcing model is the one where third-party vendors offer pre-vetted developers.

6-Flexibility and scalability – you get ‘on-demand’ service sort of, as you have the freedom of choosing the resources and the number of resources can be scaled up or down as the project expands.

7-Focus on business ROI – you can leave the development part stress to outsourcing and can focus on business goals with much-needed attention.

How to Find The Right Software Outsourcing Company?

Software outsourcing is tricky at times when everything seems fine but you either get overcharged or get what you didn’t expect. Well, this happens most of the time and you’re not alone. Here we are listing step by step approach while looking for a software outsourcing vendor.

1-List down potential vendors
You can find them at many freelancing sites and portals such as Good Firms, Clutch, Upwork, etc. And jot down the ones you think are offering value to your business goals.

2-Send RFP (Request for Proposal)
By sending RFP, you can better know the selected vendors that can fulfill the project requirements and expectations. Also, ask around your business circle for recommendations.

3-Company’s reference portfolio/past clients
Get in touch with the clients mentioned in the company’s or vendor’s reference portfolio and seek a direct review of the company. The call is recommended for getting a quick and unfiltered response.

4-Cheaper doesn’t mean better
Never opt for companies that offer rock-bottom cheap rates for their software development services. Never sacrifice quality for cheap rates. Although, you may get good service at reasonable rates from some regions of the world.

5-Security and privacy policy
A vendor offering software development services should have secure servers for the protection of sensitive information. Look for strict security policies if they are mentioned on their official web pages.

Verifying company certifications and accreditations is vital while vetting for the vendors since it’s another area where you could find red flags.

7-Technology stack
Don’t forget to look into the technology stack of the vendor sometimes, they are not good in the particular technological area which you wish for your product development.

NDA and Software Agreement in Outsourcing Software Development

NDA, a non-disclosure agreement is often used to finalize terms and conditions between two parties. This document ensures that the proprietary information of the client will stay safe, and it’s signed between a client and an outsourcing company after reaching to mutual consensus.

Types of NDAs:

Unilateral NDAs are most popular where one party agrees to protect the other party’s information whereas in Mutual NDAs both parties protect the shared information/assets.

What Should Be Part of the NDA Document?

In terms of NDA structures and documentation, there is no universal or single template, however, there are a few things that must be part of every NDA signed:

Identity of both parties: the owner (client or who owns confidential information) and the outsourcing company (offering the development services).

Highlight information (source code) needed to be secured: there is no point in mentioning the information which is already public. NDA in software development projects requires everyone (designers, developers, QA, project managers, etc.) to access the source code to sign this agreement.

Time duration: usually NDA signed are of 2-3 years but if the confidential information is shared from other sources, it doesn’t deem confidential.

Penalties on breaches: consequences of breaching any clause of the NDA.

Penalties on breaches: consequences of breaching any clause of the NDA.

Cost of Outsourcing Software Development

Hiring an outsourcing development team reduces the software outsourcing cost of developing a web or mobile app by up to 40-60% without even losing the quality of the app.


The average US developer charges $75-125 / hour whereas the same quality developer from Asia, Eastern Europe, and Ukraine will cost you $25-50/ hour.

Factors affecting the software outsourcing costs are:

1-Complexity of the project/product
2-Region of a developer
3-Number of developers/resources involved
4-Expertise or skill level (junior, mid or senior developer)

Best Regions to Outsource Software Developers

Market rates of Software Outsourcing

Eastern Europe$25-50/ hour
US$85-200/ hour
Latin America$35-50 / hour
Canada$40-150/ hour
Eastern Europe$25-50/ hour
Asia$25-40/ hour
Western Europe$45-90/ hour
Ukraine$40-60/ hour
Africa$20-40/ hour
Region-Based Market Rates of Outsourcing Software Development Uptech

Final verdict

CTO or running a startup? Software outsourcing is an ultimate pick for quick development and delivery. Reach ever-competitive markets fast by having qualified developers hired in less than 2 weeks.

Traditional hiring and in-house development are hectic and consume so much time. After the pandemic, remote work and outsourcing have become new-normal and offering mind-blowing results never expected before.

Looking to engage qualified developers, a result-oriented design approach, and business-minded development, don’t go further. You’re at the right place. Reach out. 

Lets Schedule a call and see what we can do for each other.

Lets make it happen, together.

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