Software development outsourcing is providing a wide variety of choices. Thousands of companies provide software development outsourcing services around the world. You will have a big choice depending on a lot of criteria such as geographical proximity, time difference, language requirements, and even cultural similarity. For all those years this type of service has shaped into the mature industry with a clear value offer. They are managing outsourcing software development projects for businesses as well as ISVs.

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WHAT IS THE STATE OF SOFTWARE DEVELOPMENT OUTSOURCING

For the last 10-15 years, enterprises and software companies in developed countries have been experiencing a growing demand for qualified software developers. A lot of developed countries lack a skilled workforce in technology and face the challenge of expensive services in their own country. For example, the Danish government expects the country to lack 19 000 IT specialists by 2030.

size of the the software development outsourcing service market graph

Outsourcing software development services market size from 2000 to 2018 in billion U.S. dollars. Source: Statista

First of all, they are interested in talented and qualified specialists who are able to apply rare technology expertise with met deadlines. Companies are looking for knowledge, creativity, and flexibility. That is something that outsourcing software development teams can provide you with. Therefore, this trend gave birth to a separate industry.

What are the advantages of outsourcing software development?

It goes without saying that the advantages of outsourcing software development are rather vivid. Firstly, some companies can face a talent shortage in their local labor force market. They require new high-tech skills in their workforce so as to be always on top.

Secondly, there is some rare technology expertise that statistically cannot be found in the cities they’re physically located in. Modern technology can easily help with this issue. You will feel no difference working with the expert across the table or thousands of miles from you.

Want to learn more about the dedicated teams?

Read our article about the meaning of this model for ISVs businesses and what advantages it gives to software vendors.

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Thirdly, software development outsourcing companies have accumulated the unique expertise of working with some industries and types of software products. Let’s imagine the situation – you need to develop a payment processing system – you are going to have higher chances if you refer to the outsourcing software development companies who have already created such systems, instead of trying to assemble a new team in-house from the available developers on the local market. They might have no idea about the payment processing processes even if they’re good specialists in their technology like C++. As long as you use outsourcing software development services, you will save time and money.

And of course the last advantage and probably the least – you can even cut down the services cost. Competition between software development outsourcing companies supported high-quality service and fair prices for it.

There is no more question “Why outsource software development” but you can come across “How to outsource software development”. Taking into consideration all mentioned details today we are going to discuss: what collaboration models you will be offered, what are the best countries for software development outsurcing, what questions to ask when outsource software development, etc.

SOFTWARE DEVELOPMENT OUTSOURCING PROCESS AND HOW TO OUTSOURCE SOFTWARE DEVELOPMENT

As promised, we are going to investigate the question “how to outsource software development”. First of all, we are to analyze business enter software development outsourcing in different conditions and possible collaboration models.

Project-based collaboration models

software development outsourcing models comparison

Looking for some additional details?

We have created a comprehensive study of offshore development models for you in the following article.

Offshore Software Development Model: By Levels, Business and Service Models

Sometimes companies do not have an internal IT department capable of the entire product development, their team is incapable of developing a particular part of the product, or they just don’t need to keep the in-house team constantly, so they are going to need outsourcing software development services for the one-time engagement. In this case, you can apply time and material and per-project-based outsourcing contracts. So what do you need to expect from the software development outsourcing services? What suits your company better? How to make a choice?

Time and material contract is used when you set the final goals and define all the requirements of the outlined tasks. It might also include planning, defining the milestones, and handling the paperwork. The good news is that a lot of companies are willing to guide their clients. The price of this collaboration model is calculated in man-hours and depends on the cost of developers’ work dealing with the tasks. Providing that customer accepts the job with a warranty period, a month or two usually, but any further cooperation or support will be the subject of another contract.  

Per-project-based outsourcing contract can also be called the fixed-price one. Due to this type of contract, its cost does not depend on how many hours and resources of the software development outsourcing company are spent to complete the project. Time and material contracts can be used as a good preparation stage before the per-project-based contract. It will save you the time you might spend on planning. The project duration ideally should not exceed half a year. Therefore, choosing those contracts, remember about being specific, set all your requirements, and provide detailed documentation.

Dedicated resources-based collaboration models

Another option is when companies need to augment their internal IT department by outsourcing software product development engineers, who are going to work alongside their in-house developers on the same tasks, cooperate with the internal team and augment it. In other words, they will function just as their own employees but are located in a different country, which makes it easier to find, hire, and less expensive. If this is what you’re looking for, the dedicated development team service model will be a good choice for your company.

The dedicated development team model is something similar to hiring new remote employees for your company. If you decide to try the dedicated development team model you or your employees, such as the CTO or project managers will have the ability to lead the development directly. You can divide the development process into several stages. Basically doing the same thing as with your in-house staff. The dedicated offshore developers will help you to handle routine tasks as well as reach global goals. It is not only about actual developers. The team could include any specialist you need – designers, UX/ UI specialists, business analysts, project managers, quality assurance engineers, etc. Their duties will cover launching, extending, and supporting various types of software. Clients are fully engaged in the managing process, have the possibility of communication with every member of a dedicated team, or can have the responsible specialist report to the client’s team. There are two available options for management. Projects can be managed onside (PM is chosen by the contractor) and offside (PM is assigned by the customer). As for controlling the expenses on the dedicated development team service and the billing models, you’ll have the following options: cost per resource, management fee, and hourly rate. This model is efficient for long-term support and dedicated collaboration.

There is no best or worst option for the clients, it is just your made decision based on your needs and requests. You can always consult the software development specialist for advice to choose a suitable variant of the contract. Besides, it is important that the chosen provider has first-hand experience in software development for finance, healthcare, manufacturing, education, etc.

REGIONS FOR OUTSOURCING SOFTWARE DEVELOPMENT

As mentioned above, thousands of companies are providing software development outsourcing services. They are located in different parts of the world. But it is not a problem at all for the clients. Otherwise, it is an advantage. You are able to choose the company using your own selection criteria. There are no more or less suitable countries for outsourcing, and you just need to look for the ones that meet your own requirements. Usually, selection criteria cover geographical proximity, time difference, language requirements, qualification requirements, cultural similarity, etc. These are the important features for a lot of companies when choosing outsourcing software development services. A combination of all the available criteria will help you with implementing your tasks and reaching your goals. Below you will find a brief description of the most popular outsourcing destinations according to these aforementioned attributes.

Eastern Europe

Our first option should be concentrated on the wide variety of companies in Eastern Europe. Ukraine, Poland, and Romania are great countries for software development outsourcing that have a large number of high-quality developers which clients are able to choose from. These are relatively expensive regions with arguably the best possible quality of services. The ideal option for clients from Western Europe because of the superior quality, cultural and geographical proximity, and smallest possible time difference. Eastern European developers are known as one of the most qualified IT experts and the number of them is increasing while Western Europe is handling IT talent and workforce shortage.

Are you researching this region as a location for your next outsourcing software development projects?

Consider reading our article about the outsourcing industry in Eastern Europe and how to find a reliable company there.

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A great amount of talented IT specialists with high-quality education and convenient location are among the factors that encourage IT outsourcing in Eastern Europe. In addition to this regular travels are quite cheap and fast and the legal disputes are easy to solve. But it is not only the best option for companies from Europe, the US, and Canada that need rare technical expertise such as blockchain, AI, Ruby, etc. also outsource software development here in order to receive the best possible quality of work at affordable prices.

Asia and the Middle East

Asia and the Middle East are other outsourcing destinations, with a great number of companies located in India, Vietnam, Pakistan, and Iran. This region is attractive for certain companies because of the cheapest price rates but at the same time, it is the riskiest one. The unstable political and economic situation in some countries causes the reasons that influence a lot of criteria. It is usually hard to solve any legal disputes. Some clients face the threat of a huge cultural barrier as well as the worst situation with the English language. Don’t forget about the geographical proximity; you will deal with the vast time difference, regular travel, and communication are very tough to establish.

Latin America

Latin American software development outsourcing companies are the well-balanced option for US-based companies. That goes without question because of the geographical proximity and small time difference, which is quite convenient. Service prices might be slightly lower than in Eastern Europe. However, cultural differences and relatively low English levels can be the issues.

The day you are going to apply for software development outsourcing services, just remember about the best suitable selection criteria for your company that will make it prosper.

CONCLUSION

To make the conclusion, over the last 10-15 years, software companies in developed countries are using the services of outsourcing software development companies. They are provided with high-quality and convenient services, affordable prices, and skilled and high-educated staff. They have many options to choose from for the collaboration. Your choice will start with geographical location, time difference, cultural similarity, language requirement, etc. But the most important criterion is the result and its ways of receiving. We hope that our article will help you to make the decision on the appropriate types of contracts in certain cases. You can always apply for time and material contracts, per-project-based outsourcing contracts as well as a dedicated development team model. Making your choice still remember a few things: the project duration, your budget, and the number of required developers.

Anyway, all qualified outsourcing companies will be willing to hear your requirements first and then help you with your choice. The service is all about completed tasks and happy customers.

Looking for a professional software development outsourcing company?

You are always welcome to contact Existek for some piece of advice. You can fill in the form at a contact page, or start the discussion in the chat widget on the right, and we will be glad to provide you with the consultation to help you choose the outsourcing services model that will suit your specific business case.

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Frequently asked questions

Why has software development outsourcing gained in popularity?

Software development outsourcing has gained popularity due to its cost-effectiveness, access to specialized skills, flexibility, faster time to market, focus on core competencies, etc.

What are common outsourcing business models?

Based on the outlined needs and requirements, companies can choose among several options

  • Project-based collaboration models

  • Dedicated resources-based collaboration models

What are the most known destinations for software development outsourcing?

If businesses decide to outsource software development, they commonly consider the following regions:

  • Eastern Europe

  • Asia and the Middle East

  • Latin America

How to choose the right software development outsourcing company?

It remains important to consider the following factors, including the company’s expertise, experience, portfolio, client testimonials, communication capabilities, cultural fit, data security measures, and pricing structure.

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