How to Outsource Software Development: Strategies for Success

Learn how to outsource software development effectively with our guide. Discover key strategies and tips to ensure your outsourcing project's success.

Starting a project with your in-house IT team can sometimes feel limiting, especially if your team's size and skill set don't match the ambitious scope of your company's growth goals. These limitations can lead to bottlenecks in your business operations, potentially stalling your company's progress when faced with projects that require expertise beyond your team's capabilities.

However, there's a solution to this challenge: Outsourcing. By opting to outsource, you gain access to a broader pool of talent, including developers and niche experts, who can help overcome the hurdles your in-house team might face. But, to truly reap the benefits of outsourcing, it's crucial to understand the most effective strategy for your specific project needs.

In this blog post, we'll explore how to outsource software development and expert tips to ensure your project goes smoothly.

What Is Software Development Outsourcing?

Software development outsourcing is a service that allows you to delegate work to an external company. Allowing a third party to take over some of your work can bring you both benefits and risks. Take a look at the table below:

Typically, there are three models of outsourcing in software development:

  • Onshoring:

    When you outsource a project within your own country, you are onshoring it. Out of all the models, it gives you the most control over the project, and there is better communication and cultural understanding.

  • Nearshoring:

    Outsourcing to a nearby nation is 'nearshoring'. With it, you can reduce your costs whilst retaining a fair level of communication.

  • Offshoring:

    Offshoring involves hiring software experts who reside outside of your country and region. It offers a wider pool of talent at lower costs than locally. However, you might find some communication issues.

Outsourcing Software Development Strategies

Outsourcing work to a software company can significantly impact your project's success. The strategy you choose plays a crucial role in defining this outcome. To ensure a successful collaboration, it's essential to understand the three main strategies for outsourcing system development. These strategies differ primarily in the scope of work you expect the software company to handle.

  • Staff Augmentation Outsourcing Strategy

Staff augmentation refers to when you bring in software developers into your IT team and so you share responsibility over the project. They come to supplement your workforce in numbers and skills at a lower price than if you were to hire them full-time. Since they increase your workforce, you can scale up your project.

  • Project-Based Outsourcing Strategy

With project-based outsourcing, the software company fully accepts your project. This allows your team to focus on other works, gives you flexibility in terms of project scope, and places the responsibility of the project on the external company.

  • Dedicated Teams Outsourcing Strategy

When you work with dedicated teams, they handle the entire development process and the responsibility over it. This is more applicable to companies that aren't in the software industry, such as health centers.

Here's a table breaking down the differences between these models:


Staff Augmentation

Project-based Outsourcing

Dedicate Teams





















How to Outsource Software Development

If you wish to outsource your software development, you'll need to go through the following steps:

  • Define Your Needs

To begin outsourcing the development of software, you need to establish what exactly you need and the skills required to reach your goal. Now, you should decide if you need to create something new or if the technology is already available and you should purchase it. Moreover, you should consider if the benefits outweigh the costs of onshoring, nearshoring, and offshoring projects.

  • Prepare Your Documentation

Once you've defined what you need, you should prepare the project documentation. It should include the scope, data, goals, resources, skills required, and other relevant information. Then, you should use this information to seek out software companies.

  • Research the Software Company

After you have found qualified companies, you should research them and verify their claims. You should ensure they have the skills required to do the work and a portfolio of previous work that aligns with your current project. That means interviewing their representative, looking up their references, and doing a background check.

  • Select the Software Company

Now that you've verified the potential software companies select the best one. As you choose them, keep in mind the benefits of different models and strategies. Then, you can make a contract that will protect both of you, determine responsibilities, and set expectations. In particular, you should ensure you've detailed the pricing method, intellectual property rights, data security policy, and acceptance criteria.

  • Manage Your Project

Once you've signed the contract, the software company will begin working, and you need to manage them. This is to ensure they respect the contract, stay within budget, and meet the timeline. Meanwhile, the software company will build and test the project.

  • Finalize the Project

Finally, after the software company has finished developing your project, they'll send it and its relevant information to you, and you can put it in your in-house structure. Then, you're done with the outsourced project!

Bonus Tips:

Here are the bonus tips to successfully outsource software development:

  • Communicate Regularly

    You should have regular meetings to quickly become aware of any issues and alert the external company of any changes.

  • Create a Contingency Plan

    You should plan for any problems that may arise so your business isn't greatly affected if the project fails.

  • Monitor Project Quality

    At every step, you should monitor the project to ensure it's going according to plan.

Now that you know how to outsource software development using different models and strategies, you can certainly benefit from lower costs, increased flexibility, and scalability. However, it's only by using the correct outsourcing process that you can gain these benefits. Therefore, you should carefully compare software companies within and outside your country and consider the level of control you want over your project. Finally, you should select the right company, like Divelement, to reduce cost, increase scalability, and manage the project expertly, keeping in mind the mentioned tips and tricks throughout the process.