Outsource Software Development: Why Companies Choose It

Discover the strategic reasons behind companies opting to outsource software development. Explore insights on how outsourcing fosters business growth .

Are you looking to unleash the full potential of your company? When you want to scale up your business, you often need skilled IT employees who are really good with computers and technology, which can be particularly costly. If your business isn't in the digital technology industry, that would divert your capital to non-core operations.

To solve this issue, some companies rely on external developers, which is particularly known as outsourcing. But what does that entail, and which benefits can you access through outsourcing in comparison to in-house IT?

What Is Software Development Outsourcing?

When you outsource your software development, you hire an external company to take over parts or the totality of your IT team's work. These companies can be smaller or larger and operate onshore/nearshore/offshore. Moreover, you can choose the level of their control and how much of the project they will complete.

Why Do Companies Outsource Software Development?

Companies outsource the development of their software because it's a strategy that brings the following benefits:

  • Cost-Effectiveness

One of the most obvious reasons why companies opt to outsource their software development is because it reduces costs. In general, outsourced developers cost less than full-time IT employees. This could be because, in their location wages are lower. However, there's also the fact that since they aren't your employees, some costs don't apply to them:

  • Some Taxes

  • Employee Benefits

  • Training

  • Medical Leave

  • Office Supplies

  • Skill Access

Companies choose to outsource their software development because this service allows them to find more experienced developers with specialized or niche skills. Since they're broadening their hiring pool to every software developer company in the world, they have access to more potential developers. They are more likely to find the right developer for their project.

In comparison, if you had to work with only your current team, there's a limit to the skills they have. Therefore, if you have a new project, your in-house team might take more time or even fail to complete the project.

  • Scalability

Outsourcing gives companies the ability to scale the number of developers working on software to the project's needs. Therefore, they pick outsourcing to manage the workforce while projects change in scope.

Therefore, if your project grows, you can hire more external developers to finish the project on time, while with an in-house team, you would either take longer or need to hire new employees. Similarly, if the project takes fewer developers to complete, your cost will most probably be reduced if you hire external developers.

However, you would still have to pay full-time employees the same even if you couldn't fully utilize them. Moreover, if you hire new employees or specialists, you would have to keep paying them until the contract ends or either party breaks it ― even if you no longer need them.

  • Accelerated Development

Companies opt for software outsourcing because it can accelerate their project's development through any of these three models:

  • Staff Augmentation

    The external developers join your team on a project. With the increased number of specialized developers, you can work faster.

  • Project-Based

    In this model, the external developers work on a project by themselves. As they work on your project, they can commit as many developers as required to finish the project faster.

  • Dedicated Teams

    With this model, the external developers fully take over your IT. Therefore, they can work as quickly as you need them to by increasing the number of developers they assign to your company.

  • Innovation

Companies may choose to work with external developers to increase innovation. External developers can bring fresh ideas that your in-house team hadn't considered. Plus, the right outsourced developer will have experience, understand the latest technologies, and have niche skills relating to your project. Therefore, they can find creative ways to resolve problems.

  • Time-Saving

One of the reasons companies use external developers for their software is because it saves on hiring full-time IT employees. More specifically, you can reduce the time you spend on:

  • Crafting Job Positions

  • Posting Job Positions

  • Finding Developers

  • Vetting Developers

  • Onboarding Developer

  • Training Developers

  • Offboarding Developer

Conversely, if you outsource your software development, you only need to find and vet them. Then, they can start working on your project and deliver it to you.

  • Risk Reduction

Companies sometimes outsource their software development because they want to reduce the risks of working on new projects. Since the external developers can work on the new project by themselves, your IT staff can keep working on the safe projects. Therefore, if the project fails or is otherwise unprofitable, you have the chance to keep doing normal operations that bring you revenue.

  • Operational Efficiency

Lastly, companies use external developers to work on IT projects while the full-time team focuses on the business's core operations. In particular, if you have a business not in the digital technology industry, you can outsource all your IT needs.

Is Outsourcing Development Better than In-House Development?

Your software development's success depends on how you leverage the benefits of in-house and external developers. Just as outsourcing has many benefits, in-house teams do as well. Therefore, you need to consider your goals and requirements. Also, you'll need to figure out how best you can utilize your resources to maximize them.

Here's a table that compares the benefits of these two systems:

Software Development Teams
















Accelerated Development









Risk Reduction



Operational Efficiency



Now, you can choose based on the benefits you want the most. In addition, you should keep in mind that you can use these two teams at the same time and balance their scope until the mixture fits your business needs.

Now that you know why companies outsource software development, deciding whether you should think about outsourcing is simple. To sum up, outsourcing brings a variety of benefits, from scalability to innovation. It's a useful tool if you want to access a large pool of specialized developers that can work faster and allow you to focus on your core operations. Moreover, engaging with outsourcing companies, such as Divelement, for your software development needs is generally more cost-effective and demands less managerial effort compared to maintaining an in-house IT team.