Outsource Software Development in 2022 [Procurement Guide]

Author: Tomasz Bąk
17 min read
Outsource Software Development in 2022 [Procurement Guide]

Outsourcing software development services can be a real game-changer for fast-growing small and medium-sized businesses. Not only can it have the effect of saving money and get you working software delivered faster.

If you’ve never worked with a software development company before, it might seem a little intimidating. That’s perfectly understandable! Putting your trust in a different company to deliver the results you are looking for is a big decision in any capacity, especially when success of your business as a whole can depend on it.

Based on our 15 years of experience in outsourced software development, this article summarizes everything you need to know about outsourcing software development: benefits, challenges, outsourcing strategies, and key elements you need to consider choosing software development outsourcing companies. Our goal is to maximize outsourcing benefits for you. Let’s get started!

What is outsourced software development?

Outsourcing software development is a business strategy of delegating software development project to an external company instead of executing it within in-house capabilities. The process of software outsourcing begins when a business decides to build start software project through the means of a third party.

Global IT outsourcing is expected to reach 351 billion USD in 2021. Behind this astonishing number, there are businesses of all sizes that are able to gain a competitive edge. Outsourcing allows them to complete IT projects faster by leveraging know-how, technical talent, and flexible team scalability offered by specialized outsourcing partners.

Level Of Satisfaction

Why companies outsource software development?

Why do companies outsource software development? Here are some of the key benefits of outsourcing your business's software development.

  • Reduce software development cost The rapid pace at which technology evolves means that the software development industry is ever-changing. Hiring and training software developers for a project can turn into unnecessary overhead costs.

  • High-quality software development team With software outsourcing services you are able to hire with a diverse software development team with all sorts of skill sets. Those niche experts that can help you to understand the market from a domain and technical perspective.

  • Save time on hiring specialists The saying ‘time is money’ really is true, so you can cut costs ever further by bringing in pre-approved specialists. With developers in outsourced teams, the hiring and researching work has already been done. Now, you can swoop in there and enjoy all the successes by spending a minimal amount of time. The whole process of hiring an outsourced team can be equal to or less than the time it takes to hire one single developer into your in-house setup. Think about the time, and therefore money, that this has the potential to save you.

  • Gain access to world-class talent Part of the beauty of an outsourcing network is that you can bring in some of the finest software development from the other side of the world at the click of your fingers (kind of) on an outsourced basis. As long as you can utilise project management and collaboration tools, you can reap all of these amazing benefits.

  • Flexible team capacity and scalability An awesome thing about software development outsourcing is that it can give you a sense of ‘on-demand’ service. Imagine a scale between skills and cost (sure, it’s a loose idea), but this will help to visually the freedom that you have with this opportunity. Scaling your project as and when you need it has huge benefits for time and money.

  • Work with a managed team It’s not just individual developers that can save you manpower, and therefore time and money. Management is a huge part of this too. Hiring the right manager for an in-house team can be one of the most difficult things you will do with your company, but you don’t have to worry about that as much when outsourcing, as every team will already be managed. You’ll certainly need management to guide the project down the line, but a lot of the weight of management can be taken away from your own company.

  • Focus on your core business And that brings us nicely to the final benefit of working with an outsourced software development company. Being able to focus on your core business will undoubtedly allow you to get a better result overall, as there will be nothing to distract you and lose sight of your original idea. This could well be the most important thing to focus on overall.

Software development outsourcing models

There are some basics you need to pay attention to before you outsource your project. In this guide we would be focusing on the client and provider relationship model. This is primarily because healthy relationships drive business success. When the relationship is right, you don't have to worry about distance. Here are the three main relationship based models:

  • Staff augmentation In the staff augmentation model you own your project from start to end. The client takes the most of the responsibility. You're hiring tech talents from an outsourcing company To strengthen the team responsible for the development projects.

  • Managed team In this model responsibility and ownership are shared by the client and the outsourcing provider determining on which responsibilities belong to whom. Your managed team operates independently of your in-house team, with an outsourced Project Manager overseeing daily operations and workflows.

  • Project-based The outsourcing provider takes the most of the responsibility and own the projects from start to end. He or She completes your development projects according to your specifications.

Different problems require different solutions and different software outsourcing models. So you make sure to know what kind of problem you have before looking for a solution. If you're new to outsourcing, staff augmentation is a good and easy start. It gives you a feel of the outsourcing world. As your needs increase and your relationship with your outsourcing partner grows, you can try other models of outsourcing.

Scale Of Responsibility

Comparison of the software development outsourcing models

STAFF AUGMENTATION MANAGED TEAM PROJECT-BASED
Scope Not set Estimated Predefined
Timeline Predefined Estimated Predefined
Control High Medium Low
Client Technical Expertise/Leadership Required Recommended Optional
Communication with Outsourced Team Daily Frequent Occasional
Overlap with In-House Team High Some None
Product Management Client Shared Client
Task Management Client Outsourcing Provider Outsourcing Provider

If you want more about outsourcing models check our blog post
Software Development Outsourcing Models — Which is Best?

How do you outsource a software project?

Increased productivity, improved product quality, and cost savings are just a few of the advantages of outsourcing software development. However, you cannot effectively outsource IT development without careful preparation, and developing a sound outsourcing strategy is the first step in hiring an outsourcing partner to meet your demands. However, how do you construct one?

1. Define your goals

Set Up Outsourcing Strategy

Every project has multiple stakeholders, and you can’t expect all of them to be participating in every detail of the project. When we say project stakeholders: company leadership, end-users, customers, etc.

Outsourced projects can differ in nature, so sometimes, you can expect stakeholders outside organizations or even individuals that will use or be directly affected by the final product.

You’ll probably also want to run your ideas past other members of your team and perhaps even other people you know in the business so that you know your project has well defined goals.

2. Prepare Scope of Work documentation

There’s no point trying to reach out to a software development outsourcing company if you have not prepared the plan. They’re going to want to know your budget and your requirements, and good documentation is the best way for this. See: Starting a Software Project — Complete Guide to Project Planning

3. Define your technology stack

Given that software development outsourcing is often performed remotely, it is critical that your custom software development partner has a technical profile that matches your requirements. To this aim, we propose creating a resource list for your project. Additionally, security and data protection aspects should not be overlooked, since data loss is not unusual.

4. Bring experienced Engineering Leader

Building an engineering team starts with a high-performing leader, who brings in technical capabilities and chooses necessary technology talent to accomplish the work. A strong leader can advise clients, managed remote teams, and protects you from poor team coordination, and quality assurance issues.

At SoftKraft we are true software partner and we have dedicated development tracks to ensure talent pool for Engineering Leader position. Our Engineering Leaders not only to handle the technology, and team, but also work towards client's long term success on all levels.

Hire Developer

5. Manage project scope, budget, and timeline in each iteration

Scope, budget, and timeline are at the heart of outsourced software development. We highly recommended to start agile software development - see our article Agile Outsourcing — 12 Principles To Guarantee Project Success

The agile approach makes budget management is a shared responsibility. The Product Owner manages the backlog, the sponsor agrees on the budget, and the team delivers the backlog and spends or manages the sprint budget within agreed constraints.

Outsourcing software development step-by-step

Regardless of how complicated a software product is, it must be adaptable, maintainable, and upgradeable. This may be accomplished by meticulously preparing each stage, from ideation through maintenance. The stages of the software development life cycle (SDLC) differ between software development companies.

Sdlc

  • Requirements Gathering Once a gap or opportunity in the organisation’s application landscape has been identified, there is a need to understand and document exactly what that business requirement is in order to select the correct solution. It is important to resist the urge of jumping directly to a solution in this phase and stakeholders may need coaching and support to take an open mind about any solution preferences they may already have.

  • Design Once the requirements for the new software have been sufficiently documented and signed off, the design work can begin. At this point, organisations should decide if their effort is best spent on building a new bespoke system or purchasing something off the shelf. This may require a tender process such as a request for proposals (RFP) or a request for information (RFI).

  • Build In the build phase, the output of the “requirements” and “design” phases are transformed into working software by software developers. This could consist of various things such as building front ends, back ends, databases, microservices or many other components.

  • Test In the testing phase, test analysts will conduct a number of validation checks on the software such as performance testing, load testing and exploratory manual testing. The main objective is to ensure that the quality of the work implemented in the build phase is sufficiently robust to meet the demands that will be placed on the system during normal operating conditions and determine what happens when those conditions are exceeded.

  • Deployment During the deployment phase, the software is loaded into the relevant production environments & platforms from which it will be run. These environments may be physical servers located in the businesses data centre, or more increasingly, a cloud-hosted platform.

  • Maintenance During the maintenance phase, the system is handed over to the team who will be supporting it for the remainder of its life at the organisation. Correct documentation and helpfiles will need to be prepared for service desk operatives so that they know how to direct user support requests to the correct team.

Learn more about our Full-cycle Software Product Development Process

How to choose an outsourcing software development company?

So, you’ve decided to outsource your software development. Congratulations! You’ve just made the first step towards the implementation of an awesome new software project, and now it’s time for phase two: finding the right software outsourcing companies..

This is another crucial stage of the process. The outsourcing company that you choose has the potential to massively increase the quality of your project or be a factor behind its failure! It goes without saying, therefore, that plenty of time and focus should be spent on this part of the development lifespan.

It is important to consider the topic in two ways, depending on the model of your business and the type of project that you are about to embark on: you’ll want to assess their skills and experience in the more general world of software development, and more specifically, how that skills set applies to your own work, including their experiences working with similar clients.

Our recommendation questions should cover all bases on both fronts, but you are probably going to want to add a few of your own to double down on making sure that they are the right developers for you specifically.

Outsourcing In Poland

Software vendor interview questions

Questions to ask software development companies can really vary depending on a number of factors. This being said, the 15 questions we are about to recommend should be good questions to ask a software developer in most cases. They are general enough to cover the most important aspects of software development projects, but also specific enough that they will encourage revealing answers from the individuals responding.

1. Could you present a project similar to mine in terms of technology?

Right off the bat, this is probably the most important thing that you can ask a potential software developer. You can assess their answers to this question in two ways:

  • Do they have the right technical expertise to suit you?
  • Has that technical expertise been applied in similar ways to what you are looking for?

The confidence with which they answer this question and the assurance that you feel when they do so will be very telling as to how good this company could be to work with you.

As well as this, don’t settle for just one or two vaguely similar projects here. The more there are, the more experience that software outsourcing company has, and the more likely they are to deliver the goods for you.

2. Can you provide good references from previous projects?

Talking about how good you are as a development company in delivering similar pieces of work is one thing, but anyone hearing that information will want to ensure that it is backed up by reviews from clients.

It is great to be able to see examples that correspond to your project as a business, but what is truly telling is seeing how well the provider’s software development processes and the delivered software performed for the client and other businesses supported with the software respectively. If you can get good feedback from two, three or more other businesses that your software development outsourcing partner of interest has been working with, that will be a big green tick by their name.

3. What kinds of companies do you typically work with? / Who is your ideal client?

Here, you’ll want to check if your interviewee has target clients with characteristics similar to your own, including your vision and the size of the project. If they do, it increases the probability that you will have a positive experience with them.

Small startups that engage with larger software development companies (who have a tonne of big clients) might find that they are not top priority and that things take longer to happen.

Read more 15 Software Vendor Interview Questions

Software development outsourcing contracts and pricing

Once you've found the ideal software development company, the next critical step is to sign the software development outsourcing contract with us. The custom software development contract is a legally binding document that establishes the terms and conditions of the relationship between the customer and the contractor. It assists both parties in avoiding risks while achieving expected results. A strong contract ensures the project's good quality and a positive experience working with the development team.

There are two primary ways of paying a developer for the production of custom-made software: an hourly charge, or a lump-sum (known as a "fixed-price" agreement). Therefore, the two types of software development contracts are “time and materials” contracts and “fixed price” contracts.

  • Time and material This is the most typical sort of custom software development outsourcing arrangement. By signing a time and material contract, you commit to paying the developers for their time spent on your project. To get the total fee, simply multiply the number of hours delivered by all the developers by the hourly rate adopted for the project (or a total number of man-days X man-day rate).

  • Fixed budget A fixed-price agreement requires a high level of certainty on all dimensions of a project, from design to technical solutions for both parties. It involves an assessment of all stages of the project and is more suitable for engaging suppliers to perform minor tasks.

Custom software development contract template checklist

There are certain key provisions that should be in every software development contract, notwithstanding whether the contract is a time and material contract or a fixed budget contract.

Software Development Contract Checlist

Read more Custom Software Development Contract Template Checklist

Why consider outsourcing software development in Poland?

Software developer roles are projected to grow 21% between 2019 and 2028 and this translates into 290,000 new software development jobs in the US alone.

How hard is it for an HR agency to source applicants for a development services? If you post a software development job today you will have plenty of applicants. However, after a basic screening, you’ll be left with few viable choices and the real sense of a talent shortage.

Poland software development outsourcing services facts:

  • Poland accounts for 25% of Central Eastern Europe's offshore programmer skills.

  • Around 15,000 students with a concentration in information and communication technologies graduate from Polish universities each year. Simultaneously, around 80,000 students are studying to become software engineers. This implies that the country receives an annual tidal wave of tech talent.

  • According to the Tholons Globalization Index 2021, Poland is placed 14th among the top 20 digital nations. Additionally, according to the same index, Krakow is among the top twenty super cities in terms of digital innovation.

  • Poland is ranked among the top 30 nations for offshore services by Gartner.

  • The Polish IT market is expanding at a steady rate of between 5%-10% per year.

Why Poland

Outsource software development with SoftKraft

Need to craft an end-to-end software application with a complete cross-functional team? At SoftKraft we provide Full-cycle Software Product Development. We take project ownership and responsibility for decisions that were taken during the development. Success of the project is the only metric that really matters to us.

  • Engage quality tech professionals

    15+ years of experience in engineering custom software solutions for startups and SMEs.

  • Results-driven design thinking

    Design Workshops to clarify your business idea and build a much better product faster.

  • Business-minded engineering

    Work with engineers who understand the need for bottom-line results from tech initiatives.

Hire a team in
four simple steps

01

Describe
your needs

Tell us your technology requirements and describe your project using our contact form.

02

Schedule meeting
to align on goals

No one-size-fits-all. We always create a unique team augmentation strategy.

03

Approve
your team

Our HR and tech leaders provide you CVs. You approve each candidate who will join your team.

04

Start your project
with remote talent

We seal the deal with a contract and launch your remote team.

It Staff AugmentationKafka ConsultingSoftware Development Team

Conclusion

Software development outsourcing allows you access to a diverse pool of tech talent that can allow you to move your project quicker and in a more cost-efficient way.

If you’re in the process of outsourcing software development, reach out to SoftKraft to see what we can do for you. We’re happy to share our portfolio and find out whether we can get you to where you need to be on your next software development project.

Frequently Asked Questions (FAQ)


How to Protect Intellectual Property when Outsourcing?

While trying to save time, be more flexible, save money, and increase productivity through outsourcing, it is important to consider the risks to your intellectual property and take the steps necessary to protect your intellectual property. With the knowledge of the importance of the legal framework applicable to your IP, for example, you may review past outsourcing agreements and renegotiate where necessary. You may also limit server and data access to vendors. You will also strategically approach future outsourcing agreements or arrangements by asking the outsourcing vendor key questions.

How to manage offshore software development teams?

Managing an offshore development team is bounded with some challenges. Knowing what difficulties may come your way will help you solve problems quickly.

Efficient outsourcing software development requires easy and quick online communication; an accessible, shared location for file storage; and a workable system for easy collaboration with remote teams.

What is Agile Outsourcing?

When you implement agile outsourcing it might appear incompatible to merge agile processes and outsourcing. The agile techniques, with its emphasis on collaboration, frequently contrasts with the traditional outsourcing paradigm, which necessitates contracting with providers whose employees are educated primarily to follow direction rather than collaborate. By mixing in-house and vendor teams you can still implement agile methodology while continuing to outsource and have benefits such as lower fixed costs and increased access to desirable skill sets. The key to success with agile outsourcing is to get a partner that can handle the dynamics of validated learning smoothly with a solid software development process, both on the software design and engineering side.

Can I outsource a CTO?

However, while the demand dramatically outstrips the supply, this doesn’t necessarily mean a skilled CTO is necessary for every company. The job description for a CTO might look like one that requires bringing on full-time staff to handle but many startups do not have the budget to hire a full-time CTO and so have to look into more affordable alternatives. This is where the outsourced CTO services come in.

An outsourced CTO position usually acts as a manager for your company’s technologies, engineers, IT support, and tech partners. He can help to identify risks in company cybersecurity systems and ensure that your company’s services and products are up to required standards. The answer, therefore, is Yes, you can outsource CTO. But should you?

Let’s look at the views for and against CTO outsourcing.

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