Software Development Outsourcing 2024: Complete Guide

February 19, 2023

During the digital age of the 21st century, companies have advantages that their predecessors could only dream of. This includes access to some of the world’s most talented IT professionals, analysts, developers, and engineers-a true asset considering how quickly technology evolves in this industry. More companies than ever before now realize the benefits of outsourcing software development services. Even though many businesses outsource IT services of all types as well as accounting and marketing, one IT function is outsourced more frequently than any other: software development. According to Statista, 64% of respondents outsourced software development in the past year, well above IT infrastructure, help desks, and even third-party data centers.

What Is Outsourcing In Software Development?

The practice of outsourcing involves selecting an external provider to handle a particular aspect of an operation or project. An ideal provider would be highly qualified and provide the talent, time, and resources needed to run the project and assist the business. Instead of using an internal team to develop software applications, a company contracts a third party to do so. Businesses often outsource software development when they lack the in-house skills needed for the project. To maximize the time available and achieve goals faster, others outsource software development services. Despite this, many firms choose to outsource simply to access a pool of experts who can help them offer the best possible customer service.

Software Outsourcing Models

  Since software outsourcing refers to the use of a third-party programmer by an organization, it can take many different forms. Among the most common software outsourcing models are:

Project implementation: 

  Programmers are contracted to implement specific software projects for businesses or organizations. Programmers develop new software, optimize existing servers and hardware for its use, and implement it in an organization’s environment.


  Rather than focusing on individual projects, this outsourcing model focuses on filling a position remotely. While fulfilling the same out-staffed role, an out staffer can work on multiple software projects at once. As a result, outsourcing relationships are steady and predictable.

Dedicated Team:

  It can be tricky to navigate the process of outsourcing software development services. Software development and/or testing can be easier if you have a dedicated team of managed (and remote) workers. You can hire any outsourcing company, and they’ll assemble a dedicated team for your project, along with a project manager to oversee the project’s lifecycle. When outsourcing software development services, the general process is as follows:
  1. Outsourcing companies receive project requirements.
  2. The outsourcing company’s team will develop a product roadmap.
  3. You will be in direct and constant communication with the development and testing team during this phase.
  4. Finalization and completion of the project will result in a ready-to-market product.

Maintenance and support: 

  It is common for businesses to require ongoing maintenance and support for their existing or new software products. Engineers can modify the product after delivery to fix faults or to enhance functionality and improve performance. Maintenance and support can be handled remotely (and during off-hours) by outsourcing software development services.  

Quality assurance and independent audit: 

Organizations frequently use third-party providers for quality assurance and independent audits. Having an external provider perform functional, performance, and general source code quality testing has the advantage of being impartial. It inspires consumer confidence because of its impartiality. Moreover, in modern testing processes, outsourcing companies leverage automated testing techniques to enhance overall quality and efficiency while saving time. The combination of manual and automated testing further optimizes results, ensuring a comprehensive evaluation of software performance. From automated GUI testing to regression testing, modern automation tools offer a robust framework, streamlining the identification of potential issues and contributing to a more reliable product. This strategic approach upholds the principles of impartiality in quality assurance and aligns with industry best practices for delivering trustworthy software solutions.  

Migrations and upgrades: 

As with project implementation, the programmer ensures the program’s successful integration into the organization’s environment. Engineers can perform system migrations or serial upgrades. Programmers ensure that each set of changes integrates well with other programs, hardware, and servers and functions efficiently.

Outsource Wisely

  As Since software developers, engineers, and other experts are so easily available online, many businesses and organizations choose to outsource software projects and positions. Professionals are now available on a remote basis like never before, allowing them to leverage expertise and experience more cost-efficiently and flexibly than traditional, in-house teams. When outsourcing software development services, it’s essential to keep in mind that each software project, staffing position, migration, upgrade, or QA project is unique. There are different benefits and risks associated with different types of projects and platforms. Hence, it’s crucial to consider the platforms in use before deciding whether to hire a local team or outsource software developers. By doing so, you will be able to determine which type of outsourcing relationship is right for your business.

Outsourcing Contract Models

The first step in outsourcing software development services is to identify the best contract model for your project. Organizations typically choose one of three major contract models:
  • Fixed bid. In large-scale and green field implementations, fixed bid contracts are typically used; they are effective for waterfall-type projects as well as Agile-based, flexible projects with multiple unknowns. The partner typically won’t be paid until the work is completed or until significant milestones are reached, so the financial risk falls on them. In the absence of an experienced IT project manager, formulating and checking acceptance criteria for each deliverable item will be challenging.
  • Time and materials (T&M). The T&M contract, on the other hand, allows the contractor to bid on the materials and time he or she will use throughout the project. A well-planned T&M project can be cost-effective, but delays and overspending can result if you don’t outline it thoroughly.
  • Incentive-based. An incentive-based contract offers the partner a reward for meeting performance, time-based, or other goals. In addition to the fixed bid or T&M contract, these contracts can help motivate the partner beyond those terms. It is possible, for example, to install a retainer system where you pay for the full-time engagement of a certain team or expert; in return, you’ll receive a discount for your commitment to hire the person for a long period of time.

Choosing the Right Partner

Numerous outsourcing solutions are available to fulfill the varying types of outsourcing projects and positions. Three important types of specific outsourcing are likely to come up if you’re considering outsourcing software development services:
  • Onshore/local outsourcing. You can take advantage of a local pool of talent for this type of outsourcing, depending on your scope. Outsourcing based on your geographic location may allow you to build relationships and facilitate communications, but you may also encounter higher prices and a smaller pool of professionals.
  • Nearshore outsourcing. Nearshoring is the process of finding an outsourcing partner in a country adjacent to or nearby your own. Communication can be just as easy and cost-effective with nearshoring as it is with local outsourcing.
  • Offshore outsourcing. This type of outsourcing gives you access to a worldwide pool of talent and potentially lower costs by choosing the best outsourcing partner regardless of region. Offshoring partners generally speak English fluently and offer assistance in multiple time zones to ease communication. When people hear “outsourcing software development services,” they typically think of this.
  • Hybrid mode. It may be much more beneficial to combine local coverage with offshore development and testing teams for customer-facing roles like project management, business analysis, and software architecture. Even with a moderate budget, you can still get the best talent while mitigating the risks associated with managing remote teams, especially in multiple time zones and locations.
You may be able to benefit from one or all of these outsourcing options, depending on your organization’s goals. You’ll also want to consider the current structure of your team and the specific outsourcing model that will work best for your daily operations. Local outsourcing may not be ideal for you if you have a tight-knit team and little time to dedicate to working closely with outsourcing partners. The hybrid outsourcing mode might be a good option for you. You may find, however, that offshoring your software project gives you access to a world-class team of developers that can meet your requirements remotely, and that fits your team structure much better. It is inherently flexible to outsource software development services (which is another advantage).

Where Can You Find an Outsourcing Partner?

To identify potential outsourcing partners who can meet your needs, it’s vital to use multiple resources. When searching for a partner, start with these top three resources:
  • References. Obtain references from business associates, friends, and other contacts who have recently completed projects similar to yours. You can narrow your search field using personal references to find outsourcing partners who do quality work and have experience with your type of project.
  • Online listings. A listing site can give you more than just the name of a potential partner; it can also provide background information, contact information, and even past projects. In some cases, you can even rate potential partners based on their skill level, efficiency, and flexibility. Check out listing sites such as Clutch, Goodfirms, DesignRush, and similar ones.
  • Research. You can find additional outsourcing partners by conducting your own research using search terms relevant to your project type and niche. To determine if an outsourcing software development company is a good fit for your project and business, you must first investigate their backgrounds.
If you want to find a potential business partner with excellent reviews, a proven track record of handling projects like yours, and a work ethic that comes highly recommended from your business associates, use all three methods.

Outsourcing Software Development Services: How to Choose a Partner

You need to make a final decision once you have shortlisted potential outsourcing partners you believe would be a good fit for your software project and business model. Build your knowledge of each potential partner by communicating with them individually – you will be able to make much more informed decisions. When choosing a software outsourcing company, follow these steps:
  1. Reach out. Make contact with each partner and express your interest in a potential partnership. As part of this step, you should also outline your project thoroughly. It takes a lot of planning to outsource software development services.
  2. Describe your ideal delivery model. You will need to specify which outsourcing model fits your needs if your potential partner has representatives onshore in the country where your project is being run.
  3. You should ask for references. An outsourcing partner with a reputable track record should have a number of references who can attest to their skills, work ethic, and performance. Get a sense of each of these aspects of your partnership by contacting the references provided.
  4. Contact us for pricing information. The pricing model you encounter during your conversation will depend on your project and the partner in question. Comparing your pricing model with that of other potential partners is a good way to get an estimate.
  5. Make a deal. Your final step is to negotiate with your final candidates and choose the one that best matches your organization’s software needs, budget, and culture. Be firm about your requirements, but understand that you often get what you pay for when outsourcing software development.

Why Choose Carmatec?

With extensive years of experience in software development, Carmatec is a leader in the field. Several teams of experts have been built around the world by us as an enterprise-level partner, including Custom software engineering, Mobile app development, IoT, embedded software and eCommerce. As a result of these skills and competencies, we’ve been able to serve a variety of multinational corporations. Become familiar with Carmatec’s software development outsourcing services by contacting us today.