Outsourcing Software Development

Outsourcing Software Development: Things to Consider When Outsourcing Software Development.

Everything you need to know about IT outsourcing. An in-depth review of how, where, and when to outsource software development for some best results.

Gabriela Adynowska
12 MIN READ
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Table of Contents:

  1. What is outsourcing software development?
  2. What are the possible service models in outsourcing software development?
  3. Who should consider outsourcing software development?
  4. Pros and cons of outsourcing software development compared to inhouse development
  5. A high-level comparison of freelancers and software companies
  6. Where to outsource software development?
  7. How much does outsourcing software development cost?

What is outsourcing software development?

In the simplest way, software outsourcing means hiring a programming company or a freelancer capable of taking care of the whole software development service in order to help you achieve your advancement goals. Thanks to transposing some of your duties onto a specialized in this field third party you ensure yourself that the work will get done smoothly, quickly and according to the best standards in the industry.

Nowadays, one has such a great variety of choices and services available that it is difficult to actually make a choice. There are many pros of going up this path, such as reducing costs and increasing efficiency of the team. Of course, nothing is ever only bright coloured, there are also a few risks or disappointments waiting for you down this alley. This may be especially troublesome when it is your first time considering hiring a third party in order to develop for you. Imagine that choosing a software development company (or a freelancer, we will talk about it later on) for your project is much like choosing the right hairdresser. You should do some investigation first as otherwise, you may end up really unhappy. Start with looking at their previous works, reading people’s opinions and double-check everything before you decide that they are trustworthy professional team. This can save you a lot of worries and even more money.

As outsourcing software development usually happens remotely and often means working with people from some other countries you may end up having communication problems. Depending on which company you choose and how much you are willing to pay for this kind of service you will either be able to communicate with them in fluent target language or may end up having difficulties understanding what they actually wanted to say or write. Sometimes outsourcing may turn out rather pricey, and it is especially the case when you choose to outsource in Northern America, Australia or Western Europe (source: Qubit Labs). It is essential for you to find a location and a company that balances both their hourly rates and quality of their service on the most sustainable level.

What are the possible service models in outsourcing software development?

Outsourcing software development is based on a few main models which can be looked at from two different perspectives. You can either analyse it according to the forms of cooperation (project-based outsourcing and staff augmentation outsourcing model) or the forms of compensation (time & material and fixed price model). Let's have a look at the first division:

Project-based outsourcing - this is a model that gives the software company a lot of flexibility to plan and execute (usually the whole of) the project while the customer simply worries only about the end result. This means that it is the developers who take care of the whole of the project or its coherent definite part. It can be either, for example, an entire PWA app, website etc. What is very important in this model is that the client does not have to provide any technical input or support. He can focus on the business and marketing without having to worry about the management of all the small steps and early stages of the project.

Staff augmentation - this is a model that aims to reinforce your in-house staff with specialized software developers that will become a fully incorporated part of your team. It requires the client to manage the whole project. This means that the developers will simply do their job without much possibility to provide you with innovations or unique expertise except for the stated area of their responsibility.

This model is especially useful when you do not want to hire any new employees permanently and already have some ‘technical’ personnel in your team, yet their time is limited by other day-to-day tasks. Such a mix of in-house staff overseeing the job of the outsourcing programmers can be truly miraculous. In the staff augmentation model the hired company does not have that many responsibilities compared to the project-based outsourcing.

The other possible way of distinguishing between different types of outsourcing is the ‘money-based’ focus. Here we have the time & material and fixed price models.

Time & material model - this model relies on the so-called ‘costs of resources’, that is, developers' hourly rates (their salary) and the additional costs of materials. In this particular situation, it is important to focus on the milestones your outsourcing team meets on the way, not the fixed price for the whole project. After each one of these steps, you should thoroughly analyse it. Go through the number of hours and multiply it by the earlier agreed on hourly wage (time) and add to it any additional costs of materials. This way you can be sure of what exactly you are paying for and at the same time have better control over your project. It is a very elastic model because, despite the earlier estimates, you pay only for the hours worked.

Fixed price model - this model guarantees you a fixed amount of money you will have to pay for your project. Notwithstanding the overtime, you can be sure that your budget will not change. What you need to know is that at the very beginning you must undergo a very detailed specification of your project in order to be able to predict technologies used, the very amount of hours the programmers will need for each feature and set the fixed sustainable price. This model may not be the best choice as such analysis is a long process not always done right. Within most of the projects in the industry there are at least a few highly dynamic changes one has to implement on the way. Due to the fact that one has to plan a few months work and analyse very many factors there is a high risk of of having to change or redirect the initial assumptions. It can be caused by changes on the market or things that affect all of us globally - for example, coronavirus pandemic. Overall, just like in everyday life, it is really difficult to be able to predict every possible scenario that may happen. In the end, barely ever a ‘fixed price’ is truly the ultimate fixed price. Despite all these facts the fixed-price model is a good idea when your project is rather small and very well defined - for somewhat 2-4 weeks of developers’ work.

If you’d like to find out more about the time & material and the fixed price models, click here.

Who should consider outsourcing software development?

If you are running a business or want to build a startup, but have no idea how to do it; If you are the CTO at your company and wish to find a cheaper or a more efficient option, you need someone to work for you just for one project or you are working in a field that does not evolve around IT technology and simply need to launch a website or an app for your product without having to hire someone full time; If your target audience is not technical but rather business or consumer content-related, and the future maintenance of your project would revolve around only a few hours a week and could be done remotely; Finally, if you need some help with your current project, someone to join your team for a certain period of time, bring a fresh view and some great development and programming skills - outsourcing may be just for you as the most efficient option to go for.

Pros and cons of outsourcing software development compared to inhouse development

What are the real advantages and disadvantages of outsourcing software development?

Nothing is ever black or white, we always balance on the greyscale. This is why it is really important to make a wise choice and know what risks and what conveniences come with such a solution. On the one hand, outsourcing is very convenient for many people, you can find some very skilled programmers that will bring a fresh view to your team and will not be too expensive at the same time. On the other hand, you can also come across some developers with poor knowledge of the particular technology you wish to use who will turn out very pricey (especially if you will have to hire somebody new in order to ‘clean up’ their mess). Let's have a look.

Main pros of outsourcing software development:

  • Possibility of short-term employment;
  • Reduction of the expenses;
  • Flexibility of the external workers;
  • Time efficiency;
  • ...and more!

Main cons of outsourcing software development:

  • Possibility of miscommunication;
  • Different business philosophy;
  • Less control over the external workers;
  • ...and more!


A high-level comparison of freelancers and software companies

When it comes to outsourcing software development, you have two main options. You can hire a freelancer, an independent programmer who will most likely provide you with some excellent abilities combined with great dose of flexibility. Unfortunately, there are also a few risks, for example, while hiring a freelancer the management is completely on your side. When usually it is not that much of a problem, in the case of a bigger project and hiring a few freelancers it may be rather tricky because it is difficult to create a coherent team out of people that have never worked together. They may end up having some communicational problems and this, combined with narrower knowledge (than that of a unified team of developers who implement, substitute and learn from each other) may actually limit their usefulness. They may also not always be there when you need them due to personal reasons or holidays. The second and probably more reliable option is hiring a software development company. They usually consist of a team of highly skilled and experienced people who strongly rely on teamwork and mutuality. They can easily substitute for each other, however, may be a little more expensive.

An article in which we will analyze it for you in more detail is coming soon!

Where to outsource software development?

Nowadays, there are thousands of companies providing outsourcing services which are located all over the world. As many developed countries lack specialists in this field or their assistance is simply way too expensive the only reasonable way for them is to look for help somewhere else. Choosing the location wisely is a highly important matter as the quality, price, communication level and many more vary to a great extent from one country to another. We can list even more bullet points and useful criteria for you to consider, such as geographical or cultural proximity, time difference and educational background. However, we need to underline that these are only estimated assumptions that are not always true, in every country there are many people and companies that go beyond the area and provide software outsourcing on the level that is way above average statistics.

How much does outsourcing software development cost?

Rates of software outsourcing depend on many factors, such as location, the size of your project or technology used. So, what about some real numbers? Let’s take a look at statistic costs of mobile app development for 2020 created by Qubit Labs.

  • Eastern Europe - $25-$45 per hour;
  • Western Europe  - $110-$300 per hour;
  • Central Asia - <$25 per hour;
  • East and South Asia - $15-$200 per hour;
  • North America - <$195 per hour;
  • South America - $20-$55 per hour;
  • Africa - <$100 per hour;
  • Australia - $100-$180 per hour.

There are also some other features that may influence the hourly rate proposed to you by the outsourcing company:

Level of expertise - big companies usually try to group the developers on the market based on their experience. However, given the junior/mid/senior categories it is rather difficult to give judgement on the exact boundaries between these classes. They may also be very unreliable (from the point of view of the employer) and unfair towards many programmers and their skills.

When it comes to the hourly rates usually the bigger the experience and abilities the higher the rate. However, it is important to remember that senior developers tend to work quicker due to their industry knowledge. This means that even though you pay more per hour, the work on the project will get done quicker which equals lesser amount of hours you will have to pay for.

Overall, though, it is definitely the best to combine developers of different levels of expertise in the same team, it will pay you back with fresh ideas, proven technologies and more optimal price. Making the long story short - less complex and repetitive tasks can be done by the junior members of the team, more challenging ones are definitely a perfect fit for mids, and the overall architecture and coding quality can be ensured by seniors.

Scope of work - in outsourcing software development you should not be scared of your idea for a project and if you have a great concept with some neat (yet affordable) designs, just go for it and hit the developers up. If its composition, actual size of the project or anything else turns out too pricey for you, the outsourcing company or the freelancer will help you to cut the costs. They can do so through, for example, the use of different technology or some ready-to-implement mockups which significantly lower the number of hours they have to spend on coding.

Location - the price of software outsourcing also depends on the very geographical location the company is from. You may not want to choose the countries where the costs of living are rather high as it increases the hourly rate to some enormous numbers. Such places are usually the most developed countries. This is why one should seek for software developers somewhere, where there are lower costs of living and English (or your target language) is widely known on a high proficiency level. Such places, usually located in Eastern Europe, provide you with service on the same level but simply cheaper. The educational background is usually very similar to the more expensive outsourcing areas. Actually, European universities place pretty high in the rankings and their alumni programmers climb sometimes even higher.

Type of service/technology - the type of service and technology used within a project may also affect the price. Sometimes the exact choice of tech stack saves the time the developers spend on your project which literally converts to the lesser amount of money you pay in the end. For example, using a hybrid mobile framework, such as React Native is a great means that, thanks to having one codebase for two platforms (iOS and Android), the developers spend less time on your project which equals lesser amount of hours you have to pay for. Another example of cutting the expenses in an easy way is using templates or any other kinds of ready-to-use components that cut down the amount of coding the developers have to do for you.

Soft features - there are also some unmeasurable things that can also slightly affect the price and the overall ‘happiness’ of your cooperation with the developer. Some of such features are:

  1. Complexity of the project - the more complex and daring the project is the happier are the developers to take it. No one likes to be bored at work. Very many of the programmers would rather take on a challenge than work on the same (boring) thing everyday.
  2. Innovativeness - innovations excite people. The outsourcers are curious about challenges, new skills that they can learn and all the things that may entertain them.
  3. Pride - if participating in your project will make them proud, your cooperation may be very fruitful from the very beginning! Who would not want to take on a challenge which at the same time will be a walking advertisement of their skills? Developers will joyfully put some mockups of your app or web design in their portfolio. This fact is so crucial because in such a situation you can be sure that they will do their best. Another important thing that matters to them is whether your project has big or low chances for success. Let’s face it, it is easier and nicer to work on something long-term and fun rather than worry whether something you've spent so much time working on will be used by actual people at all. If you make the developers believe in your project, they will do their best to help you achieve the best results possible.
  4. Communication level - this is such an obvious point that we sometimes forget about it. It is no surprise when communication always comes so easily to all of us. But when you think about it in terms of outsourcing software development this point may be tricky. This form of cooperation usually equals two things that are rather problematic when it comes to proper communication.

    The first one of them is employing someone to work for you remotely. It means not seeing them often (if ever). In some cases this may lead to difficulties with checking up on your outsourcing developers and their progress. Of course, it depends on the very person you work with and the things you agree on at the very beginning. The outsourcing software development companies are usually very flexible when it comes to calls, group chats and other forms of communication and make sure to update you on their work each week. This is why you should set your priorities clear. Nowadays, the Internet era makes everything possible and as the communication is the key to great cooperation, you may want to give some more thought and attention to it. If you decide that you want a Skype or Slack call to check on your developers' sprint backlog and the pace of their work every week and they agree on it - so be it!

    The second problem one will most definitely encounter is the level of English (or any other language you wish to communicate in with your team) of a developer coming from a foreign country. This is one of the things that should be checked at the very beginning as it is really difficult to communicate via google translator. So, if your first language is, for example, German and you wish to use it with your team, it is important to ensure that at least one of the outsourcing developers will be able to speak and write it fluently. Of course, the better the knowledge of a foreign language, the more likely the hourly rate will be (slightly) higher.

    One other thing we thought was also worth mentioning in this point is communicational skills on the side of the future employer. Yes, it’s you!
    Being nice and kind is always important but what is more, is how you describe your project. If you talk about it in an excited manner and are able to sell it, the developers will happily work for you. They will know that you mean what you say and simply will not be a pain to work with. If they are sure that the cooperation will proceed smoothly, they will be more likely to negotiate the price. Better rating for better communication. Remember, first impressions are truly important!

These all points above, regardless of being based on some soft unmeasurable skills make it easier for you to get a good developer to take care of your project. Sometimes even though they are busy they will happily squeeze into their schedule something that is innovative, fun-composite and veeery toney :)

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