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Outsourcing Software Development Best Practices

Outsourcing software development best practices

Product development is a long and laborious process. Sometimes, you have to get new features out the door so you can launch your product right away and start raising money. And because of this more and more companies are using Outsourcing Software Development services to help them to reduce the time to market.

As you are reading this, maybe you have just achieved a new milestone for your company. After a few months or years of working hard, you’ve finally gained some traction. Your business is scaling up too fast. You’re nailing and crushing it.

But then problems start to come out on the surface. Customers are demanding more. They want faster service and more features. Your engineers who used to easily crank up new features are now missing deadlines. They’re having a hard time pulling off great ideas to make your product better.

Customers are growing and the systems seem to be slowing down. More and more are complaining about performance issues and bugs. And it seems that your engineers cannot keep up. You’ve thought about hiring more people. But you’ve got so much on your plate already.

When you are building a company, you have to make a lot of sacrifices. As your business grows, new processes are created and operations get more complex to meet the increasing demands of your customers.

There is never enough time, money, or talent to get all things done. Companies, especially in tech fields, constantly struggle with having to move fast and deliver top-notch products and services.

That is why many businesses tap into other companies to outsource. Business outsourcing has been around for decades, and it continues to be a major trend among companies, particularly in the tech industry.

Product Management and Software Development: The Big Clash. While product management and software development should go hand in hand, often, they end up on a clash. Why?

Product managers and software developers, while working on the same product, have different goals and processes. Product managers are more concerned about things that concern the customers, such as the user-friendliness of an app or software. On the other hand, engineers are more concerned about technical implementation. Product managers decide on what features to have while engineers are down there working on how to make those features possible.

This communication barrier usually results in wasted time, money and effort, especially if you don’t have enough engineers on staff. Software development is not an easy feat. It takes a series of product updates, coding and testing to create a fully functional software that has all the features and qualities that product managers aim for.

Software development outsourcing is the process by which an organisation hires a third-party company to handle tasks or projects that are related to software development which could have been done in-house. Currently, 60% of companies in the outsourcing market are from the IT/software fields.

The major reason for software development outsourcing is to hand out essential businesses processes so that you can focus on more complex tasks and be able to manage your organisation from top to bottom. In this post, we’ll talk about the major advantages of outsourcing software development, what you need to know about it, and the mistakes you should avoid when outsourcing this critical process.

Why software development outsourcing?

There are many reasons why companies choose to outsource software development.


Perhaps the biggest advantage of outsourcing software development is to minimise cost. It saves companies, on average, 30% on operating costs. Outsourcing reduces the cost associated with recruitment, training, and talent retention.

Additionally, businesses can save on investment as they do not need to spend some more on developing infrastructure. Software development is an expensive process. It requires specialised technology, tools, and infrastructure. The partner who takes on the outsourced work makes all the necessary infrastructural changes needed to get the job done.

Access to Top Talent

One of the major reasons why many businesses choose to outsource software development is that it allows them to tap into the best pool of talent. Everything, from development to deployment is taken care of by a team of highly skilled engineers who get to focus their time, attention, and resources to one project at a time.

Better Focus on Core Business

Initially, your engineers are able to develop features and address technical problems in a timely manner. But as your company grows, so as the tasks that your engineers need to get done. Outsourcing software development enables a company to focus on strengthening core processes.

It allows your in-house engineering staff to focus on key tasks and responsibilities by freeing their plates with tasks that don’t match their skill levels. In turn, you are able to allocate more time and resources to other matters that are equally important in achieving your business goals.

Risk Management

You are told not to put all your eggs in one basket. When investing, it is recommended to diversify portfolio rather than put all your money in one place. It has a similar effect on outsourcing key processes. By splitting components of operations among different vendors, you are lessening risks that could be associated with many factors, such as the cost.

Increased Efficiency

Not having enough talent is most probably the reason why you are considering outsourcing software development. You understand how important it is to have sufficient in-house resources to get things done, especially when it comes to product development as delays can result in lost revenues.

Hiring new employees often take time. Add the fact that you still have to train them. Outsourcing ensures efficiency in core processes because you skip all the tedious tasks of recruiting, hiring, and training people. You can also ensure that your requests are delivered in a timely manner.

It is the outsourcing company that is responsible for keeping up with client demands. Additionally, software products require regular maintenance and support. Having a dedicated team who will focus on this area is going to save you time and cost.

Security of Data and Infrastructure

Your in-house engineers will be freed from tedious tasks, which means they can focus on high-level projects. They can effectively tackle issues, such as the safety of your data and infrastructure. Your in-house team can also help project managers in creating features that best serve the interest of your customers.

Companies that Outsource their Software Development

Aside from the benefits mentioned above, software development outsourcing can be a powerful tool for driving growth and innovation, especially in the early stages of a company. While many companies seek to outsource this key process to save on costs, more are doing it to boost innovation and optimise their processes.

Let us see how software development outsourcing has become a key driver for success for many business organisations.


It can be surprising to know that a giant (perhaps the biggest) tech company that has all the funding, technology, and infrastructure, is outsourcing its software development. Well, they have been doing it for some time.

In 2011, Google outsourced its customer support process for AdWords. And in 2016, they outsourced software maintenance and development projects to third-party technology vendors.


A pioneer to video calling, who doesn’t know or hasn’t used Skype? The company has worked with third-party companies to develop the app’s backend to cater to business clients worldwide. Skype was such a massive innovation, which was created with the help of a tech vendor.


This company started out slowly until they decide to outsource the development and refining of its product to freelance developers. It was originally a web consulting service which has evolved into a popular project management software.


The world’s largest online marketplace also achieved greater heights with the help of outsourcing. They outsourced much of their website’s early development to a third-party company as they found it difficult to find local programmers.

By outsourcing the back-end development of the site, Alibaba was able to compete with Amazon and eBay – two of the largest online marketplaces in the world.

Software Development Outsourcing: What Options Do You Have

Outsourcing key tasks to talented developers in Eastern Europe is far cheaper than in other countries. But the cost isn’t the only thing that your organisation has to consider when outsourcing software development.

Managing your outsourcing team can be a challenging task.

Problems like language barriers, conflicting time zones, communication issues with remote teams, process adjustments, decision rights, and authority, and failed expectations are just among the many challenges that come with managing the outsourcing of software engineers.

Outsourcing is not as easy as it seems. It isn’t just you hiring someone, telling them what you want, and then presto – you’re good to go. Remember how diversified portfolio in investing works? You don’t just invest. You nurture your investment so that it grows.

The same thing with outsourcing. Your goal is not simply to find software engineers and assign them work. The inability to manage your outsourcing team can result in failures, postponed product launches (or no launches at all), and loss of time and money.

Below you can find  some critical steps to prepare for software development outsourcing.

Determine your internal team’s strengths and weaknesses

Acknowledging the need to outsource tasks is not enough. It is important to be clear about what functions or processes are better outsourced. To do this, you first need to understand what skills your internal software development team has.

What specific tasks or functions are better left in their hands? What are their weaknesses? What are the skill gaps? Maybe your internal team is well-versed with back-end development but lack skill in quality assurance. Additionally, determine what specific skills are required and their availability.

Create a process guideline

This is perhaps the most tedious part of outsourcing. Basically, you want to be clear about what you want and what you expect from the vendor. There has to be a contract and NDAs to protect the security of your information.

Decide what’s best for your company and see to it that your best interest is taken care of. Additionally, you want to tackle how your internal team and outsourcing team will communicate, determine tools and collaboration platforms to use, and many other things. Additionally, you must be able to assign roles so all team members (both internal and external) will know who they will report to and who needs an update on a specific area.

Define decision rights and authority

Knowing who makes decisions is the most common source of contention. Often, internal teams assume that they have authority and decision rights. However, some rights are actually transferred to the outsourcing team as part of the outsourcing agreement.

Supervise work.

Trust is the basis of any outsourcing project, whether it’s software-related or not. When you hire offshore developers, you don’t have to check on them every hour or ask for an update real-time. It doesn’t help them. Rather, it could cause tension among your outsourcing team members which can just negatively affect their performance.

To avoid micromanaging, it is important to plan ahead and lay down your goals and what you expect from them. Set schedules for regular meetings and update, and identify persons to tap into for urgent requests or correspondence.

Select a time-tracking tool

Ensuring the productivity of your outsourcing team is very important. Of course, you want to know how much time is being spent on specific tasks so you can adjust expenses accordingly. There are so many tools out there. Find the one that works best for your team and help your outsourcing developers to get familiarised with it.

Mistakes when Outsourcing Software Development

There are some mistakes that many businesses do when outsourcing software development. These mistakes, when not spotted and fixed early on, can lead to failures, added costs, and delays in product launching.

Poor change management

The very first challenge that many organisations encounter when outsourcing key processes is the lack of buy-in from internal members, which can take form in either active or passive resistance. Even managers suffer from it.

They might think that their job is at risk or that they may lose control for tasks they are accountable for that are shifted to an external partner. To avoid this, it is necessary not to neglect the management team in the change of your management plans.

Doing the selection process on their own

Many companies choose an outsourcing partner based mainly on the price. While cost is undoubtedly an important factor to consider, it is not by far the only one. It is important to conduct thorough research and analysis to determine the monetary and non-monetary values of outsourcing. There are hundreds of outsourcing companies out there.

If you are considering software development outsourcing, you may benefit from having someone do the analysis and selection for you. Basically, you want to make sure that your message is communicated properly and that the software engineers who will work with you are on the same page when it comes to your product development goals.

Lack of clear goals and requirements.

Whether it’s software development or not, it is important to be clear about your goals and requirements before embarking on outsourcing important processes. The success of any outsourcing project greatly depends on the relationship between the company and the outsourcing team. To ensure that everyone is geared towards the same path, each team has to be aware of job requirements.

The internal team must have a full understanding of why outsourcing is necessary. At the same time, the outsourcing vendor must know what is expected of them. Everything has to be understandable from both sides, from the costs to the standards, quality, and timelines.

Poor communication

Communication is crucial in the success of projects, internal or outsourced ones. It is not enough that your requirements are clear and properly communicated in the beginning. It is equally important to continue the collaboration to know what’s going on and whether the requirements are being met in a timely manner.

With so many collaboration tools available these days, the distance is never an issue to maintain strong communication between teams. You can arrange regular meetings and know what the outsourcing team is doing, what they need to do, and whether there are challenges that lie ahead. Losing track of things can lead to undesirable results which can obviously have a negative impact on the project.

Leaving all responsibilities to the vendor

You’re outsourcing software development because you find it more practical, convenient, and effective. But it doesn’t mean to say that once you found a team to work on it, your business is done. No one cares about the project more than you do.

Even if you outsource it to a third-party company, it is still your project and your responsibility. Just as you work hard with your internal team, you also want to establish buy-in from your partner. Additionally, you don’t want to let go of all your internal engineers and outsource everything to your vendor.

Stick to what your internal software development team is good at. Through careful analysis, you can determine which tasks are better left to your internal engineers and which ones can be outsourced.

Not paying attention to culture misfit

Organisational culture refers to the company’s way of working, the values they adhere to, and their behaviour at work. Cultural barriers are among the common problems with offshore outsourcing. While the language barrier is the most obvious obstacle, it is not by far the only one.

Cultural differences, which include gestures, intonations, norms, traditions, and customs can spark a lot of conflicts between your company and your vendor. They all impact not only the relationship between both teams but also everyone’s productivity and performance.

How can you address cultural misfit?

The answer could be cultural awareness and resource deployment. Cultural awareness can be achieved through workshops to ensure that the cultural practices of both the internal and external software development teams are aligned.

Meanwhile, culturally compatible resource deployment involves having an onsite person manage the onshore client relationship. While you ideally want your vendor to learn how to work with your team, there’s also nothing wrong with learning how to work with them.

Lack of flexibility over product features

Before outsourcing the project, having a full vision of what features you want for your product is important. However, in software development, things don’t always go the way as planned. During the process, there’s a big possibility that not all the features you require will be relevant or reasonable.

For a successful outcome, you want to be flexible. As long as the core functionality of the product is preserved, when it comes to additional features, there should be someplace for compromising. Who knows, these changes can result in significant improvements?

Setting unrealistic timelines

Timelines are crucial to any project. Despite the desire to launch the product or add the required features soon, you must work within a realistic timeframe. Many companies that outsource tend to set overly high expectations and unreasonable timeline which greatly impacts the project outcome.

It is important to discuss and decide on how and when the project has to be completed. Even so, you still want to give leeway for reasonable delays as some unpredictable things can happen during the software development process.

Not having enough protection

When you outsource, you are making your company vulnerable against potential security threats. Intellectual property includes business plans, trade secrets, processes, and other proprietary knowledge – all of which are susceptible to security threats like theft and data hacking.

To make things more complicated, different countries have different legal systems and sometimes, contradicting rules on intellectual property. To mitigate the risks, it is necessary to develop stringent guidelines and protocols on data security and management when outsourcing.

These include protocols when accessing information, protecting buildings and equipment against unauthorised access, making use of secure mailing system, as well as administrative safeguards that lay out the policies and procedures of operations, the use of security controls, and the conduct of employees.

Best Practices for Software Development

Outsourcing software development can be a great tool towards innovation and business success. But what specific steps can you take to ensure things run smoothly?

Leverage technology for better collaboration and coordination

Earlier we emphasised the importance of communication in outsourcing. Your vendor could be located in another part of the world and the only way to work together is to communicate via technology. Leveraging the right technology to facilitate coordination and collaboration can streamline communications and ensure smooth management of offshore software development teams.

Platforms like Skype, Zoom, Google Hangouts, Slack, and Trello can make it easy for companies to manage internal and external teams.

Determine who gets control

Outsourcing involves freeing up internal resources so they can be deployed for more strategic tasks. Oftentimes, these tasks are less critical in nature in terms of priority. Because of this, many companies that outsource choose to transfer full project control to their outsourcing partner.

Nonetheless, while it is important to segregate the avenues of control, as the real owner of the process, you have to oversee all the affairs of your vendor.

Address conflicting processes

Software development involves both technical and managerial decisions. Outsourcing software development presents an extra challenge because everything is performed in an inter-organisational context.

While collaboration ensures that job expectations are clear, both the internal and external teams have their own interests and needs, which can result in conflicts. Add the tacit requirements, knowledge-domain gaps, and communication barriers, there could be a lot of hurdles along the way.

Basically, you want to achieve synergy between your team and your offshore engineers. Best practices for managing conflicts include being clear about the details of existing coding architecture and figuring out whether there will be any software migration in the near future.

Additionally, create a risk mitigation process that should cover how conflicts should be addressed.

Integrate cultural fit

As we discussed early on, culture misfit usually exists between companies and their outsourcing partners. Things like ways of working, cultural holidays, and workplace norms often lead to communication issues and conflicts.

Add the lack of face-to-face interactions that often complicate issues and create misunderstandings. While it is possible, it can be difficult to find a vendor whose culture matches that of your organisation. That is why relationship management should be observed all throughout.

Measure progress, output, and performance

Quality assurance is central to any outsourcing initiative. Lack of quality in your software product can result in chaos and utterly hurt your company reputation, even if it was the fault of your vendor. How do you ensure that your offshore team is doing the right thing and keeping up with your expectations?

Quality management is a key practice for outsourcing software development. Typically, QMS consists of Standard Operating Procedures, protocols, templates, and guidelines that govern the development of the project which both your internal and external engineers should fully adhere to.

In addition to the QMS, testing policies should also be implemented. These include creating a test strategy and plan that will ensure product quality throughout its development. Defining coding standards and automated measurements for validating the standards, conducting peer reviews involving both the internal and external team members.

And continually integrating and testing code to find potential defects. Implementing quality assurance throughout the product development process promotes predictable project delivery.

Safeguard data and intellectual property

Key practices to protect information and intellectual property include signing NDAs, consulting a lawyer to understand policy gaps (if there are any) and incorporating clauses in the contract that forbids the vendor from reusing your code and requiring them to transfer all ownership rights of the code onto you.

Below you have some of the best practices for protecting intellectual property

Assess applications at risk

Create an inventory of the applications or programs that are being developed or maintained by your vendor. This should involve coordinating not only with the procurement team but also to each business unit as application sprawl can take place when individuals or teams bypass the procurement process to get new ideas off the ground. Each application should undergo a risk assessment to know the risks it poses to your organisation.

Test for quality

Assign a quality assurance team for each application or development process that will keep track of risk factors, such as disclosure of sensitive information, financial loss, and operational risks. Additionally, define the degree of security testing that each application requires and the acceptable threshold that it must reach to be ready for deployment.

Review your vendor’s security capabilities

Your outsourcing partner should be able to meet your standards and expectations in data and IP security. They should have the technology, infrastructure, coding architecture, and certifications to protect your information.

Review their security policies, including how they perform security checks and monitoring. Moreover, be clear about who will conduct security tests (which is different from operational and functional testing) and whose methods and tools will be used.


Outsourcing software development can have many significant advantages for your business. These include reduced costs, access to top talents, better risk management, and increased work efficiency. Moreover, it allows your company to focus on more important tasks and facilitate rapid business growth.

Nonetheless, outsourcing is not an easy feat. There are critical steps that should be done before outsourcing software development.

These are:

  • Determining the internal team’s strengths and weaknesses
  • Creating a process guideline
  • Defining roles, decision rights, and authority
  • Supervising work
  • Selecting a time-tracking tool

There are common mistakes that many companies commit when outsourcing software development. When not spotted and fixed early on, can lead to failures, added costs, and delays in product launching.

These are:

  • Poor change management
  • Doing the selection process on their own
  • Lack of clear goals and requirements
  • Poor communication
  • Leaving all responsibilities to the vendor
  • Not paying attention to culture misfit
  • Lack of flexibility over product features
  • Setting unrealistic timelines
  • Not having enough protection

There are significant practices that will help your organisation achieve great results when outsourcing software development.

These are:

• Leverage technology for better collaboration and coordination
• Determine who gets control
• Address conflicting processes
• Integrate cultural fit
• Measure progress, output, and performance
• Safeguard data and intellectual property
• Assess applications at risk
• Test for quality
• Review your vendor’s security capabilities

Software development outsourcing is a brilliant way to meet the growing needs of your organisation. By adhering to these best practices, you can be sure that your outsourcing requirements are done in the way you want.

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