In 2019, outsourcing software development was among the biggest technology industries with a global worth of more than $92.5 billion.
Google, Facebook, Microsoft have been the global outsourcing adopters early on, using overseas talent to drive innovation. Small and medium businesses are also riding the outsourcing wave: millions of companies all over the world consider outsourcing to be the leading form of the offshore software development approach.
- What is Software Outsourcing?
- What Makes Offshore Software Outsourcing Different
- Outsourcing Adopted By Tech Leaders
- Top Software Outsourcing Destinations and Their Costs
- Where To Look For a Reliable Offshore Contractor
- How to Choose a Software Development Company
- Choosing a Model for Software Outsourcing
- Outsourcing Software Development Stages
- Benefits Of Outsourcing Software Development to Ukraine
What is Software Outsourcing?
The term “software outsourcing” is used to describe a partnership model where a company hires a third-party provider to develop a digital product for them. Normally, businesses use outsourcing services to save time and money or to receive skills that the in-house team is lacking.
Use Cases for Software Outsourcing
As the software outsourcing industry grows, so do its applications. Businesses turn to remote providers in multiple scenarios.
- MVP development. Business owners reach out to overseas companies to build a minimal viable product for their idea: the basic version of the software with essential functionality and interface. In doing so businesses can validate their ideas, test a business model, and attract investors.
- Software development. Outsourcing developers handle the project from the concept to the post-release stage. They take responsibility for software testing and deployment as well.
- Mobile app development. Companies use offshore software development services to build native and hybrid mobile applications.
- Web development. Entrepreneurs outsource software development to create corporate websites, web apps, SaaS platforms, etc.
- Software testing. Remote QA experts examine software functionality, interface, performance, run user tests, check security, document processes, etc.
What Makes Offshore Software Outsourcing Different
The global expansion of software outsourcing development is due to the benefits it provides to business owners. Global enterprises and small businesses can feel monetary, technological, and organizational benefits that nearshore software development and offshore outsourcing gives to them.
- Additional expertise. You can hire skilled experts overseas on a per-project basis and get paid for accomplished work. This makes the implementation of costly AI-, IoT-, and Big Data-based projects more affordable.
- Cost and time-efficiency. The development rates in Asia and Eastern Europe are 3-4 times lower than those of U.S-based experts. Additionally, the company doesn’t need to invest in office rent, hardware, recruitment, on-boarding, management — these aspects are fully handled by a remote provider.
- Concentrating on higher-priority tasks. Outsourcing developers can automate manual operations, take care of software debugging and refactoring, set up the entire infrastructure from scratch, while in-house teams focus more on core business needs.
- Risk-sharing. Businesses delegates the process of building and managing IT infrastructure, hiring developers, and setting up management strategies to an offshore software development provider.
- New management and organization practices. Software outsourcing teams offer their methodologies, management tools, and communication practices to the company. Product owners can re-use these strategies for further development and maintenance when working with the in-house team.
Offshore software development approach gives business owners access to experienced tech talent that can take a look at the product’s concept, plan out the work scope, handle the development — as well as testing process — and provide maintenance services for future releases.
Are There Any Possible Risks?
Due to distance and cultural differences between product owners and vendors, unexpected difficulties may arise. If the company chose an unreliable or unexperienced outsourcing provider, it can lead to the following risks:
- Miscommunication. Inaccurate estimates and poorly articulated project development lead to misunderstandings. Developers can fail to grasp business needs and offer a solution that doesn’t quite fit the business model. Or, they can provide the wrong cost- and time estimates, which will lead to budgeting issues later on.
- Desynchronization. Time-zone differences can make scheduling calls and meetings challenging if the provider isn’t experienced in international cooperation.
- Dishonest vendors. You can’t control such thing as ‘dedication’ — the lack of enthusiasm from a vendor’s side can compromise the team’s efficiency and delay the results. Also, developers can work on multiple projects simultaneously and thus their focus can be easily distracted.
With an experienced provider, these challenges can be easily navigated. You can ask a software provider directly about their methods of dealing with management and communication issues.
Outsourcing Adopted By Tech Leaders
|Works with 121,000 outsourcing contractors, who outnumber their in-house employees. Cooperation with Cognizant — a U.S. based outsourcing company with offices in India.|
|Apple||Uses in-house resources to design products, but the engineering work is performed by international vendors. Leading destinations for hardware engineering and offshore software development: China, Singapore, Thailand, South Korea, Malaysia, Philippines, and Taiwan.|
|Slack||The MVP for Slack was developed by an independent design and development vendor. The service, developed by an outsourcing team, attracted 8000 users on the first day.|
ALSO: WhatsApp’s entire core development was outsourced. Opera uses outsourcing to build new functionality. A lot of new and old tech giants outsource their entire infrastructures to get relevant expertise and cut expenses.
Top Offshore Software Development Destinations and Their Costs
Software development rates in popular overseas destinations — Western Europe, Eastern Europe, India, Asia, South America — are much lower than in the United States. This tendency is consistent not only for software developers, but also for analysts, marketers, testers, and other experts, involved in the process.
Eastern European developers are influenced by development trends from Western Europe and the U.S. This is one of the most developed regions in terms of technology: Ukraine and Poland host R&D centers of global enterprises (like Google) and have a lot of promising local startups. Developers salaries are among the lowest ones, due to low local prices.
- The services of a Junior software developer cost $25-$42 per hour.
- Business analysts charge around $40-63 per hour.
- QA services cost from $30 per hour, for Junior specialists, to $50 for a Senior Tester.
Western European development rates hugely vary from one country to another.
- Markets like Germany or the Netherlands are more affordable — a junior developer charges around $37-50 per hour;
- Prices in Switzerland can reach up to $200-300 per hour since it’s an economically expensive country.
- Countries like France or Belgium fall in the middle of the price spectrum with average rates around $40-60 per hour.
Asian outsourcing market is comprised of developers from China, Japan, Philippines, Vietnam, Malaysia, Sri Lanka, Indonesia, Thailand, Pakistan, and Bangladesh. Here, the price is the ultimate competitive factor for software developers.
- The hourly rate of a Junior developer is $15-25.
- Business analysts charge $30-42 per hour.
- The costs of QA services range from $15 for Junior QA to $36 for a Senior specialist.
Central Asia, and India in particular, is considered to be one of the most affordable outsourcing regions and offshore software development is a major source of profit for the Indian economy.
- The hour of a Junior software developer costs $20-25 per hour, a Senior charges $30-40.
- Business analysts have an hourly rate of $30-40, project managers charge $35-50.
- An hour of a Junior QA specialist is worth $15-25.
Due to its close proximity to the United States, software experts in Latin America are in high demand, which led to the rapid growth of the local technology market.
- The hour of Latin American Junior developers costs around $35-$44.
- Business analysts charge $44-55 per hour.
- The services of a Junior QA specialist cost $30-39, while a Senior charges around $40-50.
Latin American companies cooperate mostly with U.S. firms, due to close proximity. The local technology hub isn’t particularly innovative or well-developed — here the location is the main competitive advantage.
Where To Look For a Reliable Offshore Contractor
Here are four simple strategies you can use to find reliable offshore developers. We encourage you to combine all of them to get the fullest outlook on the team’s expertise.
To find an outsourcing provider, use keywords like “software outsourcing”, “software outsourcing team”, “hiring offshore developers”. Add services or industry you want to develop a product for — “offshore developers fintech”, “software testing outsourcing”, “outsourcing SaaS development”, etc.
Ideally, you want to find an expert team that specializes in the type of development service that you are looking for, not a jack-of-all-trades.
Google search will present you with thousands of software development companies, and many of them will feature convincing materials that display the team’s experience and expertise. Review platforms, on the other side, will give you more detailed information and will help to validate providers’ development skills.
- Clutch — an international rating platform for B2B businesses. All scores are based on customer reviews. The Support team personally contacts each client to verify their review.
- GoodFirms — a review-based platform that is popular among Eastern European and Asian development teams. The selection process is less strict than on Clutch — companies aren’t required to provide a particular number of reviews. On one hand, the score is less objective, but also, there are more teams to choose from. GoodFirms regularly publishes interviews with companies’ founders, where they talk about their development expertise, approach, and share practical cases.
Review platforms provide official validation of the vendor’s expertise and give an insider look at their best cases, practices, and relationships with clients.
Word of Mouth
Tried-and-proven references will help you get reliable vendors on-board. You will be working with a vendor that’s familiar with the industry you are working in. Their expertise has already been validated by previous clients, plus you can get direct unbiased feedback from your industry colleagues.
- LinkedIn. Ask your connections to tag reliable software development providers and make a post that your company is looking for a partner.
- Twitter. Reach out to experts in the field and people whom you haven’t met personally yet with a short message.
- Forums and boards. Check industry-related message boards and Reddit threads; likely, there have already been conversations about software development providers, if not — start one.
Another way is to meet people at conferences and forums and ask them to share their development experience. Usually, people gladly share contact info of trusted contractors.
Many businesses prefer using freelance marketplaces to connect with vendors. Offshore software development companies are actively investing in their marketplace presence as well.
- Upwork. An on-demand freelance service where companies can hire not only individual specialists but entire teams.
- Toptal. A software development network that connects software development teams and individual developers with businesses.
- Outsourcely. The platform connects development teams to company owners and provides custom tools for project management and communication.
How to Choose a Software Development Company
Building successful cooperation with the offshore development company is not just about making sure they are the best, but checking if they are the best ones for you. Here’s a checklist on how to kickstart your cooperation with a software development vendor before committing to a particular team.
- Summarize your needs. Make a presentation or text document that describes what product you want to develop, budget, timing constraints and competitors’ products.
- Outline project objectives and budget. Describe your goals one by one, preferably with tangible numeric metrics and quantitative objectives. These numbers will be important for project tracking and SLA agreement.
- Make a list of the most prominent candidates. Review your choices and pick providers that worked on projects similar to yours.
- Examine team credibility and the quality of work. Take a look at the company’s blog, white papers, social media. Check if they share their case studies, expertise, techniques, etc.
- Schedule an interview to check the company’s attitude and communication skills. Ask them about difficulties in previous projects, encourage them to share their thoughts on your project. At this point, you want to see a proactive team that understands the challenge instead of cluelessly doing what they are told.
- Contact team’s previous clients. You can come back to Clutch and reach out to the authors of the reviews. Sometimes, clients change their opinion about a provider — some issues can only be seen over time, so don’t hesitate to start a one-on-one conversation to find out details.
At this stage, focus not on the software development techniques or tech expertise, but rather, on communication and project management skills. The goal is to find out if the team is transparent, reliable, and disciplined.
Choosing a Model for Software Outsourcing
Before you start offshore software development, familiarise yourself with three common cooperation models that are out there:
The offshore development team works full-time on your project, but still, they are an independent unit. Such a team normally has a project manager who oversees the cooperation process and connects business owners with developers. We wrote a whole guide about choosing a dedicated team.
Will be a good option for:
- Projects with a large scope that require attracting lots of human resources.
- Businesses that have several ongoing projects and the in-house team that can’t handle all the work.
- Product owners that don’t have defined objectives and product requirements.
- Startups that don’t have an in-house development team.
Time and Materials
This financial model implies that developers are paid on an hourly basis, plus the cost of materials used. Before the work starts team makes time estimates, calculates risks, and outlines additional expenses. At the same time, this is a flexible cooperation model: business owners and developers can add new tasks and work hours if the project is more complex than was initially anticipated.
Will be a good option:
- When business owners don’t have the precise vision for their future product and want to introduce new features along the way.
- When product owners want to keep it flexible in terms of budget, project scope, etc.
- For the development of multifunctional platforms with complex functionality and versatile interface — CRMs, ERPs, etc.
In this cooperation model, the outsourcing team comes up with a precise(fixed) estimate for budget, timelines, product functionality, etc., which is followed until the project is completed.
This way the team will be committed to complete the project in a timely manner. On the other hand, there will be no flexibility — the business owner won’t be able to introduce any changes to the initial agreements, even if their business model requires them to do so.
Will be a good option:
- If the project faces monetary and time constraints.
- When a business owner has worked with this software outsourcing company before and can predict the workflow from past experience.
- When a product is supposed to have simple functionality and interface (MVP or microservice).
Outsourcing Software Development Stages
The software development process can be broken down into 6 key stages, from the very early product concept to its post-release maintenance.
- Project requirements gathering
- Requirements analysis
- Software development planning
- Project delivery
- Testing and feedback analysis
- Maintenance and further support
1. Project requirements gathering
The first step of the software development project is putting together a detailed list of requirements. This information is used to plan the work scope and define the nature of the product.
Business owner and IT team will use this list as a reference point when planning sprints, monitoring progress and resolving any associated issues.
- As-Is vs To-Be model. If there is a real-life product similar to yours, analyze its features one by one and determine how they should look in your product.
- User personas. Break down your target audience into segments and write detailed user portraits: their age, gender, occupation, location, needs, pain points, online habits, etc.
- Context diagram. Define which services will be connected to the product, and distribution channels.
- Competitive analysis. Analyze existing solutions and make a list of DOs and DON’Ts, based on their interface, performance, users’ feedback.
2. Requirements analysis
Verify your requirements to make sure that they will actually drive the product’s growth. Use the following criteria to do that.
- Requirements should be complete, consistent, actionable, and clear. All participants should understand the precise meaning of each requirement; you should foresee which metrics you’ll use to determine the progress.
- Requirements should be prioritized. Determine which goals are the most urgent ones and focus your efforts and investments on them.
- Requirements should be testable. Determine which test scenarios can define the completion of a requirement.
3. Software development planning
The success of the software development project depends on how well the team manages their workflow, timing, communication tools, and analyze metrics. Here’s a list of top activities for building a clear project plan.
- Break the process into sprints, assigning one task per sprint. You can use the Agile practice of assigning story points to each sprint: the more story points, the higher is the task difficulty.
- Plan product release beforehand. Even if you are working on complex products with multiple interactions ahead, you need to have a final date. It can be then rescheduled, but having a global goal from the start is a must.
- Assign responsible people. A team member has to be assigned to each particular task to control its successful completion and deal with all possible issues.
- Make a communication schedule. You need to have a clear idea of when, how, and why the meetings will occur. For each planned activity, set a metric that will show the team’s efficiency in completing it.
4. Project delivery
Project delivery comprises on-going work on code building, assurance, and monitoring. Developers, testers, and designers need to be included in the cooperation from the early project stages.
- Software design. Developers transform customer requirements into software and design architecture. The team establishes functionality specifications of the system, develops its design and checks if the early prototype satisfies defined requirements.
- Coding. The designed specifications are executed with a programming language. At this stage, the product is no longer a concept – developers write actual code that can perform specific actions. This is when product requirements get executed practically.
- Testing. Developers can choose to cooperate with testers early on, conducting Quality Assurance of each new feature, or test clusters of software’s functions to save time from running individual tests.
- Documentation. The team documents each development stage by describing user requirements, architectural choices, technical tasks, and solutions, used tools and APIs.
5. Testing and feedback analysis
The scope of software testing hugely depends on the nature of the product. To perform a successful Quality Assurance, testers use the following best practices.
- Testing a small code fraction at a time. Breaking the code into manageable chunks provides better visibility: developers see which feature is damaged and can eliminate the issue right away.
- Documenting all test cases. Keeping documentation of all testing activities reduces the need for re-running use cases, keeps business owners and developers updated on the progress.
- Isolating code from the development environment. Testers should run tests in a stable environment, not when developers and designers make changes to the product.
- Automating redundant work. Repetitive test cases should be carried out by testing algorithms, not by testers.
6. Maintenance and further support
The vendor provides post-release support and maintenance for the product to make sure it is bug-free and runs as it has to after each new update.
- Having a fixed schedule. The team should dedicate a fixed time slot to analyzing user feedback and cleaning up bugs so that issues don’t pile up.
- Prioritizing the fixes. Testers should determine the urgency of each maintenance task after reviewing them from a user’s point of view.
- Performing control tests. Each update should be re-tested. The team has to check if the changes in code translate into desired functionality improvements and if the updates don’t cause additional issues.
Benefits Of Outsourcing Software Development to Ukraine
Ukraine presents a perfect combination of cost and quality. It’s one of the most prominent tech hubs worldwide with an internationally recognized IT community and proficient English-speaking specialists.
Ukraine’s technology resources are distributed across the country: Kyiv — the capital itself, Kharkiv that was recognized as a leading offshore software development center by Tholon’s List, Lviv that is often referred to as large IT hub, Dnipro, one of the biggest Ukrainian cities, etc.
Throughout the entire country, offshore software developers demonstrate a high level of technology expertise.
U.S and Western European citizens don’t need to have a visa to visit Ukraine. You can easily meet with Ukrainian vendors in person if you want to strengthen your partnership.
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