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Software Development Outsourcing

How to outsource software development and be good at it.

Last updated: March 19, 2019

Read time: 10 minutes

High performance software outsourcing is an achievement few companies experience if they outsource on their own.

Since most tech leaders outsource just a few times in their careers (and sometimes for just a few months), it’s difficult - if not - impossible to develop deep experience in the full software outsourcing lifecycle. To be truly successful, you need planning, global team selection, launch processes, and ongoing management skills that reduce risk and optimize a software outsourcing relationship over time. Mistakes in any of these key areas lead to high-risk, low-performance engagements that cost your company time, effort, and money.



When Is it Time to Outsource Software Development?

It’s time to consider software outsourcing when your company’s growth strategy depends on software but internal and external inhibitors prevent business growth. Some - if not all - of the following drivers are typically present in the decision to explore software outsourcing.

Internal factors that drive software outsourcing

Maximizing your software development budget is the number one reason most companies outsource software development, but it's just one of many. You might nod your head as you review this list of challenges most tech leaders face: 

  • Lack of experience with software development
  • Limited budget to build the necessary internal team
  • Long hiring cycles
  • Inadequate company culture to attract top talent
  • Lack of skills for emerging technology
  • Aging systems in need of digital transformation
  • Large backlog of feature requests, enhancements and/or technical debt
  • Insufficient cybersecurity protections

As if that's not enough, you're probably facing a few external factors that impact your software development efforts. 



External factors that drive software outsourcing

According to CompTIA, high labor costs are the number one growth inhibitor for software development. Although labor costs and the availability of skilled workers might pose a challenge for your growth initiatives, it’s not the only external inhibitor that can influence the success or failure of your software development.

  • High salaries in the marketplace
  • Shortage of talent in local market
  • Shortage of skills in local talent
  • Competitors are more attractive to talent

Any of those issues sound familiar? Your Internal and external challenges in software development can cost you.

  • Lower staff productivity
  • Lower levels of customer engagement
  • Lower sales or profitability
  • Insufficient speed to market
  • Insufficient cybersecurity protections
  • Inability to keep up with competitors
  • Increased employee tension, burnout and exit

Given the internal and external factors you may be facing, you simply have few options to engineer your software. One choice is to insource full-time employees, but the market for developers is on fire with more jobs than talent. And, realistically, if a company brings software development in-house, you'll have to pony up the highly competitive compensation packages needed to attract and keep top-notch software engineers, assuming they can even be found.

With software development outsourcing, you'll get high-quality software that supports innovation, generates revenue, and grows your business.

Companies often hesitate to outsourcing software development because they're stuck on the idea that an internal team will be more effective than an outsourced team. That's not the case and in fact, an internal team isn't always more effective, but simply more expensive. 

Software outsourcing works... when done right. 

Maybe you've heard about - or experienced - software outsourcing that doesn't work.  Low priced developers producing low quality code. Offshore development companies that promise more than they deliver. 

Bad outsourcing is what we're here to help you avoid. It all starts with great planning.



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The Accelerance research team has reviewed more than 8,000 companies around the world so you can outsource with confidence. Want to know which ones to trust?

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Before you begin, think about the cost. 

Software development represents a significant portion of a company’s annual expenses. That being said, spending your dollars wisely is in your company’s best interest. Fully consider the direct or even “obvious” costs of attracting and retaining top talent internally, as well as the not so obvious costs that are very real and relevant. The not-so-obvious in-house employee costs include:

  • Recruiting costs
  • Benefit costs
  • Onboarding costs
  • Retention costs

Do these sound familiar? When you hire in-house employees, you’re not just paying for their base salary, but their fully burdened in-house costs, which can include a variety of factors.

The 2018 Guide
to Global Software Outsourcing Rates


The 2018 Guide to Global Software Outsourcing Rates will help you answer the question: how much does it cost to outsource software development?

Get the guide


Software outsourcing hourly rates are the best.

When compared to US salaries, offshore and nearshore typically provide the best hourly rates which makes them the most cost efficient.

By eliminating employee overhead costs, you’ll decrease your fully-burdened cost of employee benefits, taxes, paid time off, company perks, training and retention, and gain flexibility around growing (and shrinking) team.



Fully Burdened In-House Employee Costs

When your finance team is crunching the numbers to determine the exact cost of hiring a programmer - the total cost they calculate will likely be a dollar figure much higher than an employee’s base salary. In-house employee costs go well beyond base wages. The fully burdened cost of an in-house employee benefits include:

  • Employee taxes
  • Insurance
  • Paid time off
  • Retirement and savings contributions
  • Paid time off allowance (vacation, etc.)

Create better strategies for
software outsourcing

Unlike do-it-yourself outsourcing which can be a hit-or-miss venture, Accelerance delivers a proven methodology for outsourcing that identifies and manages risk and optimizes results so that your company gains all the benefits of high performance global partnerships.

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Plan to work with experienced software teams, not a bunch of freelancers you have to find and manage.

If you’re getting ready to outsource your software, hiring a freelancer isn’t always your best bet, especially when it comes to larger projects.

Teams vs Freelancers

It’s fine to hire a contract developer or two when you have a temporary need or a small project. But serious software development requires a team of developers, not just one or two. Make sure you hire a company that can provide a team and not just individual developers.

The Challenge with Freelancers

Frustrated technical executives might say, “I know how to hire developers, I just can’t find enough candidates.” They try to build a team of individual freelancers around the world and get them to effectively work together. The freelancer approach might work, but it’s not easy. Even pre-vetted, highly-recommended freelancers are individual contractors whose daily work schedule you can’t control. And if they take another contract assignment, cut their hours or simply no longer show up... you're stuck looking for their replacement.

Hire A Team, Not Freelancers

A better approach to software outsourcing is to hire an offshore, nearshore, or onshore company that offers a team working together in the same office - even if it's just 2 or 3 developers. Good outsourcing companies recruit, train and create an environment where your development team will be productive. And, most are constantly recruiting and hiring. Look for an outsourcing partner who'll always have someone on the bench to join your team if one of your developers unexpectedly leaves because - your software development should continue without interruption.

Teams Offer the Right Environment

Professional software development companies create the right environment and company culture where software developers can be innovative and productive. Creating this culture can be a positive add-on for companies who don't specialize in software development. A freelancer or a group of freelancers doesn’t provide the synergy gained from a professional culture. You can still engage small teams - or even individual developers - but in a productive team environment that you don’t have to create from scratch.

Plan to visit your software outsourcing partner

Online meeting and collaboration tools are sufficient when working across the miles, but don’t limit your outsourcing relationship solely to online interactions. Visit your outsourcing partner before you sign a contract. Visiting your outsourcing partner will be invaluable over the duration of your software engagement. Plan to visit every few months to keep relationships open, authentic and strong.

The H1-B Visa and Software Outsourcing

Unless you’re in a tech hot spot like Silicon Valley, Austin, Texas, or elsewhere, the best developers just aren’t interested in relocating. It’s easier to get a qualified developer to move from India to anywhere in North America, than to get qualified US developers to move to an American city that’s anywhere but the hottest tech locations. Can immigration and H-1B visas fill the talent gap? The vast majority of outsourced DevOps is not about importing individual engineers. High quality and successful outsourcing is done with an expert team of developers and DevOps engineers who stay in their home country.

Expert DevOps Approach

An expert DevOps approach requires a much higher degree of communication, creativity and collaboration work than IT outsourcing. Good software outsourcing companies take full responsibility for the design and delivery of your software. Of course, recruiting is a key element of success but not just to hire developers and software engineers to work at your company.

The best software outsourcing companies recruit developers and engineers to work for you at their location and also provide ongoing training and a work environment that fosters innovation. Real software development outsourcing means hiring a company to deliver a complete service better than you can do it yourself with your own employees and individual contractors.

Learn more about
software outsourcing

Accelerance helps technology leaders create effective strategies for global software outsourcing through better planning, better partner selection and better ongoing management.

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Offshore vs Nearshore vs Onshore



Where you outsource your software impacts every part of the process, from the outsourcing rates you can expect to ease of communication. Accelerance has traveled the world to vet and verify highly-qualified software teams.

Offshore Software Outsourcing

Offshore outsourcing involves contracting a company that is “offshore” or geographically distant from your own. Many engineers from offshore regions have spent considerable time in the US and Western European countries and are familiar with our language, customs, and business practices. In moving back home, they’re able to provide sophisticated software development services that meet Western needs extremely well and at a lower cost.

Onshore Software Outsourcing

Onshore outsourcing involves hiring a company in your own country to handle your software development. They may in turn use offshore engineers for some of the work on a large project, but all of your interaction and communication will be with engineers in your country, possibly within your own offices.

Nearshore Software Outsourcing

Nearshore outsourcing is outsourcing to a firm in a nearby country. In the US, this is outsourcing to Mexico or the countries of Central and South America. In the U.K., this is outsourcing to the countries of Central and Eastern Europe. Generally speaking, nearshoring options carry similar benefits to onshoring options (such as workday overlap and close-cultural ties) with lower rates similar to offshore service providers.

Outsource with CONFIDENCE

The Accelerance research team has reviewed more than 8,000 companies around the world so you can outsource with confidence. Want to know which ones to trust?

Get a team