Guide to Outsourcing Software Development for 2023
18 min.

Outsourced development is a growing trend in IT. According to Statista, the global IT outsourcing market reached approximately 413.72 billion U.S. dollars in 2021. Creating software is a critical decision and that’s why many companies are understandably hesitant about outsourcing software projects.

However, like every other endeavor, success in software outsourcing projects requires understanding the intricacy of the process from start to finish. These details are broken down here by ProCoders. This guide will help you to find the right software developer outsourcing company for your needs.

I came I saw I outsourced meme

What is Software Development Outsourcing?

Software development and outsourcing are processes when an organization contracts a third party to develop custom software solutions. Comparing insource vs outsource software development, the last one going outside your company, or even offshore. Due to that, outsourcing has many advantages including cost reduction, improved efficiency, mitigated risk, and enhanced security.

Still, many business leaders doubt the effectiveness of outsourcing since there is plenty of software outsource pros and cons. However, outsourced software engineering bridges talent gaps for many companies, in addition to many other benefits.

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Why do Companies Outsource Software Development?

At ProCoders we heard a lot of reasons to outsource from our clients. Here are some of them:

Cost Benefits

By the time you add the costs of recruiting, training, and paying the salaries of permanent in-house developers, you realize that it is less expensive to hire outsourcing developers. So, outsourcing could be your answer to the question of how to reduce cost of development.

Fast Innovations

Innovation is the foundation of IT, but since this industry evolves at a rapid pace, it might be difficult for your in-house team to be on their toes 24/7 and develop their skills in brand-new technologies. Outsourcing helps bring those new fresh skills to the team as fast as possible.


Flexibility in Scaling and Changing

You can hire a team with any composition of developers and add (or remove) people to it if necessary. Since the outsourcing company has a specific list of professionals, the process of scaling is fast and you can be 100% sure of the skills of those you add to the team.

Focus on Core Business Goals

Even with an in-house team, it makes sense to outsource some aspects of development. You get a dedicated team that is focused on a single project or routine non-essential tasks while your in-house staff can continue with core activities. And if you don’t have an in-house team, but your business needs an app – it is worth trying to outsource app development.

focus on your core outsource the rest mem

Diversity Brings Best Solutions

You can expand your talent pool and gain unique insights based on different perspectives. This is particularly important if you plan global business growth.

Best Practice From Top Developers

Using outsourcing code development means working with people who have been in the industry for a long time and have dealt with a wide variety of companies, which means they have the know-how to improve business performance, can offer innovative ideas for project development, take initiative and use their best practices to improve your business.

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Other Notable Benefits of Software Development Outsourcing

  • Companies that trust the software projects outsourcing process to gain access to unique tools and resources from the outstaffed team, which reduces expenses on new infrastructure.
  • Outsource certain aspects of development, especially when your in-house team is overwhelmed. The benefits are getting a dedicated team that is focused on a single project, while your in-house staff can continue with routine tasks.
  • To deal with the skills gap in the US within the IT space, outsource development as a means to overcome your team’s shortcomings in terms of talent availability.
  • Forget training and onboarding, in-house developers. When outsourcing software development, a project is ready to begin once an agreement has been reached. Choosing a software development outsourcing company that meets your requirements is a key step in ensuring the greatest success. Do the research and ask questions before reaching an agreement with an outsource software company or freelancers.

Regarding how to outsource software development, it has to be done right if a company is to fully reap the benefits above. Hence, the necessity of this guide. Most of the actions you take to make outsourcing effective are foundational.

Risks of Outsourcing Software Development

Naturally, outsourcing comes with its own risks, which it is advisable to think about in advance before you start looking for an executing company.

Intellectual Property and Security Issues

It is normal to worry about the safety of your intellectual property when you delegate its execution to an outsourcing company. After all, these people come from a third party. This risk is easily eliminated by signing NDAs or other non-disclosure agreements, which now is a fairly standard practice in such companies.

eveything we discuss will be confidential

Lack of Experience with Remote Developers

As a rule, outsourcing developers are working remotely, which can be difficult for those CEOs who have little experience with this model of co-working. However, in 2022, there are many channels for continuous communication that will make up for this shortcoming: for example, video calls or corporate chats.

Communication Issues

Finding contact with a software developer from the outside can be very difficult: they are not working in your office, are employees of another company, and in general, are newcomers to the team. The issue of establishing clear communication falls on your shoulders and this jeopardy cannot be underestimated.

communication is the key

Matching Requirements

Finding a good developer is hard. Finding a good developer who meets specific narrow requirements is even more difficult. As a rule, competent IT software outsourcing companies help with the selection of appropriate specialists. However, it’s still a risk that you won’t find a match among a pre-maid list of coders in a specific company.

Involvement and Dedication

There is a misconception that outsourced developers care less about projects. Naturally, this is not so. The strict execution of projects for such employees is a priority since their image, payment, and portfolio depend on it. 

Less Control and Handleability

Delegating authority can be tough for leaders who prefer control. It’s natural to feel uneasy about entrusting tasks to an external employee and having the urge to constantly check on progress. At ProCoders, we understand this concern. That’s why we establish communication procedures upfront in our contracts, allowing for more frequent calls or reports based on your preferences. Plus, our developers are contractually obligated to respond to messages within 30 minutes, ensuring you stay informed and maintain control.

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Hidden Outgoings

Hidden costs include money to find a vendor and contracting, properly transitioning to the vendor once you’ve found them, managing the team, and, if the project is not done in time and it’s not specifically mentioned in the software development outsourcing contract, the cost of prolonging the hire. This can be avoided by competent drafting of documents and a contract, but for first-timers, this can be a problem.

Software Development Outsourcing Models Comparison

The table below provides a brief comparison of various software development outsourcing models, highlighting their benefits and risks. You can use it to better understand each model’s unique characteristics, advantages, and potential challenges.

At ProCoders we know all about outsourcing firsthand, and you can find in our blog all sorts of information about it, like offshore vs onshore software development, benefits of nearshore outsourcing, the difference between fixed price and time and material models, and even cost of outsourcing software development. So if you want to dig deeper – be our guest 🙂

Offshore Outsourcing 

Hiring a development team from a different country for your project.– An expanded pool of talent
– Lower costs due to differences in costs of living
– Access to diverse skillsets and expertise
– Unstable and poor communication
– Language barrier
– Difficulties for inexperienced CEOs in leading remote teams
– Time zone differences
Dedicated Development TeamLong term collaboration between a client and a team of professionals hand-picked to meet specific business objectives.– Long-term collaboration
– Customized, well-functioning team
– Can include various specialists (like UI/UX designers, Quality Assurance for software testing, PM, etc.)
– Increased productivity
– Time-consuming team assembling and management
– Not budget-friendly
– Possible cultural differences
Staff AugmentationHiring developers as a part of your team, but only for the duration of the project.– Complete control over developers’ work
– No additional costs for hiring in-house employees
– Scalability
– Remote work adjustment
– Time-consuming process to find the right developer
Fixed-Price ContractsPaying a set sum of money to an outsourcing software development company to develop a product.– Clear budget and deadline
– Reduced financial risk
– Encourages project scope clarity
– Inflexible for changes
– Less suitable for large, unclear projects
– Potential quality compromise due to fixed pricing
Time and Material ModelEstablishing a clear pay rate for the time needed to complete the project.– Flexible for projects with no set date or unclear vision
– Final price depends on the time spent, not other factors
– Allows for project adaptability
– Uncertainty with the executor
– No guarantee of working with the same team throughout
– Requires constant supervision
– Less predictable budgeting
Hybrid Outsourcing ModelCombining both offshore and onshore specialists in a team, with a main IT software outsourcing company and different sites based on needs.– Combines price and location advantages
– Main IT software outsourcing company with different sites based on needs
– Balanced skillset and expertise
– More expensive than purely offshore
– Difficult to find a compatible company offering the model
– Potential communication challenges among mixed teams
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Find out how
Staff Augmentation model fits you

7 Steps of Software Development Outsourcing

Step 1. Define your Development Goals

It is best to work with an outsource software development company whose culture and work ethic align with your company’s business and specific project goals. Using the SMART acronym is one surefire way to determine and define your goals. Goals must be Specific, Measurable, Achievable, Realistic, and Time-bound (SMART).

Also, make clear plans for:

  • Addressing contingencies
  • Identifying and correcting flaws
  • Budgeting for the project
  • Testing the software in multiple environments

These are some of the basic steps that must be taken before outsourcing of software development. Many companies wait until they have hired the team before setting their goals, but this misstep can lead to a lack of direction. Instead, set goals first, then communicate those goals to the hired professionals.

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Of course, their input might help you refine and clarify the goals, but this way the hired professionals aren’t the ones setting direction for the project—you are.

Step 2. Analyze your needs

The goals you set to determine the outsourcing strategy that is perfect for you. Usually, outsourcing is classified into two models: project-based or specialist models.

Project-based outsourcing occurs when a company lacks technical expertise and hires a team of developers to carry out a project. Usually, the responsibility of management falls on the development agency.

Specialist model outsourcing is when the client company most likely has a project manager, or even an in-house software team. Specialists are hired from outside to fill in specific gaps in expertise in the company.

Out of the two options, the specialist model is the most preferred. Why? It’s a fitting model for any software need. It is also a flexible approach to software development when compared to a more rigid project-based approach.

TimeframeShort-termLong-term or short-term
PurposeQuick deliveryStaff Augmentation
Rate (Payment)FixedFlexible (monthly or hourly)
Differences between Outsourcing and Outstaffing

Step 3. Define Budget and Time Expectations

Making up even an approximate plan for your project greatly increases the efficiency of its implementation. Setting up deadlines and milestones, as well as KPIs, will help developers assemble sprints and stick to them. That way you will know the exact deployment date.

Defining the budget at this stage is essential, as it is will determine the model of outsourcing you choose (smaller budget – offshoring, bigger budget – onshoring, or hybrid, if you’d like) as well as the number of developers you’ll be able to add to your team.

Step 4. Research Countries for Outsourcing

When choosing a location for outsourcing software development, consider factors such as tech stack, hourly rates, time zones, and cultural differences. Even things like methodology or workflow processes differ from country to country, which can also be a challenge. It’s essential to work with a company or freelancer that shares similar work ethics and language to ensure seamless integration and communication.

Also, be aware that the rates for outsourcing software development services vary by country. For instance, Asia is more popular for outsourcing than Europe, and its average rate is typically less compared to European companies. However, due to the low price, professionalism or quality of work may suffer. More simply put, buy nice or buy twice.ProCoders pay a lot of attention to IT outsourcing industry trends in different countries, so we prepared a table, where you can find up-to-date information about.

CountryTech StackHourly RatesTime Zone (UTC)English ProficiencyProsCons
PolandDiverse & strongMedium+1HighHighly skilled developers, high demandHigher rates compared to some other countries
IndiaWide rangeLow to medium+5:30VariesCost-effective, 24/7 availabilityInconsistent quality, time zone challenges
RomaniaBroad tech expertiseMedium+2GoodHigh-quality labor, emerging hubLimited availability of niche technology experts
ChinaExtensive tech capabilitiesLow to medium+8VariesLarge labor force, major companies presentLanguage barriers, infrastructure inconsistencies
MexicoGrowing tech expertiseMedium-6GoodNearshoring for US, time zone compatibilityTech expertise not as extensive as other hubs
EstoniaDiverse tech stackMedium+2HighInnovative e-governance solutions, skilled devsTime zone less suitable for US-based companies
CroatiaExpanding tech skillsMedium+1GoodEmerging destination, strong work ethicTime zone challenging for North America
PortugalVarious tech stacksMedium+0HighHighly skilled devs, compatible with Europe & USLimited global presence compared to other hubs
AlbaniaDeveloping tech expertiseLow to medium+1GoodCompetitive rates, increasing skilled devsTech expertise not as extensive, time zone for US

Step 5. Choose your Future Software Outsourcing Partner

Once you have found an agency for outsourcing software development projects that matches your goals and budget, the next step is to evaluate them. Consider the following factors:

  • Portfolio: review projects that the developers have handled in the past to understand their skills and expertise, make ensure that the team has handled a similar project.
  • Reviews: investigate reviews and ratings on websites like, GoodFirms,, and Hubspot Agency Directory, to learn about the agency’s client relationships, time management, attention to detail, and expertise. For example, you can check out what our customers are saying about ProCoders on Clutch.
Summary of a review on Clutch
  • Past clients: try to reach out to the agency’s past clients through phone or emails for more detailed and honest feedback about the agency’s work.
  • Team members: inquire about the team’s composition, including seniority, tech skills, and roles. You should screen all outsource software developers you are willing to hire, the projects they have contributed to, and the value of their contributions to each. This screening should include a phone/video interview. This allows you to meet the developers upfront and assess their abilities. Ultimately, you would get to the actual testing stage, where you give the developer a small task, simply to assess their abilities further.
The same person as a different specialist meme
  • Infrastructure: one of the benefits of software project outsourcing is not having to spend money on new infrastructure. Therefore, Ensure the agency has adequate infrastructure to fulfill your needs.

Step 6. Sign a Software Development Outsourcing Contract

Upon choosing the ideal outsourcing software company, initiate discussions through a video conference or in-person meeting, similar to interviewing a job candidate. Aim to understand the agency’s work conditions and agree on project specifics. Consider the following factors:

  • Access to source code: Ensure you have access to essential project files, especially the source code, allowing for adjustments and updates by your in-house team or other professionals. Don’t assume these things. Ensure that the contract details all the files you would have access to throughout the duration and upon completion of the project.
  • Price, with Services Included: Understand the full range of services, pricing, and payment structure, whether per project, milestone, or hour.
  • Time Estimate: Allow developers to choose a realistic timeframe based on project complexity, reaching a mutually agreeable schedule.
  • Failure to Perform:  What happens if the project fails? Who takes the responsibility for the various risks applicable to the project? Many overlook this aspect but it is very important. Define each party’s responsibilities and potential penalties in case of non-compliance. Generally, the responsibility regarding terms or quality of execution (and support) lies on the outsourcing company, but if the app did not pay off on the market it’s on the customer.
The Simpsons are protecting money
  • Legal agreement: Defines conditions, expectations, service levels, metrics, obligations, and penalties.
  • NDA: Protects sensitive information from unauthorized disclosure, with exceptions for legal obligations.
  • Specification: Outlines software behavior, evaluation criteria, and use cases, providing a clear vision of the final product.
  • KPI: Establishes sustainable, measurable, and time-specific indicators to track progress, quality, and compliance.
contract is necessary

Step 7. Begin the Development Process

Outsourcing software development relies on various factors like the model, number of developers, and their location. To effectively manage your outsourced team and successfully outsource software development, consider these lifehacks provided by ProCoders:

  • Provide a clear roadmap: Create a flexible roadmap to guide the development process, covering the work calendar and performance monitoring. It is especially important when you consider outsourcing software development for startups. Things do not always go to plan, and no matter how much you try, therefore, create a roadmap that can be easily adjusted and updated as the status of the project changes without affecting the process adversely.
  • Prioritize communication: Ensure frequent, clear communication and build trust among team members. Integrate in-house and outsourced teams for round-the-clock progress. Overcome time-zone barriers by establishing efficient communication channels.
  • Adopt agile methodology: The agile approach to project management requires a high level of collaboration as well as CI/CD (continuous integration and continuous delivery/deployment) and DDT (data-driven testing). Focus on collaboration, continuous integration and delivery, and data-driven testing. Hire developers or agencies with an agile mindset and use agile-friendly tools like GitHub, Miro, Google Drive, Asana, Slack, and Zoom.

How Much Does Software Outsourcing Development Cost?

There is no way to say with 100% certainty how much does outsourcing cost since the price is subdued to many factors and general market fluctuations.

  • The outsourcing model – offshoring is the most affordable model, while onshoring or hybrid tend to be more expensive, especially if the country of origin is the US or the EU.
  • The location of developers – let’s compare the rates for ReactNative developers in different parts of the world. The average salary for a developer well-versed in ReactNative in the US is approximately $117,000 a year, in the UK it’s $93,000 per year and in Ukraine, it’s $70,000. Naturally, the countries with the lower cost of living would be cheaper than the US or the UK, Germany, or other EU countries with the higher cost of living.
  • The number of people on a team – outsourcing is best known for its scalability and the number of developers that work on your project definitely can influence the price.
  • The skills and tech stack – rare technologies and skills tend to be more expensive, same goes for the experience the developer has – the more experienced the developer, the more elaborate the portfolio – the more expensive it is to add them on a team.
  • The complexity of your project – this factor combines two different aspects such as skills and time. We’ve already mentioned how tech stack can influence the final sum, now it is obvious, especially for a T&M model, that you’ll pay more for the long-term collaboration, than the short-term.

How to Choose an Outsourcing Software Development Vendor?

Tips for Verifying a Software Outsourcing Company

Now, it is extremely important to approach choosing a vendor with caution, since you share your intellectual property or other sensitive information with the executors. This is where the question of verifying the quality of a said vendor arises.

The easiest but probably the most important thing you can do before the meeting with a potential partner is thoroughly research the information you can find about them. Take a look at their portfolio and note whether they worked on assignments and projects similar to yours. If they have the experience, they’ll probably know all in’s and out’s, as well as potential pitfalls, and be able to overcome them.

Companies with good reputations also post reviews from their clients, so take a look at them as well. If they don’t have quotes or interviews with customers on their website try searching for them on Clutch or Upwork.

this is the best

Assess their website in general: how does it look, do they have a blog and how regularly they update it, are there customer reviews or case studies describing their approach and results of their work.

If you already have vast experience with outsourcing – make a conclusion yourself based on the aforementioned criteria. If you have a technical advisor (be it an in-house employee or third party) – you can get their consultation and assessment before heading to the interview.

Technology Vendor Selection Criteria

The best way to see whether the outsourcing company fits your technological criteria is to give them a test task, containing a few of the elements your project has. You can also ask to see their demo presentations or sample codes.

In some instances, sample codes and demo presentations are better than test tasks, because they allow seeing the bigger picture: how developers approach architecture, how different parts of code complement each other, and so on.

Checklist to Choose a Software Development Company

There are multiple boxes to check when it comes to choosing a software development outsourcing company, but we laid out the main points of interest. So, the perfect vendor:

  • Has a well-made website that contains customer reviews, case studies, a well-functioning blog, etc.
  • Maintains a good portfolio
  • Have relevant experience with similar projects
  • Have profiles on Clutch, Upwork, and LinkedIn, where you can check reviews
  • Offers a cost-effective pricing model
  • Covers security issues and NDA
  • Uses Agile methodology in developing a product roadmap
  • Offers multiple communication channels
  • Provides customer support

Why Choose ProCoders as Your Outsource Software Company?

Here at ProCoders, we specialize in outsourcing software developers (staff augmentation), so we know everything about outsourcing firsthand. Our unique approach enables us to expand your in-house team by transitioning our exceptional developers under your command. With their skills and abilities at your fingertips, you’ll have total control over your product’s journey from concept to reality.

Imagine having the power to fill in the gaps in your existing team effortlessly. With ProCoders, that dream becomes reality. We handpick the perfect specialists to bolster your ranks, saving you the hassle and expense of hiring an entire team.

But what if you need a full team of seasoned developers? We’ve got you covered. Our collaboration with Quartz Network is a prime example of our ability to make magic happen. They needed a website for their B2B platform but lacked the in-house staff to bring it to life. ProCoders swooped in, assembled a full-stack team in record time, and propelled their development process to new heights.

Take AxisPoint, for instance. They had a talented team, but they needed more coders to create a platform for their products. ProCoders seamlessly integrated seven full-time staffers into their in-house team, resulting in flawless performance and delivering the flexibility AxisPoint needed to achieve their business objectives.

So, if you’re looking to hire software developers in Central Europe and searching for a reliable partner to make it happen, ProCoders is the answer you’ve been seeking. Just schedule a call, and our dedicated specialists will connect with you to discuss how we can help drive your business forward. With a proven track record of success and a passion for excellence, it’s no wonder dozens of companies have already trusted ProCoders to turn their visions into reality.

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What should startups outsource?

Startups can outsource tasks that are not their core competencies, including software development, IT support, customer service, accounting, and marketing. Outsourcing allows startups to focus on their primary objectives and leverage external expertise to achieve faster growth and scalability.

What startup stages outsourcing is profitable?

Outsourcing can be profitable at various stages, including ideation, development, and growth. In the ideation stage, startups may outsource market research or prototyping. During development, they can outsource software development or product design. In the growth stage, startups can benefit from outsourcing marketing, customer support, or HR functions.

What risks to consider when outsourcing at the pre-seed stage?

Outsourcing at the pre-seed stage involves risks like choosing the wrong service provider, miscommunication, loss of control over essential processes, intellectual property theft, and data security concerns. To mitigate these risks, startups should conduct thorough research, establish clear communication channels, and sign appropriate contracts, such as NDAs and IP agreements.

How do I ensure quality in outsourced software development?

To ensure quality, carefully select your outsourcing partner by assessing their portfolio, client testimonials, and technical expertise. Establish clear project requirements, set milestones, and maintain open communication throughout the development process. Implement quality assurance processes, such as code reviews, testing, and performance evaluations, to ensure that the final product meets your expectations.

How do I ensure data security when outsourcing software development?

To protect data security, choose a reputable outsourcing partner with a proven track record in data protection. Sign an NDA to prevent unauthorized disclosure of sensitive information. Ensure that your outsourcing partner adheres to international data security standards and follows best practices, such as encryption, secure data storage, and regular security audits.

How do I handle intellectual property when outsourcing software development?

To safeguard intellectual property rights, establish a clear IP ownership agreement with your outsourcing partner. This agreement should outline ownership of the developed software, source code, and any other related assets. Additionally, include clauses on confidentiality, non-disclosure, and non-compete provisions in your contract to protect your intellectual property further.


Are you ready to outsource? Software development project outsourcing may seem like the easiest solution, but note that it is not a shortcut in any way. It still requires the rigorousness and efficiency that apply to software development in general. It also requires a healthy partnership between both sides (the outsourcing team and the client company).

But as a result, with outsourced product development you’ll be able to save up time and resources to concentrate your team’s efforts on core activities. 

Granted, some people are nervous about outsourcing since it feels like giving up control, but in reality, businesses usually want to get read of tasks that lie outside of their prime activities, like outsource IT development. Moreover, with the development of legal support your intellectual property is safe.Long story short, the benefits of outsourcing surely outweigh the negatives, but eventually, you might want to consider another cooperation model for your project. If so, we suggest comparing outstaffing vs outsourcing and finding out which one will suit you better.

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