How to Outsource Software Development

Dinesh Thakur

06 Jun 2025

As the demand for specialized software development skills and expertise grows, organizations are outsourcing their projects to global resources to fulfil their software development needs. Although outsourcing saves costs, it is not just about cutting costs, but accessing specialized talent and expertise, speeding up timelines and using internal resources for core business functions.

But outsourcing can also lead to frustration, missed deadlines, ballooning costs, and quality that doesn’t meet the mark. Too often, companies jump into offshore partnerships with vague expectations, limited vetting, and no clear plan for collaboration.

Offshore outsourcing can work and work well but only if it’s done right. In this blog we will explain what outsourcing is, its benefits and how to outsource software development to achieve the best benefits like specialized talent, expertise and reduced costs.

What is Software Development Outsourcing?

Outsourcing software development is a practice used by businesses to hire expert offshore developers to build top-notch software. The approach allows organizations to tap into the external talent, expertise and resources required for software development. Organizations of all sizes use this strategy to access specialized skills, minimize costs and speed up time to market for their products. 

Outsourcing software development is not limited to just coding, but it comprises a wide variety of processes, the most common being design, testing and maintenance of application. Organizations might choose to outsource complete projects or some parts or phases of the development. 

Why Companies Outsource Software Development

Outsourcing software development is the best option when you are on a tight budget and want to launch your product as soon as possible. It helps organizations save time and focus on the core business activities. It offers access to the skills, expertise and specialized knowledge in specific areas such as developing custom mobile apps, industry specific software or modernizing legacy applications with advanced technologies. Here are some common benefits for which companies prefer outsourcing software building.

Cost Savings: Outsourcing can save your money. You don't need to team up in-house employees for specialized projects that require complex or advanced technology. 

Access to Specialized Skills: Outsourcing offers organizations access to specialized expertise and skills that are not available in-house. It is especially useful when you are planning to develop a complex or advanced product. 

Flexibility: Outsourcing offers you more flexibility as you can scale up your team or scale down as needed. This is specially useful when you need to expand your capacity for a limited period. It also minimizes your risk as you work with a reputable company with a team that is experienced in the technology you want to use to build your product. 

Faster Time to Market: Outsourcing also helps you to get your software or application to market faster. You will not need to wait to hire or train employees for the project; you can simply outsource the project and launch it immediately after completion.

Key Steps to Outsource Software Development

Outsourcing software development requires you to consider multiple things such as scope of your project, finding the best team, analyzing the costs, language barriers, time zone and your specific requirements for the project. You need to follow a precise step-by-step approach from initial planning to launch your product in the market. Here are the steps for outsourcing software development.

1. Setting Goals

Before you dive in, figure out exactly what you want to achieve with outsourcing. Do you want to reduce costs? Or maybe tap into specialized skills, speed up development, or reduce risks when entering new markets? Whatever it is, make sure your goals are clear and balanced that cater to your project's requirements and align with your vision.

2. Define the Scope of Work

Different outsourcing providers excel in different industries; some tend to be stronger on development, while others are more consulting-oriented. Define the tasks you want to outsource very clearly. For development projects, start with a Software Requirements Specification (SRS) document that details all functional and non-functional requirements. This step ensures everyone understands the project’s scope clearly, aligns expectations, and lays out a solid roadmap for development.

3. Technological Requirements 

Since outsourcing often means working across locations, it’s critical to ensure the technology your partner uses matches your project’s needs. Clearly outline the tools, platforms, and resources your project requires. Talk to potential providers, compare their experience and technical capabilities, and see how well they align with your requirements.

4. Estimate Your Budget

Draw a rough budget, considering the number of professionals required and their rates according to the location and service provider. Be very careful with below average low cost offers, the quality of these offers may not be in expectation, or they will turn out to be very expensive in the future. Remember, in general, that the more you rely on a service provider only, the more costly it becomes to replace, if things go wrong. 

5. Choose the Right Location

Where you outsource matters. It affects cost, time zones, communication ease, and even cultural fit. For example, India offers cost-effective options and is popular with startups on tight budgets. Latin America works well if you’re based in the U.S., due to minimal time difference and easier travel. Eastern Europe strikes a good balance between price and quality, with a skilled talent pool and favorable business conditions.

Choosing the right location means weighing your priorities whether it’s saving money, syncing schedules, or finding the right expertise.

6. Selecting the Right Outsourcing Partner

Don’t just Google and go. Finding the right development partner takes more than scanning a website or glancing at a price list. Start by looking in the right places like review platforms like Clutch and professional networks like LinkedIn. Look for a strong, relevant portfolio, real experience in your industry, recent client success stories, and solid technical expertise. Just as important, the right partner should treat data security and IP protection as non-negotiables, with global compliance standards to back it up, not just promises on paper.

7. Secure Your Data and IP Protection

There is no way around sharing confidential business information in an outsourcing relationship. Therefore, there is a need to secure such information. Before any collaboration begins, your outsourcing partner should sign a rock-solid NDA. But don’t stop there. Ask about their security protocols: How do they handle audits? What access controls are in place? A trustworthy development firm will have clear answers and proven safeguards to protect your data at every stage.

8. Choose the Right Engagement Model

Your outsourcing model should support your business goals. Before jumping in, get clear on how much flexibility, control, and long-term commitment your project needs. Then choose the model that aligns with that.

Here are the three most common:

Dedicated Team: Ideal for long-term projects where you need a stable team working as an extension of your own.

Time and Material (T&M): Best when your project scope is likely to evolve. You pay for the time spent and materials used. This model is flexible and transparent, but it requires close oversight.

Fixed Price: Good for short-term, well-defined projects. Everything is scoped and priced upfront.

Challenges in Outsourcing Software Development Services

Here are the challenges decision-makers run into most often:

Communication Breakdowns

Geographic and time zone differences often lead to asynchronous workflows. When expectations aren’t clearly documented and reinforced, misunderstandings and delays are inevitable.

Lack of Visibility

Without structured reporting, milestone tracking, and transparent communication, it's difficult to maintain oversight. A lack of visibility often results in delayed timelines and misaligned deliverables.

Cultural & Workstyle Differences

Different regions operate with varying interpretations of deadlines, collaboration norms, and escalation practices. If left unaddressed, these disconnects can impact productivity and team synergy.

Inconsistent Quality Standards

Choosing a partner based on cost alone can compromise engineering practices. Lack of robust QA processes, proper documentation, or scalable architecture often leads to technical debt and rework.

Data Security & IP Risks

Outsourcing requires sharing sensitive business information. Without rigorous data protection policies, signed NDAs, and IP ownership clauses, you run the risk of unauthorized access or long-term exposure.

Addressing these risks early with clear contracts, technical due diligence, and alignment on delivery methodology can significantly improve outcomes and build lasting partnerships.

Why Choose DITS as your Outsourcing Partner?

Choosing the right outsourcing partner is crucial for the data security, and success of any project. DITS stands out as an outsourcing partner committed to your success. We have a software development team with years of technical expertise, and knowledge in various programming languages and domains. In addition, we use transparent communication, and a client-centric approach in every project we work on. 

Our rigorous talent acquisition process allows for the sourcing of professionals that are highly skilled for your specific project needs. We ensure data security, and intellectual property protection in every project. DITS thrives on collaborative partnerships, with flexible engagement models and proactive problem-solving. We wish not merely to be your service provider, but to grow into a trusted extension of your team providing quality software solutions for the growth of your business.

Conclusion

The process of software development outsourcing is complicated by several factors. Remember that the lowest cost is not always the best value when it comes to software development projects; there are additional dimensions you have to consider such as security and continuity. When you take the time to define your outsourcing strategy and educate yourself on the options available to your hiring decisions, you allow opportunities that bring innovation, accelerate product development cycles, and address your overall business objectives. Think wisely about whom you partner with and enjoy the journey towards growing your company!

FAQ’s

1. What is software development outsourcing?

Software development is outsourced when one hires an external company or team to take care of his software projects rather than using in-house resources. It promotes cost-reduction, allows for the availability of global talent, and faster time-to-market.

2. Why do I need to outsource software development?

Outsourcing provides access to quality developers, reduces overheads, and frees up the company to concentrate on core activities while the experts are concentrating on development.

3. How do I choose the right outsourcing partner?

Experience, communication skills, portfolio, client reviews, technical capabilities. Never accept a partner without interviews and asking for sample work.

4. Is my data and IP safe when it comes to outsourcing?

Certainly, if NDA agreements are signed and a reputable vendor is chosen following strong data security practices. 

5. What usually are the outsourcing models?

Fixed-price, time & material, dedicated team are the usual models out there. Depending on the size and scope of your project, go with whatever fits your project.

6. Can I outsource just a part of a project?

Yes, you probably can, depending on what you wish to do externally. You might outsource UI/UX design, backend development, or QA testing.

7. Wouldn't language differences, time zones, and so on affect communication?

These could become a challenge; however, with most experienced outsourcing companies out there, they are flexible and equipped with useful tools like Slack, Zoom, or Trello to mitigate differences.

8. How shall I manage an outsourced software team?

Using project management tools, giving clear expectations, scheduling regular updates, and establishing communication channels help provide clarity and ensure the team makes their progress.