Software Outsourcing Services: Everything You Need To Know

Today, with such rapid changes in technology, business seems to move more smoothly than ever. This can create strong competition among businesses.

  • How to deliver products to the customer in the fastest and most economical way?
  • How to make successful business and stay at the top of the competitive environment?
  • How to deal with the shortage of software developers in the IT industry?
  • How to developing a software project within budget, yet, bring more profit?


The answer for these tough questions is ‘software outsourcing services’.

Software Outsourcing Service Everything You Need To Know4 (1)

What is software outsourcing service?

In a short way, software outsourcing services are the practice of hiring the skills and expertise from a third party to handle complex tasks relating to software development.

The demand for outsourcing software is increasing day by day due to the competitive market and digital transformation need. According to a report of Statista, the report for IT outsourcing industry also shows that the global outsourcing market amounted to 92.5 billion U.S dollars. Comparing to the market size years before which dropped down to 76.9 billion U.S. dollars, this number/statistic in 2019 has shown how strong the demand for outsourcing services.

This increasing demand is understandable due to the rapidly changing of technology. Business owners should evaluate their system, understand and adapt the business and technology trends. And software outsourcing will be a doorway for organizations to adapt these trends by digitizing and optimizing their business processes. Moreover, it can be a solution to gain a competitive advantage by accessing the talented pool and working with tech talents across the globe.

By approaching the outsourcing, business owners/entrepreneurs will get the various IT functions to ensure the best outcomes for their clients. Beyond that, it can release them from the burden of money, time, and many other things which the in-house team can’t offer.


Types of outsourcing services.

There are three main/common types as below:

  • Nearshoring

This means that business owners will hire a third party in a neighboring country. For example, the company located in China and forms a partnership with a outsourcing company in Vietnam. In this case, Vietnam will be a nearshore outsourcing to China.

Because of the closing in geographic and time, it will help to clear the gap of time zone, culture, communication. Moreover, it can be easy for clients to visit and meet the development team in person which helps to figure out the crucial issues relating to the development process (if any).

  • Onshoring

This means hiring a third party company within the country. For instance, the business is in the United States and hires a company locally. Hence, the United States will be an onshore outsourcing destination to the US companies.

No language barriers can be an advantage of this type because they both speak the same language. This can help outsourcing become more effective. Yet, clients may have to pay for development costs higher than nearshoring and offshoring.

  • Offshoring 

This means that business owners will hire a software outsourcing company from distant countries. For example, the company in the US collaborates with or hires a agency from another country such as China, India, or Vietnam. Hence, China, India, or Vietnam will be offshore software development destinations for the US company.

Cost-effective will be the first mention for offshore outsourcing because of its low labor costs. Multiple resources is another advantage of offshoring. It help business to choose the right company for the project. In this term, India and China are well-known as outsourcing hub. Yet, Vietnam is another great destination for company to choose.

However, language and culture differences might be bring issues to both parties. Regular meeting and researching cultural before developing the product would help in someway.

 Type Of Software Outsourcing


Outsourcing models

What mentions above based on location or distance. Now let's look at the outsourcing models which will identify the different ways to utilize this services based on the relationship between the clients and the vendor. Of the many types of models involved in the software project, there are three primary models.

Staff Augmentation Model

The staff augmentation model is when the client will hire temporary developers by contracting with the software outsourcing provider instead of hiring a permanent developer; in order to fill the gap within the in-house team, especially skill sets, and thus accomplish the project.

In this case, the IT outsourcing company will provide the client with the elite one with specific skill sets to the needs of their client. They will work along with the client for the best quality outcome. In this case, the clients are still in control of the project from start to finish and have right to take care of distributing tasks and responsibilities, even providing a workplace.

However, once the contract was signed, the software developers are part of the client’s human resource. And they have the responsibility to ensure the tasks are completed and reported to the team on time. With this model, the clients need to choose talented and skillful one that fit the needs/goals of the project.

Dedicated Development Team Model

The Dedicated Development Team Model is a model where the client will entrust the project to a software outsourcing partner who will, in return, provide a high quality and professional team to take care of it from start to finish. The professional team might include every single role that a project needs for bringing the project to fruition. Such as software developers, project managers, business analysts, quality assurance, etc.

Providing a professional team here also means that they will take care of matters relating to recruitment, IT infrastructure, vacation, team-building, sick-leave, administration, etc. In turn, the clients will discuss with the outsourcing provider the team size, skill sets, time for launching, adding some more requirements, and their involvement in the process.

Once this model is applied, the dedicated team belongs to the clients. They have the right to be directly involved in project management if they want.

They can trust the project manager from the provider who will help them stay up-to-date with tasks and how the project is progressing. The development team is in their hands. Hence, they are in control and can make any changes.

The Dedicated Development Team Model would be a choice for a company to purchase the best business outcomes. However, this should only be invested in if it is a long-term, dynamic, and complex project.

Project-based Model

In the Project-based Model (another name is software outsourcing model or outsourced development team model), business owners will hire an outsourcing company, and allow the end-to-end development team to take full responsibility following the client’s requirements and expectations. This means that the client will be hands-off all things relating to the project and focus more on core business or business strategy.

This model gives the outsourced team flexibility in the whole process from beginning to end. For example, defining and taking care of the process, providing a skillful team to manage it, applying the most suitable technology, etc. What is expected to see in this model is the result rather than the process.

Software Outsourcing Models

Why outsourcing?

Software outsourcing would be a good strategy to start during this challenging time. Some reasons for that are cost-savings, time-saving, the cutting edge of technology, etc. This service will help the business stand out from the market, increase productivity, and boost business outcomes. Below here are the top 8 reasons or 8 benefits which can provide a clear vision of why outsourcing services would be a good choice.

Infographic -Why should you invest in software outsourcing service (1)

When to outsource?

The answer may be simply depending on business needs. However, eight reasons below will help the company know whether they need software outsourcing services or not.


When To Outsource

How to choose the reliable company for a business?

There are hundreds and thousands of IT outsourcing companies around the world. How to choose among these companies is always a tough question. A business owner/entrepreneur can’t just simply say ‘I like this one’-even they have the right to do that. Picking up randomly is easy but to ensure that the they can bring the best quality products or the best outcomes is another story.

How do you outsource effectively? Where to find a software development company? What do companies outsource? Here are a few steps to choose the right software outsourcing services company.

Firstly, define goal/goals clearly.

This is a significant step because you can’t go anywhere if you don’t know where you are going. Before reaching out to the software development company, business owners should define the goal/goals that they want to achieve in business terms.

For example, building a good management system for the enterprise, new ideas that want be added in the software product to boost business profit, the business needs IT integrated to improve services quality or the business processes that need to be optimized. The assessment will help to decide to outsource or not. Beyond, this can help them know what exactly they want to outsource. Remember that a clear vision can give you a clear direction.

Then, spending time with the business team or whoever might be involved with the next project to evaluate internal resources. Some aspects need to look at such as budget, business field, skills, or new technology in the IT project, even competitors. This will narrow down the number of potential partners and helps choose the right company.

Besides that, the experiences, competencies, and technical skills from the in-house developers also have to be examined. This evaluation will provide some ideas such as what technical skills are needed; whether the in-house team can handle the project or not; and how many software developers might get involved/added to the project.

By doing so, this review will be a good source to decide software outsourcing models for the project- whether it is staff augmentation, dedicated team, or project-based development. It also will help the IT outsourcing provider not only bring the best software solutions with effective cost but also provide skillful one and suitable team size that meet the business needs and goals. Remember the clearer the information and requirements provided, the better the software company can estimate.

Even though this is a vital step and influence in the whole project, it should not be too rigid. Once the contract was signed, business owners are stepping into the ‘win-win’ relationship. As good partners with experience in multiple projects, they have built a strong foundation in the business view. Hence, they can discuss and figure out the way that brings most business profits such as giving IT-consulting, proposing to improve the requirement features, recommending the development team size, or the latest/suitable technology for the software product.

Secondly, decide the type of outsourcing services.

Whether choosing onshore, nearshore, or offshore outsourcing, each of those will have advantages and disadvantages. The decision has to be based on the internal resources and the careful consideration of other factors. Such as the different time zones, the pay rate per hour for each developer, the communication skills, the size of the project, the time in need for the project (long-term or short-term), and so on.

Thirdly, make a list of potential company.

After deciding on types and models of outsourcing, now is the time to look for potential partners. Shortlist at least 5 to 7 potential company. There are multi-ways to do this. For example,

Ask referrals or recommendations from friends or partners if they were in partnership with outsourcing company. This is a secure channel because friends/relatives/partners already have experience working with those software development companies. Thus, they will know which one is best, and how expert, professional, and experiential these companies are.

Check social media tools, especially LinkedIn and Twitter. From these social media channels, it will show who they are, the culture, etc… Of course, these channels can’t give 100% right about what businesses want. However, this will at least give some ideas and options to choose.

Approaching B2B companies might be another choice. Some companies listed the best outsourcing development companies such as Clutch, Upwork, Goodfirms can be a place to look for. The shortlist can be based on the category such as software development services, custom software development, BPO outsourcing, software outsourcing services. Even though this is a good source to find out, business owners should choose in a careful way.

Fourthly, do thorough research on their background.

The next step when having a list of outsourcing companies is to check software company background. The following questions will suggest some key points for the company to research.

  • Reputation?
  • How professional they are?
  • What are their skills and domain knowledge? This is an essential question because it will filter suitable companies for the project. If the company has no online profile but it was mentioned that it has a good reputation on the particular skills/knowledge, then the business should contact them personally.
  • Check the case study. A case study will project how the company solves the problems and whether they’re similar to client's project or not.
  • The length have they been serving in the market?
  • How large the company is?
  • What is the feedback from their clients?
  • What types of development methodologies are they using? Scrum, Agile or Waterfall?

Normally, after having a list of IT outsourcing companies-of course with careful research or with the information from trustworthy sources, business owners can go forward to contact the software company. However, this step is not redundant. This will reassure the company and help to know who is handling the project.

Contacting potential partner.

After completing the research and there is no doubt about the results, the clients can proceed to contact potential outsourcing partners and arrange a meeting to discuss further the project.

Explaining the problems/expectations of the project would be helpful. If possible, requiring the solutions or ask for technology consulting. Or asking for the CV of developers to certify that the business gets the best talented and skillful one. References from previous projects and clients can be a trust-worthy source at this critical moment.

Finally, if that company fits the expectations and requirements, the business owners are on the right track. And if everything is going well, let’s wait for the results and see how quickly the business grows.

Bonus Tips to avoid the pitfalls during the software development process

To ensure high-quality for the project, here are some tips for successful software outsourcing services

Looking for value beyond cost-savings

Cost-savings is the fundamental reasons for a business to turn into outsourcing. However, cost-savings does not equal cheap and it should not be the only reason to outsource.

Many businesses accept the cheapest price from vendors without hesitating. Yet, it is a big mistake and could destroy the whole process of carefully looking for outsourcing vendors. Beyond, business owners are putting their product into a quality risk.

What other factors that the company should pay attention to? It could be the experience and competencies of the software developers, portfolios, work quality, and the ability to communicate well in English besides technical skills. These will help clients define approximately the rate that they might have to spend.

The great benefits of outsourcing is that it allows the clients to access the talented pool of developers who have strong experience and skills in the software development industry all around the world. Good outsourcing companies will provide a skillful and experience one to ensure that the high-quality services and the more value to the project.

On the contrary, by outsourcing to the cheapest one, inexperienced developers might be provided and it will affect the quality of product in some way. Hence, before accepting the quotation from vendors, the employer should deliberately considers other factors.

Avoid miscommunication

Communication will define the success or failure of the IT project. If a company is hiring onshore outsourcing services, communication might not be a big deal. Because both are speaking the native language.

However, for the nearshore and especially offshore, English is the second language. This can be very challenging for the client or their in-house team and extension development team to understand each other.

Hence, to ensure the software project is going well and bring the most value to business, checking and verifying the English-speaking ability of the development team is necessary. Conducting the interview, having a look at CV of developers would be the option to filter out the skillful one.

Establishing the communication channel and scheduling regular meetings with the team is another way to keep software project going on the on-pace. Many communication tools could be used during the development process such as Skype, Zoom, Slack, Jira. Setting up the daily, weekly, and even monthly meetings can assure that the client and the outsourced team are always on the same ground. Beyond that, if there are any changes or any vital information that need to inform, they still can follow-up.

Regular communication should happen during the entire development process from the beginning to the end. This will ensure a good outsourcing relationship and both-business owners and partners- are on the right track.

“Where to find the top software development company?”

The answer that readily comes to mind is India and China. These two countries are well-known and are leaders in the outsourcing field. However, this article will mention Vietnam as a new attractive destination in the software outsourcing firm.

Recently, Vietnam has been becoming a rising star among Asian countries and becoming the top leading country in technology in general and in software outsourcing services in particular.

There are many reasons which can affirm that Vietnam will be a top destination and the right choice to invest in. According to AT Kearney in their 2019 edition of the Global Services Location Index (GSLI-this index edition means to identify locations that can best provide information technology (IT), business process outsourcing (BPO), Vietnam has been moving up one position compared with 2017 edition-from sixth to the fifth position.

This shows that Vietnam is day by day becoming a great offshore outsourcing destination for technology investment. In other words, Vietnam is becoming the tech hub among the Asian countries.

Besides that, cost-effective is also a great advantage when investing in Vietnam. Compared with India and China, outsource software development to Vietnam can save 50% cost-operations. And compared to the US, this can save 90% in costs, according to CIO Magazine.

The quality of the developers is also increasing in skills and knowledge. A large number of universities and training centers have opened and invested in information technology courses and courses relating to the IT field. According to Hackerrank, Ho Chi Minh City University of Science of Vietnam stays in the top three universities that have the best coders in the world.

Those above and a significant number of other reasons can assure that Vietnam will be an excellent choice for software outsourcing.

In conclusion

This article is presented to give general information relating to software outsourcing services. The guidelines above for choosing a partner will help business owners/entrepreneurs to find the best company that fits the requirements and expectations.

If you are considering to build up your project and want to seek a leading offshore software development company that can help you grow your business and stand out on the market, don’t hesitate to contact us

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