Step-By-Step Guide: How To Outsource Software Development In 2023

How to Outsource Software Development: Step-by-Step

If there is anything that the Internet has provided for humanity, it’s the ability to connect at a long distance. Hence, it’s made developing software more accessible than ever. We are no longer constrained by geographical location and can connect with developers worldwide. According to Statista, the global developer population is currently 27.7 million individuals. However, it is expected to reach 28.7 million by 2024.

How To Outsource Software Development: An Updated Step-By-Step Guide 2023

With so many people located in different parts of the world, there is always an answer: How to outsource software development. It is known that startups and tech giants are outsourcing software development to other countries and continents. The difference is in the ability to choose the team members, possibly at lower rates than in your homeland.

We approach outsourcing at TNation by allocating dedicated teams of software engineers to assess, develop software, install, and support our clients. This allows us to consistently and effectively deliver high-quality, tailored solutions. But where do you start? In this updated step-by-step guide, you’ll be able to navigate the process with ease. We will provide a comprehensive overview of the process, from finding the right team to managing the project.

Outsourcing Software as a Company Strategy

There are many reasons why companies choose to outsource software development. The reasons vary, but the common one is that it has become a strategy for businesses worldwide. Outsourcing software is a purposeful plan to delegate a particular business process or, in this case, software development to a third-party service provider. Strategies may differ depending on the company, but the ultimate goal is to achieve business objectives, avoid risks, maximize quality, and achieve cost-effective solutions through outsourcing companies.

What is the Basic Process of Outsourcing Software Development?

The software development process is complex and depends on the expertise of the software development company and the communication with your partner. As we discuss each segment further in the text, let’s look at eight steps to make or break your successful software project.

Determine Your Goals: Before outsourcing software development, it is crucial first to determine what you want to achieve.

Develop a Plan: Work with the provider to develop a plan for the project. This should include tasks, deliverables, and a timeline for completion.

Choose an Outsourcing Destination: Consider the location of the outsourcing partner, the quality of available development resources, and the cost of the services in other countries.

Choosing the Engagement Model: When outsourcing software development, one essential step is selecting the suitable engagement model for your project. The three most popular engagement models are dedicated team, fixed-price, time, and material.

Select a Provider: Once you have established your goals, you can look for a software development provider. Consider factors such as cost, experience, and technology stack.

Negotiate the Contract: After selecting a provider, negotiate the terms of the contract. This should include the scope of work, timeline, cost, and other relevant details.

Test and Launch: Once the project is complete, test the software to ensure it works as intended.

Project Completion and Beyond: After the development project is completed, it is vital to maintain a relationship with the software development partner to ensure ongoing maintenance, support, and updates.

Step #1 Determining Your Goals: A Crucial Step Before You Outsource Software Development

One of the most critical steps to take when choosing to outsource software development is to determine your goals for the project. A clear view of your goals and objectives will help you find the right software development partner to meet your needs. This step will also ensure that you get the best possible project results and that your partner understands what you are trying to achieve.

Your goals should be realistic and achievable. It starts with defining the objectives and scope of the project. That includes what you are building, your budget, quality standards, who is your user, your goals for this project, and the deadline. Defining goals is not just for your guidelines but for the outsourcing company that must align with your business’s plans to build software that will satisfy your needs.

For instance, if you have a list of features for your mobile application, but not all are necessary, you should prioritize the parts and explain that to the vendor. The truth is if the idea of the project is yours, then putting it on paper makes sense since only some share the same vision.

There is never one word too many when explaining your project to the outsourcing company. Your goals are the starting point even before choosing the vendor for your project. Additionally, you want the outsourced team to understand what you are trying to achieve at all stages of development.

Step #2 Come up With a Master Plan: How to Develop a Comprehensive Plan to Outsource Software Development

Depending on goals, industry, and requirements, businesses have different ways to outsource software development. Unfortunately, others tend to overlook the importance of planning. There are many reasons for developing a plan to outsource software development, which can only benefit your business and project. It includes costs, timelines, risks, communication, and project specifics.

The main reason why outsourcing is so popular among many businesses is cost efficiency. The goals we mentioned can be broken down into bullet points alongside the requirements for your project. Having it on paper, you can evaluate the need for specific features and cut costs to stay within the budget. However, please don’t choose the vendor based on their price because they might not have the adequate knowledge or experience to complete your project successfully.

How To Develop A Comprehensive Plan To Outsource Software Development

A plan can help you make informed decisions and predict possible challenges. If you don’t have a plan, the things that take you by surprise can lead you to make wrong moves that can reflect on your project, relationships, deadlines, and costs. For that reason, it’s much easier to estimate possible risks and have a strategic plan on how to execute them that will have the best outcome for your business. Your vendor can help you work on prevention for potential issues and ensure the project can progress smoothly.

If you plan out the details of the arrangement, you can set a clear message about who is responsible for specific tasks and activities, this way; you avoid miscommunication and conflict, which is unnecessary in building software that should help your business. In addition, stating obligations for both parties and setting clear timelines and roadmaps leaves no room for unnecessary delays and cuts down your time to market.

Equipping your business with the right strategy can give you an advantage when setting quality standards and quality assurance. It allows you to refine the product until it satisfies the requirements stated in the plan. Ultimately, you want a quality software solution that has passed the QA testing.

Step #3 Where to Outsource: Options for Nearshore, Offshore, and Onshore Outsourcing

When you set your goals and plan the right strategy, the next step when choosing to outsource software development is to decide on the location. Cliche as it sounds, but the world is your oyster, and numerous vendors worldwide can complete your project on time and on budget.

However, multiple options exist when searching for the right partner to outsource software development. The point is where to look for them, and outsourcing is categorized based on the geographical location of the companies to whom you will be outsourcing your project.

Nearshore Outsourcing

This implies working with a team in a neighboring country. It’s one of the most popular ways of outsourcing because of the same time zone or a few hours difference. That is why many Western European countries hire teams from Eastern Europe, such as Serbian outsourcing companies.

Offshore Outsourcing

It involves working with a vendor’s team located on another continent. However, there is a more significant time zone difference, but the benefit is cost-efficiency which comes with Asian countries such as India.

Onshore Outsourcing

It implies choosing a partner from the same country as yours. Many businesses are aware of the higher costs but are concerned with cultural and language barriers when selecting a partner to outsource software development.

However, you should not be strained by prejudice and seek a partner with knowledge and experience in your niche or similar projects. There are developers worldwide with excellent communication skills in the same language as yours and higher knowledge to complete your project according to your requirements.

Step #4 Choices in Engagement Model: Choose the Right One for Successful Software Development Projects

Once you choose the location to outsource software development, it’s time to reconsider your project scope and requirements and decide on an engagement model before seeking the right outsourcing partner. Engagement models determine the relationship and level of responsibilities between you and the outsourcing provider. There are many models, but we will give you the two most popular ones according to our experience as an outsourcing company.

Dedicated Team Model

The dedicated team model is compatible with complex long-term tasks with collaboration and communication between you and the outsourcing provider. It includes hiring a remote team of developers, testers, designers, and project managers to work exclusively on a single project. Most businesses opt for this model as they have greater control over the development process.


  • Very high level of communication and collaboration between you and the outsourced team
  • You have complete control over the project development and the hired team
  • The team works solely on your project
  • The provider is more invested in your project


  • The model requires your time and commitment

Staff Augmentation Model

Staff augmentation means filling the tech gaps in your team to complete the project efficiently. Depending on your needs, you can hire the team long-term or just till the end of the project. A great deal of communication is required as the hired experts will be working alongside your in-house team members.


  • You can quickly scale your team according to your needs
  • You have flexibility when discussing the length of their engagement or scope of work


  • Challenges when onboarding the hired experts to your in-house team

Step #5 Finding the Right Partner: Choosing Software Development Provider for Your Goals

You may have made these four decisions so far when choosing to outsource software development, but finding the right outsourcing partner is the hardest one. However, if you look at it, the quality of their work and your relationship with that provider can significantly impact your software project in the long run. As a result, your research and communication with potential partners will ensure that your criteria align with the partner.

Experience Matters

Your priority in search of the right outsourcing partner is researching their experience in the same industry or similar projects. Don’t constrict yourself to a website form; ask them face to face, as sometimes websites don’t always tell everything. Also, many companies are bound by the agreement not to reveal their partner’s details or name.

Hence, you will never find their previous work on the website page. The point here is to find out how they handled the project, its challenges, best practices, and delivery. You might find the best developers, but if they lack experience in your project type, things are less likely to run smoothly, as they don’t anticipate the possible barriers.

Review the Team

That said, it doesn’t imply that the team you hire should lack knowledge of specific technologies. Many outsourcing companies will provide you with a CV to review their best selection for the project. Your word, however, is final in the matter, as you will decide after an interview whether or not this individual is right for you. In these sessions, you can use the time to evaluate their capabilities.

Review The Team

Communication Skills

Every project is dependent on proper communication between the team members. Hence, it’s a good rule of thumb to evaluate their communication skills and ensure no language or other barriers when conversing about highly technical subjects such as software development.

Advantages and Disadvantages when You Outsource Software Development Team

There are benefits to outsourcing software development teams, and they often surpass the advantages of hiring in-house or a freelancer. It’s also the easiest way to expand and diversify talent on your project without a long-term commitment. Businesses embrace outsourcing when they have tight deadlines and need additional expertise. However, it has its strengths and weaknesses, which we will discuss here.


When you Outsource Software Development it Often Comes in a Full Package

The first benefit of hiring an outsourcing company is that they already have different kinds of expertise. Many companies offer well-rounded services, including business analysts, consulting, full-stack developers, designers, and QA specialists. In other words, hiring a selected team can help you get your project started right away as they have already worked together on various tasks instead of spending time building the right team and catering to the culture.

The external team can Ensure Your Project Runs Smoothly.

No self-respecting outsourcing company would allow itself to miss deadlines or have issues with project delivery unless it’s something outside of its power. Each of them cares about their reputation and good results, hence, satisfied clients. They are typically there, always responsible, and open to any communication or suggestions.

Hiring Outsourced Team Brings You Unexpected Experience

Many well-established outsourcing companies have over five years of experience in different projects. If you look at their employees’ CVs, they likely have extensive experience working with them. However, with that experience comes the knowledge of possible barriers, solutions, and the discipline and professionalism required to complete the project successfully. These individuals are sometimes invaluable team members as they can ensure the project is on the right track.

You Have No Legal Issues when Hiring an Outsourcing Provider.

If you have ever worked with freelancers, their engagement sometimes differs from hiring a legal entity. That said, as legal entities, the outsourcing company is highly obliged to diligently respect all the points of the contract. Ultimately, the agreement clarifies everything and all parties understand their obligations up-front.

Staying Up to Date with Technology and Industry Trends

Companies that outsource software development services are constantly up to date with trends and new technology and ensure they are ready to offer solutions for the following product. Market demands often influence the solutions themselves, so following up is crucial for these companies to stay current.


Finding the Right Team for Your Project is the Hardest Step You Make

The market is saturated with companies that offer their services. However, knowledge and expertise are sometimes only a part of what you look for in a partner. There are soft skills that make or break the deals between the partners. That is why we often mention clear communication as one of the most important. The entire project is based on good communication between the team members and how the external team member works with your in-house team. Choosing the right team can sometimes be a disadvantage.

Step #6 Negotiating & Contracting: Securing Agreement on Scope, Timeline, and Cost

Most agreements between the company and outsourcing services provider state the obligations of both parties. Therefore, reconsidering what you want in the contract when choosing to outsource software development gives you a binding document clear of any misunderstandings between you and your outsourcing partner.

Ownership or access to source code is one of the points many companies consider implied. However, if you choose in the future to continue working on the project with your in-house team, you need a source code, and that can be a challenging task.

The cost and services included should be addressed. It’s easier to determine everything in the contract, so you are confident about your project’s range of services and pricing.

Time is often of the essence for many software projects. If you have already talked to developers to see how much time they require for this project, be sure to enter a realistic estimate in the agreement.
Additionally, consider writing down the software specifications in terms of its behavior and provide a clear vision of the product so that there would be no doubts about the agreement and your requirements.

Step #7 Testing Before Launch: Ensuring Quality Results of the Software Project

Many companies have released less than satisfactory products during the pandemic. It can hurt your business in the long run and cost more to perform alterations or do it all over again. Therefore, you should ask the provider if they perform QA testing. Establishing clear expectations for software quality and quality control through the software development life cycle can save you time and money in the future.

Step #8 Beyond Project Completion: Maintaining a Relationship with the Software Development Partner for Post-Project Support

Every software has its timeline in the development process. This process will often have changes and adjustments according to your input and feedback. Eventually, all projects end, but does that process end for your company? Depending on the project type, you might extend the partnership to provide maintenance, updates, or scale-up software in the future. That means talking to your partner about these things, as you will surely need them in the future.

Case Studies & Examples of Companies Choosing to Outsource Software Development

As an outsourcing company doing business for a decade, TNation has had many clients from Western Europe and North America. However, as it happens, companies from the UK and Norway find it convenient to hire our company as there are no time differences between the countries, and the quality of the software product is equal to the one in their respective homelands, but at a reasonable price.

During that time, we have had several successful projects, from complex systems to small business apps. For example, one such company had hired us to develop a fintech app, which was a cost-efficient way of developing their software and having access to a larger talent pool simultaneously. As a result, the business is now more competitive in the market and increasing customer satisfaction with its innovative approach.

In conclusion, when you outsource software development, it can be a great way to do the job efficiently. It is essential to take the time to understand all aspects of outsourcing, from the model and company type to the country and firms you explore. Doing this will help you make the best decision when selecting a company for your project and avoid any potential issues. Once you have done the necessary research and chosen the right company, you can be sure to succeed in your custom software development outsourcing project.

About TNation

TNation is a software company based in Serbia. We have a decade of experience employing the country’s and region’s IT talent. This enables us to build custom development teams and provide customizable software solutions for startups, middle-sized businesses, and large enterprises. We have groups and experts in practically every technology you might require. TNation continues to expand its work worldwide, to deliver efficient digital products.

If you want to get in touch TNation starts with project consultation and completes with a demo of your software product.

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