Back in 2019, Clutch surveyed over 500 founders, managers, and entrepreneurs to get answers to the hottest questions related to outsourcing services. At that time, 37% of respondents outsourced certain business or technical tasks, while more than half were interested in outsourcing in the future.
Today, the popularity and profitability of outsourcing are still on the rise, and software development outsourcing is a hot topic.
As local engineering talent shortages, business challenges, a lack of resources or particular expertise, and a dozen other factors push founders to choose outsourcing, one critical question still needs an in-depth and up-to-date answer:
How can you choose a software outsourcing company?
Here, you’re going to find the answer.
Before you start the search
Starting the search immediately may seem the best way to find the perfect software development company.
But we suggest shedding light on certain things before diving into the actual search and selection process: the concept of outsourcing itself, your goals and needs, and possible pitfalls on your way to successful outsourcing.
What do you know about software outsourcing?
Outsourcing is a simple yet efficient way to cooperate with specialists outside your company and to delegate certain tasks that would traditionally be performed by your in-house team.
Outsourcing became a common practice in the 1950s for white-collar jobs; in the late 1980s, the rise of IT made outsourcing popular, profitable, and incredibly common among both huge enterprises (who decided to enhance their businesses with software solutions) and small teams (who leveraged technologies to take leading positions in the market).
What do entrepreneurs outsource now?
Software application development is the most outsourced IT function today.
Application development is followed by software app maintenance and data center support; customer support services are often outsourced too.
Still, in 2023, if you speak about outsourcing, it is likely you mean software outsourcing.
Reasons to outsource vary widely.
Some companies opt for outsourcing due to the talent shortage on the local market; others wish to cut their expenses, as software outsourcing services may be more affordable compared to the same services in the US or the UK. But these are only two of the multiple advantages outsourcing may bring you.
According to a survey by Clutch, outsourcing is the way to increase a team’s efficiency, deepen expertise, become more flexible, and save your internal team’s time for other tasks.
Still, the outsourcing model has its own particularities, hidden challenges, and possible headaches. In this article, you’ll learn about all of them, along with ways to outsource in the most effective and most profitable way.
Software development outsourcing is one of the most straightforward ways to deal with some of the main development challenges. It allows you to scale capacity, hire the world’s best talents, prioritize development components and improve app development timeline, contribute to time management and save time you invest in the development process.
What’s your goal?
A succesful business starts with thorough preparation.
To outsource effectively, you need to clarify why you would like to outsource, what you would like to outsource, and who you would like to have on your outsourcing team.
In the previous section, you discovered the answers to why: increased efficiency, access to global talents, optimized operating cost of web application development.
Now, it’s time to determine the what and the who.
The role of the tech founder
Do you have a technical co-founder on your team? Are you planning to hire one?
Having a tech expert by your side in your internal team may significantly help you when starting to outsource software development.
- With a technical co-founder, you can easily and quickly define tasks and responsibilities you plan to outsource, fill in the project brief for your software outsourcing company, and start looking for a company to hire.
- Without a technical co-founder, it may be more challenging for you to identify roles you need in your outsourcing team, decide on the technology stack, and enhance the project brief with technical details.
But don’t worry. Even if you haven’t worked with a technical specialist yet, your future software outsourcing partner may offer a pre-vetted development leader who will supervise the entire engineering team, advise you on technical questions, and help with selecting the technology stack, product architecture, and app logic.
All you need to do is define your needs.
List of requirements
What tasks would you like to outsource?
What exactly do you need to get done on your project?
Do you have a mock-up or wireframes to describe your idea to your future partner?
Would you like to build a web-based app or a mobile solution? Native or cross-platform application?
Are there any similar apps in the market?
You may need to prepare a simple explanation of your app’s purpose, its key features, and design preferences before you reach out to your potential partner. Familiarity with competitors’ apps and a user persona may be useful too.
If you do not have clear goals and guidelines for your contractors, you won’t be able to determine if outsourcing actually provides benefits to your business.
— Clutch
The deeper you understand who will use your product, the easier it will be for you to explain your vision to a software outsourcing company. This will result in a more profitable and fruitful cooperation.
To define your requirements correctly, we suggest starting with a project discovery phase.
A whole team vs a couple of skilled engineers
In his book The Startup Way, Eric Ries draws our attention to four critical components of a startup.
- An accountability system that defines the set of policies to motivate employees, improve their attention, and measure the main KPIs
- A process system describing tools and techniques to ensure optimized and effective daily work
- A culture that consists of beliefs, goals, and objectives the founder and the entire team share
- A people team, which is the critical component of the entire startup structure
Outsourcing software development is a way to organize all four components of your startup’s foundation and focus on business growth, product promotion, and funding. Outsourcing agencies call these things product development services. When you pay for product development services, a complete team of engineers, designers, analysts, and managers work on your startup MVP. They are accountable, establish the development process, and share your goals and beliefs.
But if you’re a lifestyle entrepreneur and if you already run a software business, you may have the three basic components of the pyramid well-established, organized, and defined. You only need to slightly modify, rearrange, and augment the people system by hiring several specialists to join your existing engineering team.
In this case, outsourcing can also help. You can look for a software development company that offers IT staff augmentation or team extension outsourcing services and hire several specialists for defined roles in an existing team.
Before you start looking for a software outsourcing company, you need to think about the expected development team structure and decide which sort of services you should focus on.
What are the possible limitations when working with software outsourcing company?
Now, let’s take a look at things that may get in the way of software outsourcing.
Legislation
Are you familiar with local laws and regulations related to outsourcing, financial operations, and related topics? Before you start looking for a partner, make sure you can outsource without challenges.
US federal laws do not specifically regulate outsourcing transactions. Contract law is generally governed by state law, which is subject to any applicable federal laws, such as laws relating to intellectual property (IP) rights, immigration, export controls, and bankruptcy. Certain industries such as healthcare, finance, and insurance are regulated either on a state or federal level or both.
— Mark Heaphy and Tamia Simonis, Outsourcing: United States Overview .
If you operate within the healthcare, finance, or insurance industries, particular laws and regulations may apply. Consult with your lawyer for up-to-date information.
Budget
The Founder’s Dilemma by Noam Wasserman has an entire section devoted to the founding team.
Wasserman describes the Three Rs framework:
- Relationship — whom to hire
- Roles — what positions to create
- Rewards — what the founder is ready to pay new hires
“Founders have to make different Three Rs decisions depending on their motivations and blueprints, and then adjust their decisions during the different stages of the startup life cycle,”
says Wasserman.
This framework is applicable to hiring a software outsourcing company too.
As we’ve defined the relationship and roles in one of the previous sections, we’ll now shed light on rewards.
What is your budget for software development services?
- US-based outsourcing companies, or in-shoring companies, may charge around $250 per hour for development services.
- A near-shore team based in Argentina or other Latin American countries may charge $30 to $70 per hour.
- The hourly rates for offshore development services in Eastern Europe, including Poland, Ukraine, and Romania, range between $40 and $100.
Once you define your budget, it gets easier to focus on the next point.
Location
Where would you like to outsource software development?
Would you like your app to be built within your country? It may be convenient to work in the same time zone as your development team; however, the price may be high. At the same time, if you’ve already noticed talent shortages in the local market, then your local outsourcing partner may also find it challenging to fill your team with expert developers.
Eastern European countries have proven experience in software development outsourcing. For example, in Ukraine and Poland, the number of software development engineers exceeds half a million. This is a nearly bottomless pool of amazing talents.
At the same time, you may want to consider outsourcing to Asia, which allows you to minimize development expenses but has drawbacks related to time zone differences and possible communication issues.
How can you find a software development company you can entrust your project to?
You’ve finished the preparation stage. You have a vision of your app requirements, and your project brief is ready; you know who you’d like to hire and what services to look for; you’re aware of possible limitations, have a well-defined budget, and are focusing on a particular region as a preferable outsourcing destination.
Now it’s time for making initial contact with potential outsourcing partners.
Meet your outsourcing partners offline
Are there any opportunities to meet your potential partner in person? Here, you can find two of them.
Word of mouth
This is one of the simplest and fastest ways to meet an outsourcing partner: just ask for a personal recommendation.
Entrepreneurs, founders, and managers from your social circle may be eager to share their positive experiences with you. They may have walked in your shoes; they are aware of how challenging it is to select the right outsourcing vendor. Thus, they will likely share tips and tricks for hiring in the local market as well as for cooperating with a regional software development vendor - a vendor that runs a business in your country, region or city.
Events and conferences
Offline events extend your borders and allow you to meet software development professionals from any country, build reliable international cooperation, and learn something new.
- Web Summit in Lisbon, Portugal
What do Elon Musk, Gerard Pique, Nikolay Storonsky, Prashanth Chandrasekar, and Tom Taylor have in common?
They all were speakers at Web Summit.
Web Summit is a huge tech event that brings together more than 150 speakers, 70,000 attendees, 1,200 investors, and thousands of startup founders annually. Unicorns and small startups, politicians and football players, the brightest talents of our time, and the most successful founders all come together under one roof in November to get acquainted, find out about cutting-edge tools and attention-winning platforms, meet developers and investors, and drink a glass of marvelous port.
- The Next Web in Amsterdam, The Netherlands
The heart of tech. That’s what they call The Next Web website.
The Next Web was established in 2009 and positioned itself as a tech media platform. Now it is also one of the biggest European tech events, with more than 10,000 attendees, representing 6,000 companies.
The annual The Next Web Conference takes place in June and allows attendees to both see fantastic innovations firsthand and meet the most powerful software outsourcing market players.
- Outsource People in Kyiv, Ukraine
This event is currently postponed due to the war russia launched against free people of Ukraine. Stand with our country and support Ukraine to prevent deaths, global starvation, and WW III.
Ukraine is one of the top software development outsourcing destinations.
In 2021, the British Global Sourcing Association named Ukraine the best country for outsourcing in its annual nomination.
The International Association of Outsourcing Professionals (IAOP) placed 12 Ukrainian companies on The 2023 Global Outsourcing list.
With a huge number of engineering professionals, it was impossible for Ukraine not to start hosting global events. Among annual events held in Ukraine, we would like to draw your attention to Outsource People — a two-day conference that takes place in the capital, Kyiv, and covers multiple significant topics for software development outsourcing businesses.
Visiting this event is one of the best ways to find reliable, trustworthy, English-speaking development partners who offer affordable rates.
Meet your outsourcing partner online
In 2020, the COVID-19 pandemic changed our lives, businesses, and the entire world as we knew it. Offline events were canceled, face-to-face meetings were forbidden, and face masks became mandatory.
Meeting an outsourcing partner offline became practically impossible.
At the same time, the pandemic created prosperous conditions for digital business development and eCommerce industry growth. The world switched to remote everything mode — you could work remotely, talk to your friends remotely, and order food remotely.
Although the situation with the pandemic is much better now, meeting an outsourcing partner online is still a common option.
There are multiple online resources that may help you meet your future partner. But again, start with asking for personal recommendations. Then proceed with the suggestions on our list.
On LinkedIn, you can find a software outsourcing company in just a few clicks. Use the search bar to find particular specialists and related content. Subscribe to groups you find interesting, follow outsourcing companies, and connect with tech influencers. If you already have a profile on LinkedIn, try to post an ad about your search, use hashtags, and wait for the result. It’s likely that representatives of outsourcing companies will find you and reach out.
Clutch
Firms that deliver — what a laconic yet accurate slogan on the Clutch website!
Clutch is a B2B ratings and reviews platform that helps over a million users connect with business partners monthly.
Filters on Clutch are much more convenient compared to LinkedIn. Choose a directory, filter your criteria, and review descriptions, reviews, and ratings of dozens of outsourcing companies that may potentially meet your requirements.
Clutch even offers you a custom shortlist built precisely for your project. Why not give it a try?
Upwork
You may associate Upwork with independent freelancers. However, you can also find a reliable outsourcing agency on this platform.
To do so, go to the Project Catalog section, choose Development and IT, and scroll through the offerings.
One of Upwork’s advantages is that you can select a service tier according to your budget and needs. No need to ask for a quote — you’ll be able to see an approximate hourly or project rate posted right on a company’s profile.
How to choose a software development company?
If you’ve tried to look for outsourcing agencies on LinkedIn, Clutch, and Upwork, you may have something like 117 tabs opened in your browser and be wondering what to do with them.
First of all, take a quick look at each profile on a particular platform.
- Is there enough information about the company, the team, and their key competencies?
- Do you find the profile attractive?
- Does the company look professional at first glance?
Shortlist your chosen agencies based on your initial impression. We recommend cutting the list of candidates to 10 to 15 agencies so you can dedicate enough time to each of them, focus narrowly, and make the best choice for your business.
Now, it’s time for the first contact.
The selection process
Typically, selecting a software development company includes four stages. Sending a short message would be the very first one.
- Intro message
Most companies have a contact form on their website. So once you’ve decided you like a certain company, you can immediately send the first message.
You can either fill in the contact form or reach out to the company via the email address you find on their website.
Another way to contact a company is by writing a representative on LinkedIn. Focus on managers, sales development representatives, sales specialists, and business developers to get detailed, fast, and professional responses.
Use the most convenient option for you.
In your request, briefly describe your expectations and needs.
If you send an email, you can also immediately send your project brief as an attachment.
- The first call
Within 48 hours, an outsourcing company should reach out for you to ask further questions and schedule an introductory call.
If they don’t do so within two business days after you contact them, this may be a red flag, as a delayed response is definitely not what you’re looking for.
During the first online meeting, you will get acquainted with your potential partner, share your project brief, ask questions, and help your potential partner understand your objectives.
- Portfolio review
During the intro conversation, a potential partner is supposed to share their presentation and portfolio with you. Take your time to review the documents carefully and make sure the engineering team has experience developing products in your market, industry, or domain. Have a closer look at the apps the software development company has already developed. Compare them to your idea. Do you find similarities between your product and the apps from the company’s portfolio?
Based on what you learn from your intro conversation, take your next step.
- Request for proposal
Request a proposal to make sure that prices for services align with your budget.
What components should your request consist of?
- Introduction — briefly describe your idea and goals
- Instructions for the vendor — communication language, contacts, expected deadlines
- List of requirements
After that, shortlisted firms will send you their proposals containing the necessary information for a successful start.
- CV review
At the next stage of choosing a software development vendor, you can request developers’ CVs. Typically, CV review is an essential part of choosing a company for IT staff augmentation services; however, if you’d like to hire an entire development team, you may still want to know potential teammates’ expertise and experience.
What are the key factors to consider when reviewing engineers’ CVs?
- Experience
- Technology stack
- Project descriptions
- Level of English
This information is critical to understand if a person’s qualifications match your expectations and software requirements specification.
- Meeting the team
At every stage of the consideration process, you may lose contact with some potential vendors. Some companies may be unable to take on another project; others may fail to provide a rough estimate, or the quality of communication with some teams may push you away.
As you choose the best one to three companies, you may want to meet development team representatives to be sure about your choice.
Moreover, you may want to meet an entire team or talk separately to each of the specialists that may work on your project.
Engage a technical co-founder or consultant if you want to check engineers’ hard skills. An outsourcing team should be willing to help you evaluate their engineering skills and provide proof that their specialists have enough expertise to ensure delivery of a spotless product.
How to choose a software outsourcing company: 5 critical factors to consider during the selection process
Here are five factors to pay extra attention to when choosing a software development vendor:
- Communication
Do you feel comfortable when talking to your potential partner?
Pay attention to everything that matters to you in your teammates. Verbal and written English skills are a must, while a sense of humor may be optional: some founders may even find it irrelevant. However, when choosing a software development company, try to consider them not as a service provider but more like your partner who is able to translate your words and ideas into code and improve your business with a high-quality software solution.
- Portfolio & domain
As we’ve mentioned earlier, a company’s portfolio is significant too.
At first, it may seem like the more projects you see, the more experienced the company is. However, this doesn’t entirely reflect reality. Consider the size and complexity of projects. Google some of them to find out if they succeeded, or ask the company about its most successful clients. Finding unicorns among them would be a good sign! Rely on your impressions: the number of projects as well as their size, complexity, UI/UX design, architecture, and even raised funds — everything matters.
- Testimonials
What do former clients say about a particular software company?
Visit a company’s profiles on LinkedIn, Facebook, and Clutch. Do five-star reviews prevail? Are there any complaints or unresolved issues mentioned?
On some of the company’s pages you may also notice employees’ reviews. Check them out too to make sure the company’s culture, HR policies, and overall atmosphere aren’t toxic. Employee satisfaction may have a direct impact on your product.
- Professionalism
Do the people you talk to behave professionally? Do they use the terminology, business, and technology concepts in your niche? How do they answer your questions?
Analyze behavioral patterns and consider if you would like certain specialists to contribute to your project.
- Cost
Analyze hourly rates for software company services and rough project estimates that a company provides. Are you ready to invest these resources in the development process? The answer to this question combined with your assessment of the four above-mentioned factors will help you decide on a software outsourcing development team to work with.
Create a simple spreadsheet to collect all your thoughts and impressions regarding each of the shortlisted companies. Take notes during each conversation and evaluate the five most important factors that may impact your choice.
In conclusion: how to choose a software development partner in 2023?
“[Outsourcing] gave me more time to negotiate new contracts, handle client correspondence, and manage the creative direction of current projects,”
says Rio Rocket, a digital entrepreneur.
Software development outsourcing may become a winning strategy for you, just as it has already been for many startup founders and businesses.
The only challenge of outsourcing is choosing the right outsourcing partner. While the web is booming with offerings and services, it may be hard for you to find and select a custom software development company.
Your outsourcing team should not only be able to code; it’s also essential to look for people who will become your reliable consultants, tech experts, and helpful partners.
