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What is Outsourcing in Software Engineering?

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What is outsourcing in software engineering?

Outsourcing is a process by which a company hires a third-party service to handle their software development projects.

This process is in contrast to hiring your own software development team, or if you have a team, relieving them of work and allowing them to focus on core functions like growth and innovation.

Oftentimes, when businesses are in need of hiring additional talent, their inclination is to hire full-time employees that take on tasks the company needs to be completed. If a restaurant needs a new cook to work nights, it’s likely that the restaurant will hire a full-time cook. 

The reality, however, is that unless the role absolutely requires someone to be nearby, most companies are better off outsourcing their software needs.

While it’s impossible for a cook to create dishes for customers thousands of miles away, but anything to do with software can be done remotely. 

a team workshopping with a whiteboard and sticky notes

Why is outsourcing useful when it comes to software?

The types of software projects you can outsource depend on your company’s needs. 

Companies can develop internal software for use within their own company or they can develop software that will interact with potential clients.

Also, a team that is well versed in developing the software you are commissioning will probably do just as good of a job as in-house engineers.

Today’s outsourcing is definitely not what it was 20 years ago, especially when it comes to software development. While traditional outsourcing usually consisted of hiring people just to code, modern software houses offer much, much more. 

In addition to development, they help you analyze your business idea and offer already-assembled teams with designers, testers, and project managers.

How does outsourcing work?

People may mean many things by the term ‘outsourcing’. Let’s clarify the distinctions between outsourcing, offshoring, and nearshoring.


This means hiring overseas developers to work for you full-time. 

Companies started doing this mainly to reduce costs, with India becoming one of the hottest outsourcing regions in the world. 

But, over the years, Western firms began shifting their focus from labor costs to cost-effectiveness. Of course most, most companies want to keep costs low, but it’s important to keep in mind the value we get for our money. 

This is why many companies have decidedly outsourced to countries that were closer geographically and culturally to their own. 


This second type of outsourcing is known as nearshoring. 

Central and Eastern Europe have become prime destinations for nearshoring by North American companies or Western European countries. 

However, nearshoring still implies that they are branches of our company and not fully autonomous companies.


The last type of outsourcing is what we will be focusing on in our article. Outsourcing is giving a project over to another company that will bring the whole project to completion.

This is the usual scenario for non-software companies, which don’t have a team of developers in-house but would like to build a custom-made software product. 

However, this scenario can also apply to software companies. This can free up internal resources to do other tasks. 

Many American, European, and Middle Eastern businesses have chosen to outsource their software to countries with lesser standard income yet still with many of the same cultural values, making it simpler to communicate. 

Eastern European citizens, for instance, are exceptionally proficient in English. Plus, many of the world-class programmers reside there because of their excellent educational institutions.

Outsourcing offers 7 main benefits

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Outsourcing saves you time

One of the main reasons you are going to be drawn to outsourcing your software engineering needs is the fact that you don’t have time to do it yourself. 

If you have an IT team, they may need to be dedicated to other tasks.

If you don’t have an IT team, hiring an engineer or a team of engineers is a big investment involving time, management, and money. 

You could spend months trying to assemble an engineering team and you wouldn’t have even begun your development.

Outsourcing saves you money

As we’ve said, hiring an in-house team of engineers is expensive—and may not even get you the best results in terms of time and efficiency.

In this way, it allows you to set aside a budget for software development and stick to it.

Outsourcing a team is usually done on a project basis, which doesn’t commit you to years of paying a salary and employment benefits. 

Moreover, if your company is located in North America or Western Europe, you can find companies from around the globe who will give excellent quality and save you much more money than if you were to hire in-country.

It's more efficient

If you’ve got a specific project in mind—an software app or a database, for example—you can commission a team of professionals who have experience developing for other clients.

They are likely to be more familiar with the terrain and can stick to the promised deadline easier.

You’re up to date on the latest technology trends

Teams who specialize in, say web app development, are naturally going to be more up to date on the current technology trends. This is because they can dedicate all their time to optimizing their output.

Quality control

One of the benefits of outsourcing is that they want to impress you. Their company integrity relies on them performing well. 

Performing well means that they will have received another favorable reference for future clients and it means you have them in mind for any future projects you might need.

You can ensure the instance of a successful job by calling or emailing their past clients and asking for an honest review.

Your business can also weed out firms that don’t make the cut but asking them pointed questions about certain trends in software development. If they don’t have a satisfying answer you can look for a company with a better fit.

You can have an ongoing relationship 

Admittedly, one of the benefits of having an in-house team is that they are around to develop for you year-round. 

Nevertheless, if you find a company that you connect with, you can commission them to do projects whenever you need them. 

Efficient communication

Although having an in-house team around allows for constant checking in, that might not be the most efficient way of communicating about a project.

With our clients, we do 2-week sprints which allows us to tackle certain (or multiple) features of the software. We also have a Slack channel that is open 24/7 that we can use for any questions or clarifications. 

Should you outsource?

Outsourcing is not about just handing over your tasks to another company. In many cases, the software company will help you innovate your project and help you find ways to optimize your product.

They can help with UX design, frontend and backend development, and even offer business perspectives.

Outsourcing can streamline your development process and free yourself and your company to focus on marketing strategy, business analysis or other daily tasks.


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