Software Development Outsourcing Hub

Software Development Outsourcing Process: Complete Guide 2024

February 1, 2024

Navigating the software development outsourcing process can be overwhelming. Although 78% of businesses enjoy satisfactory outsourcing, there's no guarantee you will too.

As you prepare to kick off your first project, it’s essential to cover all your bases. Here you'll find a roadmap and key points to undertake any IT outsourcing project. 

By understanding this process from start to finish, you can set up your project for success. What's more, our tips will help you create an enriching partnership in the long term.

What Is Software Outsourcing?

Outsourcing software development means relying on a third-party partner for your IT needs.

There are a myriad of reasons why businesses choose outsourcing. Perhaps they don’t have the right kind of in-house experts. Or their teams may be swamped with projects. Other times, businesses struggle to access talent due to the developer shortage crisis

Outsourcing software development connects businesses with IT experts. In this way, they can get expertise on-demand without the upfront investment. This enables top efficiency, cost savings and flexibility. 

8 Steps in the Software Development Outsourcing Process

The outsourcing software development process is highly involved. Yet, your project will thrive with a clear roadmap.

Before you begin, get a full understanding of these steps and best practices. Take the time to prepare internally and dig into your requirements. Doing so will lead to first-rate software that wows your end users. 

1. Analyze Your Needs and Goals

Start by delving into your needs and goals. This should be done in collaboration with stakeholders across all departments. Discuss requirements with directors, IT experts, end users, customers, etc.

By knowing their pain points, you can better define the scope of your project. Collect data, use surveys and undergo interviews. Get to the bottom of your business’ most urgent needs.

2. Define an Airtight Scope of Work

Your scope of work is perhaps the most important document for outsourcing success. It defines the roadmap for your project in unwavering terms. A typical scope of work will include: 

  • Project deliverables
  • Timeline of milestones
  • Minimum project success indicators
  • Team composition (PM and developers)
  • Resource requirements (hours, equipment, etc.)
  • Agreed pricing terms
  • Reporting requirements
  • Defined project risks 

Your team should explore all these areas, so that your scope is as airtight as possible. Ultimately, this will help avoid “scope creep.” This happens when your project budget inflates during development due to unclear parameters.

3. Assemble Your Ideal Tech Stack

Defining your technical profile early is essential. After all, you may choose your outsourcing partner based on their tech specialization. 

Work closely with your CTO and in-house experts. Determine which programming languages, frameworks, databases, infrastructure and other tooling you’ll require.

Having a sense of your project’s tech requirements will be helpful when you meet with your IT partner. At that point, you can validate your full tech stack and ensure it’s the best solution. 

4. Lock Down Your Budget and Pricing Models

Pinpointing a realistic budget can save you trouble down the road. Audit your project needs to understand your expenses. Keep in mind these successful budgeting tips:

  • Don’t go for the cheapest option. Choosing a low-cost partner means you’ll expose your business. Bugs, delays, bad code and poor results can tank your project. Be prepared to pay for top-shelf IT outsourcing. 
  • Clarify any hidden fees. Check whether your contract’s fine print may lead to extra fees. Thoroughly define your scope of work to avoid cost bloat.
  • Select the right pricing model. “Time and materials” is usually the most popular. This option gives you the flexibility to pay for developer hours as needed. In contrast, “fixed price” contracts can be risky. That's because your project may reveal more/less needs than your initial scope.

5. Choose the Right Outsourcing Model 

You’ve got options when it comes to outsourcing. First, consider whether you want to maintain control of the project or not. 

To build proprietary technology, you may want to keep development in-house. You might try extending your teams with body leasing, dedicated teams or resources-on-demand.

However, sometimes it's best to hand off management to a partner if you don’t have the resources or expertise. Project-based outsourcing, managed services or a hybrid model may be right here. These options let you offload certain IT tasks, so you can focus on your core competency. In this case, you can leave your technical requirements to the experts.

6. Seek a Provider Who Meets Your Requirements

It may seem obvious, but your outsourcing partner should align with all requirements. Some minimum areas to check for fit include:

  • Technical expertise: First things first, make sure your provider has the expertise. Ideally, their past projects will be similar in nature to yours. This may include the industry and/or tech stack.
  • Alignment with business goals and culture: Your partner should show business aplomb, too. They should understand your goals and share cultural values to maximum collaboration.
  • Teaming logistics: Consider the partner’s time zone, remote experience and so on. This will enable seamless workflows across hybrid teams.
  • Open and honest communication: A provider should be a true partner. During the interview phase, get to know how they communicate and build relationships. They should demonstrate a willingness for long-term commitment. 

Of course, these are bare minimum requirements. There may be a wealth of other factors that go into your decision as well. 

7. Double-Check Security and Data Policies

As you get started, do due diligence about project security and GDPR compliance. Ask about protocols and policies to guarantee your product’s security and data. Be sure that user permissions make sense in order to limit access to the source code.

You’ll also want to carefully craft the IP clauses in your contract. If you’re building proprietary technology, make it clear you retain ownership. Get all commitments in writing, so there’s no confusion later over who owns the code. 

8. Manage Your Full Project Lifecycle

Shepherding a project throughout all phases isn't easy. You'll need support across discovery, design, development, QA testing, deployment and post-launch.

Keep up with each iteration of your product with great PMs. Having an experienced leader at the helm will guarantee your product is progressing. Make sure your teams are thinking agile, too. The agile method helps teams iterate and improve the product, as well as adapt to any challenges.

The Main Models of Software Outsourcing

Your software development outsourcing process may vary according to the model you use. In essence, the power of outsourcing is the flexibility it allows. 

Outsourcing has a range of different models that meet your needs on your own terms. The most popular models below can be tailored to your specific project requirements. 

  • Outsource All: Relieve your full IT burden by letting a third-party take charge of all your needs. Usually, a single provider will manage your end-to-end technical services. 
  • Project-Based: Entrust an entire specialized project to a partner. This frees up your in-house experts to focus on maintenance or core competencies. You’ll typically define a scope of work with your provider. This may include features, timelines, budget and more.
  • Managed Services: Meet ongoing needs through a managed services model. In this case, your partner will handle daily operations, maintenance or specialized tasks. For example, organizations commonly offload cybersecurity needs this way. Partners will manage these tasks with their own resources. Usually, you'll be charged an hourly/monthly rate.
  • Body Leasing / Dedicated Teams: Expand your internal IT teams by “leasing” remote developers. You can set this up on a full-time or part-time basis. Integrate these pros into your teams to add manpower, but not give up project control. You may even choose to hire a dedicated team as an extension of your in-house IT department.
  • Resource on Demand: Similar to body leasing, you can get developers on demand for your teams. With this model, you can reserve developer time on an hourly basis. From here, you can scale up time as needed during a bug or data breach.
  • Hybrid Outsourcing Models: Your business can also create your own outsourcing model. Try mixing and matching options. It’s not uncommon today for organizations to reduce their risk by hiring a provider for every IT area. For example, you may limit outsourcing to a special project, such as a mobile app or interface. Or you can try keeping an in-house maintenance team and hiring experts for your other areas. There’s no limit to what a hybrid model looks like for your business. If you’re committed to innovation, you may utilize outsourcing exclusively to build up an R&D center. Or you can handle company-wide IT needs through multi-sourcing options. Hybrid models offer a uniquely tailored way of outsourcing for your business.

6 Tips to Successfully Outsource Software Development

Of course, you should customize the software development outsourcing process to your business. Success will mean something different for every type of product. 

Even so, software development projects outsourcing is subject to the same hurdles. Here are some key considerations to help you overcome common pitfalls along the way. 

1. Take Your Time Finding the Right Partner

It sounds simple, but your IT outsourcing partner can make or break a project. To guarantee you’ve found the ideal provider to guide your through your project, make sure to:

  • Check reviews, testimonials and client referrals. Start with your partner’s website for details. Don’t forget to read client reviews on Clutch, LinkedIn and elsewhere. 
  • Take a look at past projects. In addition to case studies and reports, browse the partner’s latest web, app or software projects.
  • Interview current team members. Get a sense of the team’s working style and culture. Be on the lookout for red flags that show team instability or conflict. 
  • Understand their resources and infrastructure. Your partner should have the equipment and expertise necessary to get the job done. Check their processes too, including the agile methodology. 
  • Get transparent pricing. It shouldn’t take a PhD to understand how much you’re going to pay. Verify that pricing is clear and covers extra features as needed. 
  • Clearly define security protocols. Reduce risks by confirming the protocols and policies in place. Your security, data and IP should stay in safe, expert hands. 
  • Verify their long-term commitment. Clients who are the real deal are looking to build a relationship. They should show values such as strong communication, transparency and more. 

Plus, you might try a test project with a potential partner. Doing so will help you get a sense of their working style, product quality and partnership. This is vital to know before committing to a long-term contract.

2. Know the Industry and Market

Take the pulse on the market conditions that may impact your outsourcing relationship. 

For example, get an in-depth understanding of IT outsourcing trends and market statistics. This will help you define your outsourcing strategies for long-term growth. 

In addition, performing market research for your product idea is essential. In concert with your IT partner, you should have a full picture of your value proposition in the market. This way, you can make sure your product meets your unique customer demands. 

3. Set Clear Expectations from Day 1

Your outsourcing partnership will go smoothly if you get on the same page. Don’t make any assumptions when getting started, or you may face challenges.

Create a well-defined roadmap with KPIs that are clear and achievable. Align your teams from the first week with open-style meetings. And utilize collaboration tools to synergize teams and document all decisions. 

Lastly, your contract should include a conflict resolution clause and a failure-to-perform clause. This way, there’s a set process if things go sour. 

4. Foster Strong Communication

In addition, you should prioritize communication with your provider. Surprisingly enough, 57% of outsourcing relationships fail due to miscommunication. 

You can streamline communication by giving your hybrid teams access to collaboration tools. What’s more, your PM should be encouraging bottom-up communication from developers. Holding regular stand-up meetings can also help get a real sense of what’s going on. 

Company culture matters here, too. Try setting clear milestones, giving honest feedback and encouraging an open environment.

5. Reduce Your Liability

Having a reliable partner can greatly minimize the risks of outsourcing. Yet, you should also put measures in place to reduce your liability. 

In particular, consider IP protection, GDPR compliance, currency rates and more. This is best handled by drafting a detailed contract with clauses for each of these areas.

What’s more, follow up to ensure security and data protocols are implemented properly. Do your due diligence to safeguard your product in the long term. 

6. Include Rigorous QA Processes

Your source code is the foundation of your product. For this reason, it’s key to perform quality checks during the development stage. 

Ask your partner about their QA processes. They should design and plan regular testing, as well as follow-up to resolve any issues. Testing should be done across all target devices and systems, too.

Throughout this process, make sure your IT provider is staying transparent about bugs. For example, partners may log issues in a tool for you to view in real time.

7. Focus on Tracking and Scaling Progress

There’s no such thing as “set and forget” when it comes to outsourcing. Stay in the loop with your outsourcing project through tracking processes. 

Your partner should enable real-time tracking, including weekly milestones and meetings. Get project updates regularly to guarantee it’s going according to plan.

In addition, your product roadmap should prioritize scalability. As your team plans their milestones, look ahead to what may be next on the horizon for your business. Strategize about next steps to maximize scalability in the long term.

What IT Services Can Be Outsourced?

(Source: Deloitte’s 2022 Global Outsourcing Survey)

Essentially, any IT functions that you require can be outsourced. Keep in mind that every business has unique requirements. That's why your partner should fit their services to your needs. Here are some of the most popular outsourced IT services today.

Custom Software Development

At 79%, software development is one of the most common outsourced IT functions. Outsourcing enables businesses to get a software solution customized to their specific requirements.

QA Testing and Services

Businesses are outsourcing QA testing to guarantee top product quality. Testing teams must understand business goals, design tests and get insights for improvements. In turn, this helps achieve the highest caliber product possible.

Cloud Computing

Just consider that 97% of IT leaders are planning to accelerate cloud adoption today. Outsourced teams can handle seamless cloud-based integrations to streamline business efficiencies. Overall, this helps boost digital preparedness and opportunities.

Mobile and Web Development

Mobile and web solutions are often the heart of great customer engagement. Businesses are outsourcing these services to guarantee stunning, user-friendly interfaces. This boosts their brand reputation and sales in the long run.

IT Support

73% of IT support services are now outsourced – and for good reason. IT support requires a dedicated team for monitoring, updates, best practices and so on. Outsourcing simplifies IT support, allowing for optimal performance and reliability. 


Data breaches have become a major challenge for companies today. It’s no wonder than that cybersecurity has become the #1 most outsourced IT area. 81% of these services are outsourced, likely due to the specialization required. Cybersecurity experts create protocols and test them regularly to ensure airtight systems. 

Big Data and Analytics

In today’s digital age, 75% of data analytics services are outsourced. Businesses today have a wealth of data to collect, clean and analyze. Outsourced analysts can craft data-driven strategies that elevate business processes and decisions. 

IoT Solutions

IoT can revolutionize your business through new sensors, data and monitoring. Having outsourced IoT experts can reimagine your processes. Doing so results in greater efficiencies, strategic decision-making and customer engagement.

UI/UX Software Design

User experience (UX) is essential for building successful digital products. Outsourced UX developers focus on designing beautiful interfaces with seamless touch points. In turn, this leads to a competitive edge in customer engagement and loyalty.

MVP Development

Finally, outsourced teams can create a Minimum Viable Product (MVP) to verify ideas. This prototype includes basic features for meeting your customer needs. 

Outsourced MVP processes can give you a sneak peek into your product’s impact on customers. From here, you can iterate as needed. When development begins, you'll know you're moving in the right direction.

Navigate How to Outsource Software Development With Netcorp

Drive results for your project with a rigorous software development outsourcing process. Our in-depth guide will enable your business to pave the way to IT outsourcing success.

As you launch your next software project, lean on the expertise of an elite IT partner. At Netcorp, we offer personalized consultations to ensure you're on the right track. Reach out to us to learn how our pros elevate efficiency, innovation and transparency.

Paavo Pauklin
Executive Board Member

Paavo Pauklin is a renowned consultant and thought leader in software development outsourcing with a decade of experience. Authoring dozens of insightful blog posts and the guidebook "How to Succeed with Software Development Outsourcing," he is a frequent speaker at industry conferences. Paavo hosts two influential video podcasts: “Everybody needs developers” and “Tech explained to managers in 3 minutes.” Through his extensive training sessions with organizations such as the Finnish Association of Software Companies and Estonian IT Companies Association, he's helped numerous businesses strategize, train internal teams, and find dependable outsourcing partners. His expertise offers a reliable compass for anyone navigating the world of software outsourcing.

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