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7 Tips to Work on Before Outsourcing Software Development

Outsourcing has become a norm in the business world. Spending on IT services was expected to be approximately 1.2 trillion dollars with a growth rate of 11.7%.

The factor responsible for increasing this growth rate was the covid-19. But it made various tech-savvy businesses realize the variety of options they can get through outsourcing software development projects.

Most SMEs are searching for outsourcing their projects because they require specific expertise or save some budget.

When should a business outsource its project?

  • A project requires a unique and quality skillset
  • Hire great talents from all over the world
  • Save costs on budget or hiring and manage developers
  • Need their in-house team to work on other projects, or the current developers lack the technical expertise to complete the project

But before you start searching for software development companies, have a look at some factors that you need to consider.

What are the factors to consider for software development outsourcing?

1. Define Your Project Goals and Requirements

“On average, 34% of IT projects have higher chances of failure.” (Source — PM Solutions)

It’s because sometimes a client is not sure about the goals and requirements himself. Defining clear goals is necessary to avoid the risk of project failure. A software services provider will work on the client’s requirements, but if there are loopholes in the project scope, things will not go smoothly.

Similarly, a project timeline and budget will also be affected. So coming up with a concise plan with a thoroughly searched project scope avoids the risk of failure.

Ask yourself these questions:

  • What will the software do?
  • What are the required features?
  • How will it add value for your business?
  • How will I identify a timeline for the project completion?

2. Decide an Engagement Model for Outsourcing Software Development

Once you figure out your requirements and needs for your software project, the next step is to choose an engagement model.

Precisely, three engagement models are applicable for almost every software development project.

Fixed-price Model

By the name, you can identify the fixed-price model is for short-term projects up to 4 months. The project requirements and budget are pre-defined.

But in the case of outsourcing software development, fixed-price contracts are not ideal. It’s because custom software development can take four months to a whole year on average.

Project milestones and development hours might change because of emerging technicalities throughout the project timeline.

When is a fixed-price model ideal?

  • The project scope is clearly defined
  • Decided budget and development hours
  • No flexibility in the processes

Time and Material Model

Fixed-price vs Time and Material?

Unlike the Fixed-price Model, Time and Material contracts offer quite a flexibility to manage the processes.

It’s a preferable engagement model for software development projects because the deadlines and number of development hours are bound to change at any project phase.

Uncertainty in software development projects is a norm, and a fixed-price contract is inappropriate in this regard.

That’s why most software development agencies insist clients work on a time and material contract with them.

When to use this engagement model?

  • When some uncertainty exists for a project
  • The timeline is divided into certain milestones
  • Project requirements may change later

Dedicated Team

This engagement model is for large-scale software projects that require a full-time dedicated team of developers to work on the project.

Once a client requests a dedicated team, a software development agency will deploy a team of developers who will solely work on the client’s project until completion.

A dedicated team contact is essential when fixed-price and time & material contracts might not be enough for a development product.

When do you need a dedicated team?

  • Need a full-time team of developers to work on your project
  • The project is a large scale
  • Have a highly complex set of project requirements

Choose the engagement model according to your requirements wisely.

Also read: A step-by-step onboarding guide on hiring a dedicated team

3. Identify the Technology Stack

The next thing you need to work on is identifying the technology stack for the project. Find out what technology stack you will need to carry out your project.

Sometimes clients themselves are not sure what technology is required because they do not have a technical background.

A software development agency will help you, but you can’t finalize your budget without finding out how much the cost is for hiring specific developers.

And there’s a risk that someone might charge you more than they should.

So here’s a good tip. If you don’t have technical knowledge yourself, it is okay. Get help from someone with expertise in different programming languages and frameworks.

4. Finalize the Budget

After finalizing the technology stack, you will decide the budget based on the number of development hours required.

Sometimes people try to lower their budget as much as possible, which might affect the quality of work too.

You need to have balance in mind for the quality of work required and budget.

A budget has to be set realistically by identifying the current average rates for different resources. Then you can search for agencies that meet your budget.

We have a software development cost guide that will help you decide the budget.

5. Look for reliable sources to find the agency

Finding the right development agency is not that easy. So, you need to search for them on authoritative resources, like Upwork, Toptal, GoodFirms, and Clutch.

We recommend these platforms because they are good to find reputable B2B companies. Plus, you get all the essential information at your hand with just one single click.

What do you need to see here?

  • Analyze a team’s technical expertise and knowledge
  • Check reviews
  • Have a look at the portfolio

6. Communication and Project management tools

59% of businesses outsource their work. (source:

And it’s because communication channels have improved over the years. If you communicate with an agency’s representative, you pretty much get the idea of how they deal with their clients.

You can’t be sure 100%, but the gut feeling can help sometimes.

A business outsourcing software development should get the agency to provide transparency through sound communication channels and project management tools.

Video communication channels can be:

  • Google Meet
  • Zoom meetings
  • Skype

And some other communication channels will be phone, text, emails, etc. Transparent communication helps establish immediate feedback from all the parties involved in the project.

Similarly, you will need project management tools (e.g., Trello, Zoho Projects, ProofHub) to work with an offshore development company.

7. Verify the Security Measures

While outsourcing software development, a client provides private information to a software company. That information about the project is confidential, and it can be at risk if proper security policies are not there.

So before you outsource your projects, ensure the software development company has standard security policies to protect client data and information.

It’s best to sign an NDA (Non-Disclosure Agreement) to hold a company legally liable for securing your business information.

Concluding Thoughts

All these factors are vital factors you need to consider before outsourcing software development.

Most people looking for work are uncertain of what they need or don’t know how to present the demanded project requirements to an offshore development company.

So you need to plan out everything before you assign some agency to work on it.

Phaedra Solutions can be a great option for you because we have worked for various offshore clients over the years, from web and app to software development.

Our company is a top-rated software development agency on Clutch, GoodFirms, and Upwork.

Contact us if you need any help regarding software development.

Recommended Blog: A cheat sheet on software development outsourcing



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