Software Development Outsourcing: Guide, Costs, and Tips
- Created: Mar 24, 2025
- 17 min
CEO
Software development outsourcing is a beneficial option for many businesses. According to the Deloitte Global Outsourcing Survey 2024, 80% will maintain or increase their investment in third-party outsourcing for a “results-driven relationship“. We can validate this point as a software development outsourcing company with over 10 years of experience.
Development outsourcing is an excellent opportunity for companies to receive high-quality software that matches their needs and budget, all without tiresome talent hunting, lengthy onboarding, and tech-related worries.
In short, software outsourcing is when a company collaborates with a software outsourcing provider to build a successful product or startup. But there’s a whole methodology behind doing this effectively.
In this blog post, we’ll share insights from our experience on best practices for outsourcing, including:
- Tangible benefits of software development outsourcing
- How to outsource custom software development
- Tips on finding an outsourcing partner
- Costs of software development outsourcing…and much more
Whether you’re looking to outsource the development of an MVP, build an internal business app, a startup development outsourcing, or scale an existing product, this guide covers the founders’ key questions.
We’ll skip the fancy jargon and offer practical tips, guidelines, and advice for setting your software outsourcing efforts up for success.
Let’s dive in!
The Many Benefits of Outsourcing
There are many reasons why companies outsource software development. And not only because of the cost-efficiency.
Let’s explore other benefits of IT outsourcing.
Benefit | Description |
| No need to hire specialists in-house | With software outsourcing, you only need a handful of people to work on a payroll basis. This will reduce the workspace requirements and go through hiring, managing, and retaining people. |
| Global talent | Software development outsourcing means you can access a global talent pool. You will work with developers, designers, testers, analysts, and others from different countries with new perspectives. |
| Leverage the cloud | Outsourcing gives you several opportunities to utilize proficient cloud technologies. Working with the cloud makes your work faster and more cost-effective. This article on the cloud migration discovery phase outlines the key steps for a successful migration. |
| Time-bound delivery | Outsourcing agencies work in a competitive space. Timely and high-quality delivery is the means to their survival rather than a benefit. |
| Focus on key business processes | When you delegate software engineering to an external team, you free up the precious time your in-house team can spend on sales, business development, partnerships, and strategic planning. |
| One-stop solution | Oftentimes, software development companies offer more than just development services. At SpdLoad, for example, we provide project discovery services, UI/UX design, development, testing, and maintenance. We are focused on maintaining long-term relations with our clients. |
| Post-development support | Software engineering is just part of the development process. Once launched, the software requires regular maintenance, updates, new features, and more. Software development outsourcing companies often provide post-development support services. |
| Access to the latest tech | Many software development outsoucing companies utilize the latest technologies in software development. Our software developers, for example, use AI development tools, to speed up the development process without compromising quality. We also invest in training our teams to stay ahead of trends in cloud computing, AR/VR, AI, and other technologies. |
If this is something your company needs at this stage, then software development outsourcing is what you need.
But when it comes to outsourcing app development, you should not work in haste. It’s a step-by-step process that includes a few significant software development outsourcing stages.
Transform your ideas into reality with our dedicated development team — contact us today to get started!
How to Outsource Software Development
There are three main aspects of how to work with an outsourcing company efficiently:
- Define
- Look
- Choose
You start by defining your requirements. This usually happens during the product discovery service. This is followed by looking for the right agency. Then, you have to choose one of the shortlisted software development companies. We will talk about these three aspects in some detail.
Define Your Outsourcing Needs
You need to be ready to outsource your software development work. Your product must have business goals and objectives to achieve.
Similarly, the outsourcing process must also have goals and objectives. These goals must be shared with the team.
Setting goals helps in:
- Structuring and managing the outsourcing program,
- Identification of the functions and features that need to be outsourced,
- Selecting the right service provider,
- Contract management and implementation.
Setting the parameters for outsourcing is also preceded by understanding the type of outsourcing.
We will talk about three types of outsourcing criteria:
- Execution
- Type
- Geography
By execution | |
| Freelancers | Basically, you hire a group of freelancers coming from online sources for software outsourcing services. Freelancers work on their schedule and cost less than hiring an in-house team. You can find freelancers for different tasks from platforms like Upwork, Guru, etc. |
| Agencies | Development agencies are akin to a one-stop solution. You will get access to every type of professional under one ceiling. Hiring, managing, and communicating with agencies is easier than freelancers. However, vetting the agencies is a bit difficult because you may be unable to talk to the entire team. Agencies have a single point of contact (project manager) who will share all the details. |
The second type of distinction is based on the process.
Type of outsourcing | Definition | When to use | Pros | Cons |
| Project-based outsourcing | Outsourcing a specific project with a clearly defined scope, timeline, and deliverables. | – When the project requirements are well-defined and unlikely to change. – For short-term or one-time projects. | – Fixed cost and timeline. – Clear deliverables and milestones. – Minimal management overhead. | – Limited flexibility for changes in scope. – Requires detailed planning upfront. |
| Dedicated team model | Hiring a dedicated team of developers who work exclusively on your project for a long-term engagement. | – For long-term projects with evolving requirements. – When you need full control over the team. | Flexibility to scale the team up or down. – Direct communication with the team. – High level of collaboration. | – Higher cost compared to project-based outsourcing. – Requires ongoing management and oversight. |
| Staff augmentation | Supplementing your in-house team with external developers to fill skill gaps or scale up quickly. | – When you need additional resources for a short period. – To access specialized skills not available in-house. | – Quick access to skilled professionals. – Cost-effective for short-term needs. – Retain control over project management. | – Integration with the in-house team can be challenging. – Requires clear communication and coordination. |
| Managed services | Outsourcing the entire software development process, including project management, to a third-party vendor. | – When you want to offload the entire development process. – For companies lacking in-house technical expertise. | – Reduced management burden. – Access to end-to-end development expertise. – Predictable costs. | – Less control over the development process. – Requires trust in the vendor’s capabilities. |
| Hybrid model | Combining two or more outsourcing models (e.g., project-based + staff augmentation). | – For complex projects with varying needs. – When flexibility is required to adapt to changing requirements. | – Customizable approach. – Balances cost, control, and flexibility. – Suitable for dynamic projects. | – Requires careful planning and coordination. – Can be complex to manage. |
At SpdLoad, we usually provide managed services. Our clients trust us to manage the entire software development process, we agree on the project scope beforehand and then update them regularly on how things go. However, we can also collaborate on a project-based basis, as a dedicated team, or offer outsourcing services as an augmented team, depending on your software project needs.
The last type of distinction we highlighted above is the location of the development team.
By geography | |
| Nearshore | In this segment of how to outsource software development, we have nearshore project delegation. The hiring company outsources the work to a company in the neighboring country. So, for a USA-based company, nearshore development will go to Mexico or Canada. |
| Offshore | Offshoring is when you hire dedicated developers in the country where that service is actually built or delivered. Since software developers are present globally, you can outsource the software development work to any country. However, the development prices will also be different in all the countries. So, it is better to check the charges before hiring. |
| Onshore | The onshore software development outsourcing model is when a company delegates software development to a provider that is located in the same country. This means the same time zone and same language, so there is less confusion with an outsourced team. However, the prices are also the same as in your region, which means you cannot expect cost savings as in the case of nearshore and offshore outsourcing. |
Moving on to the cost of software outsourcing, we have another important question.
This is about the places you need to look for when selecting a software outsourcing company.
Let’s take it up.
Where to Find Software Development Vendor
Choosing a software development company starts with due diligence.
You can start by asking your business partners who have already outsourced software engineering. They can give you honest reviews and recommendations based on their experience.
Then, you need to dive deeper into the research and explore ratings on G2 and Clutch, for example.
Source | Why and how |
| Doesn’t everything we want to start with a Google Search? Well, your search for a development agency is no different. A simple Google search with the keywords “best software development agency in (country name)” is sufficient. At the top, Google might show some ads. But below the ads, you will find some agencies or listicle articles of the best agencies. Start screening them with your requirements as parameters. | |
| Listings (G2, Clutch, Techreviewer, GoodFirms, Upwork) | Several authority websites search and create lists of software development agencies. These listings include names, core offerings, locations, and a few other details. Browse through these lists while adhering to your requirements and goals. |
| Social Media | Social media is quickly gaining importance as a validator. An agency’s existing or previous clients may leave reviews, mentions, or opinions about the said agency on different platforms. Moreover, while screening the agencies, always check the social media handles. Here, you might find the agency’s experience, past projects, and expertise. |
| ChatGPT (or any other AI assistant) | Modern problems require modern solutions. ChatGPT is slowly but surely substituting Google search. Ask it to provide you a comparison table with toop software development companies. To receive an adequate output, be specific: highlight the industry you operate in, the type of software you want to build, your budget, and your outsourcing partner location. |
After spending a few hours surfing through these resources, you will end up with a list of software development partners. Then, you need to make up your choice or at least narrow it down to the top three options. Let’s explore how to do that. 
In the next part, we will define the entire process of outsourcing your software development.
How to Select an Outsourcing Company
Choosing the right partner for software outsourcing projects is pivotal to success.
Here again, we need to retrace a few things.
First, identify your expectations
If you missed it earlier, here is your chance. Set your expectations straight.
This will help in:
- Choosing the right outsourcing partner
- Identifying the critical parameters for selection
- Negotiating the price of development
- Setting project milestones
- Measuring the deliverables.
For example, the set up goal can sound like this:
We need software engineering outsourcing work to develop a scalable e-commerce platform. The top development prioroties are AI-driven product recommendations, integrated payment gateways, GDRPR compliance, and a user-friendly interface. We expect the MVP to be delivered within six months. Our budget is $100,000.
This level of specificity ensures everyone is on the same page and working toward the same outcome.
The second step is getting social proof and checking the expertise of potential outsourcing partners
There are different methods to check an agency’s worth. We recommend spending some time to explore the following resources:
Verification method | Benefit |
| Corporate blog | Prefer to work with an agency that has a blog section on their website. How will this help outsource software development? It will let you know their:
|
| Case studies | Always check the potential agency’s case studies section. Case studies will help you understand what sort of software solutions they have delivered. You can match those projects with your requirements and move ahead with the selection process. |
| Clutch | As a B2B research and rating platform, Clutch reviews give you access to company information. Search for the company name in Clutch to learn more about it. From here, you should be able to get authentic company information along with its ratings. High-rated companies are better suited to deliver your work with perfection. However, they may also charge higher. So, your answer to how much it really costs to outsource software development can also change. |
Based on the findings and selection, you will have a few names following the above procedure.
Remember that there is no scope for a chance here.
Yes, you can listen to your gut feeling, but learn to strike off the agencies as you move ahead.
Take them off the list if they do not fulfill your criteria.
Because in the next part of outsourcing software development, things will get more streamlined.
But they will also take more time.
We are now past the preliminary testing.
The last step in choosing a team to outsource the software development is taking their interview.
Find the best TypeScript developers for your project.
How to Interview Potential Development Teams?
Teams and agencies should gather together and take the discussion forward.
The purpose of taking the interview is to:
- Assess the agency’s ability to deliver the work
- Understand their approach to building your product
- Identify their key areas of expertise
- Set the price
- Set deadlines
Where the non-technical aspects can be taken care of easily, we want to focus on the technical aspects.
Make a list of questions before starting your interaction.
These questions must make your list when outsourcing a team for software development services.
- Do you understand my business, purpose, and project goals?
- What are your developer’s expertise and skill set?
- Are your developers located in-house or work remotely?
- Do you know how to work with an agile development strategy?
- How do you figure we communicate with each other?
- What similar projects have you done in the past?
- Who will own the source code of the software after the development is complete?
Apart from this, thoroughly overview their development and designing process.
You need to get as much clarity as you can in the process.
Ask your doubts, get to know the team, and make sure to set deliverables and deadlines.
That is how you can outsource software development.
After completing the interview, if you are satisfied, then move ahead.
If not, go back to the list and take another interview.
Yes, this may take some time.
But it is better to spend time now than asking the team to make edits later.
Which, most probably, won’t be easy to get.
The non-monetary elements of outsourcing software development are complete.
Need a remote team to support your project? Check out our guide on how to hire a dedicated remote team for top results.
Here is how you can hire Node.JS developers at Spdload:
Submit a request
Contact us via phone, Skype, or your preferred method of communication. An NDA can be provided upon request. One of our HR specialists will then share the resumes of available Node.js developers with you.
Evaluate resumes and conduct interviews
Review the resumes we’ve provided. When selecting your ideal developer, consider their experience, skills, and level of expertise. Before you hire a Node JS developer, you can arrange an interview to get to know the specialist better.
Finalize agreements
Our collaboration begins as soon as we complete the necessary legal agreements and both parties have signed off. It usually happens within a couple of days.
Reinitiatethe hiring process (if needed)
Should no developers meet your criteria, we’ll tap into our broader talent network to find a developer who fits your specifications. We’ll repeat this process until we’ve successfully matched you with the right Node.js developer. 
Now, let’s talk about the costs of software development outsourcing.
Need a remote team to support your project? Check out our guide on how to hire a dedicated remote team for top results.
How Much Does Outsourcing Software Development Cost?
The answer to this question depends on multiple factors, such as the location of the software development team, the collaboration model, the type of software you want to build, its complexity, and the tech stack.
Let’s imagine you have decided to move on a dedicated development team from Ukraine. Most part of the development process is done by the outsourced team. The main task of your in-house development team is to streamline the entire process.
In this case, the price of the custom software development will depend on the following factors:
- The complexity of the business logic
- Design complexity
- Number and seniority of developers
Let’s talk about these aspects in more detail.
What affects the price? | How does it affect the cost? |
| Business logic | Consider two scenarios. One, you think I have an app idea. Let’s say, you want to build software for HR management (as we did when developing a robust HR platform) Two, you want to build software for hardware equipment that connects two people’s brains. Which software do you think will be easy to make? The first one, right? The second software may sound like an incredible idea. However, the business logic behind this software is highly complex. The developers first need to understand how the hardware will work. And then they can build a platform. For the other software, however, things are relatively easier to understand and build. Consequently, the cost of the second software will also be higher. This is the first aspect of how much does it cost to outsource your software development work. In this article, we break down the cost to build your own HR software, from essential features to advanced integrations. Looking for inspiration for your HR software? Feel free to explore the best HR software solutions on the market. |
| Design complexity | Again, taking the previous example. The design of the second type of software will also be relatively complex. Because the designers will need to understand the user base. The users of the second software will not be normal folks. Most probably, scientists and neurologists will use that. Hence, the design principles might be different for different customers. More complex designs require highly specific research and more time. That’s why the budget-wise investment usually considers outsourcing web design. Hence, the cost to design an app will also be higher. |
| Number and seniority of developers | More number of developers working on your project means faster delivery. Plus, if the developers have more experience, they will charge a higher price. (Use Outsourcing Cost Calculator to find out the difference.) |
The cumulative impact of these aspects is simple to understand.
It will cost more if you want to build high-performance software with impeccable design.
Now, let’s take a look at the desired team you need to outsource software development. Team composition is essential in outsourcing your software development project. Not only does it have an impact on the cost, but also on the quality of work.
At SpdLoad, we cover not just software development but also UI/UX design, project management, and testing. The standard team composition that we usually offer for software development outsourcing consists of:
- Project manager
- Designer
- Backend developer
- Frontend developer
- Tester
This is our team for figuring out how much it really costs to outsource software development. But there are alternatives to this team, too.
For instance, if you think you manage the project yourself, remove the project manager. Also, testing is relatively easier than development. If you can manage that, too, a tester is not needed.
The same goes for design. If you can take it up or use the native drag-and-drop elements, remove the designer too.
Lastly, a full-stack developer can replace a backend and a front-end developer. This implies that you can choose a one-person team to outsource software development. But in that case, you must put your best foot forward and participate in the development work.
But let’s get back to our original team. 
We have chosen four regions to help you compare the prices:
- USA-based team
- Asian team
- LATAM team
- East European team
Before you get any ideas, do not just look at the money. Low cost or high cost does not always mean a quality product. So, for understanding purposes, let’s consider that your software development project involves 800 hours of work.
Team | Cost per hour |
| The USA | The average hourly rate in the USA or Canada for software development is $150. So, when you outsource software development to a team here, the total cost will be $120,000. The reason? This is a USA-based team. But you can be sure of the quality and delivery. But are you ready to spend this budget to develop an MVP? |
| Asian Team | Central Asia, East Asia, and South Asia have different average hourly rates. But the average price is $20 per hour. This means that depending on the team you choose. The average cost will be $16,000 for an MVP development services and development. Here too, low cost can be misleading. For one, you may run into communication errors. Plus, Asian teams may lack expertise and experience. This can lead to low-quality product development. In outsourcing software development, you need to be more careful with Asian teams. |
| LatAm | Latin American developers are quickly gaining more ground. In the LATAM region, the average hourly cost is between $30 to $50. This makes the project cost fall between $24,000 to $40,000. With these developers, too, communication can be a big hurdle. |
| Eastern Europe | If you want a USA-quality product at an average LatAm price, choose an Eastern European company. The average hourly price is $40 per hour. You will spend around $40,000 to build an MVP at this price. Collaborating on your software development project will be easier with a team from countries like Ukraine. You will find adept teams at work. And enter the market with the most amazing product. |
There are approximate software development cost estimates. The exact number will depend on the factors we have covered above. Contact us if you have a project in mind and want a more accurate estimate. 
Software Development Outsourcing Contract Details
In software outsourcing, the client and the vendor are often separated by geography, time zones, and cultural differences. This creates the potential for misunderstandings, misaligned expectations, and legal or financial risks. A software development outsourcing contract is a formal agreement that:
- Defines the relationship between the client and the vendor.
- Sets clear expectations for deliverables, timelines, and costs.
- Protects both parties by outlining legal and financial responsibilities.
- Provides a framework for resolving disputes or changes during the project.
Without a well-drafted contract, projects can face delays, budget overruns, or even complete failure due to unclear terms or disagreements. Here are some of the essential details of a well-rounded agreement between a client and a software development company:
Contract section | Details |
|---|---|
1. Parties involved | – Client – Vendor/Service Provider (development team or company) |
2. Scope of work | – Project description – Features and functionalities – Technical requirements – Deliverables and exclusions |
3. Timeline and milestones | – Start and end dates – Key milestones with deadlines – Acceptance criteria for milestones |
4. Pricing and payment terms | – Total project cost – Payment structure (fixed price, time and materials, milestone-based) – Payment schedule and methods |
5. Intellectual property (IP) rights | – Ownership of code and deliverables – Licensing agreements – Handling of third-party tools or open-source software |
6. Confidentiality and con-disclosure | – Protection of sensitive information – Non-disclosure agreements (NDAs) |
7. Quality assurance and testing | – Testing requirements (unit, integration, UAT) – Quality standards – Bug-fixing process |
8. Change management | – Process for scope changes – Impact on timeline and cost – Approval process for changes |
9. Warranties and support | – Guarantees on software functionality – Post-launch support and maintenance terms – Warranty duration |
10. Termination clause | – Conditions for termination – Notice period – Responsibilities upon termination |
11. Liability and indemnification | – Liability limits – Indemnification clauses for legal claims (e.g., IP infringement, data breaches) |
12. Dispute resolution | – Process for resolving disputes (mediation, arbitration, litigation) – Governing law and jurisdiction |
13. Communication and Reporting | – Frequency and format of progress reports. – Points of contact. – Collaboration tools. |
14. Data security and privacy | – Measures to protect sensitive data – Compliance with data protection regulations (e.g., GDPR, CCPA) |
15. Force majeure | – Provisions for unforeseen events (e.g., natural disasters, pandemics) |
16. Signatures | – Legal signatures of authorized representatives – Date of contract execution |
Looking For A Reliable Partner?
Development outsourcing brings amazing results when you find a reliable and experienced vendor.
Consider teaming up with SpdLoad, an experienced development partner, to complete your project.
Our multi-talented team of developers, QA testers, designers, and tech leads leverage expertise across industries like FinTech, Healthcare, HRTech, and more.
We’ve perfected the outsourcing process from crystal-clear communication and total transparency to expert product design to smooth deployment.
Discover more about partnering with SpdLoad by browsing our Clutch and case studies.
Let’s talk!
