How to Outsource Software Development and Succeed: The Complete Guide for 2023

Updated 22 Dec 2022

15 Min



Post-pandemic realities have changed the world, transferring almost everybody to work remotely. In this light, outsourcing software development is the most appropriate and natural choice, gaining popularity today. Let’s turn to stats for provement. Statista notes that the outsourcing market should have reached to reach $413.72 billion by the end of 2021. That shows the popularity of outsourcing services.

Outsourcing market value 2016-2021

Outsourcing market revenue from 2016 to 2021 (Source: Statista)

Grand View Research positively predicts that the compound annual growth rate (CAGR) of the worldwide outsourcing market value is expected to be about 8.5% from 2021 till 2028 (compared to one in 2020). For you to find out how to outsource software development profitably using all its preferences, we've prepared this 2023 guide.

What is Software Development Outsourcing?

First off, let’s define the essence of IT outsourcing. This is a process of delegating a software development workflow (or its part) from a client’s company to a vendor’s one. The vendor’s staff keeps working on their places and remotely completes the tasks given by the client. Now let’s take a look at the models of outsourcing.

Outsourcing Models

Software development outsourcing is divided into several types by location and the relationships between the client and the vendor’s company.

Depending on the distance between the customer and the IT service provider, the location-based types of outsourcing contain:

Relationship-based outsourcing is classified by business aims and the kind of management your project needs. According to these criteria, there are the most common two models of outsourcing:

  • The project-based
  • The specialist model

The project-based outsourcing model is used in case the client company needs more tech expertise for the project; they hire the outsourcing development team to build the product and manage the workflow. The scope of work is fixed (as well as the payments), intended for short-term completion and quick delivery.

The specialist model means that the hired outsourcing company develops the product (filling the gaps of the company’s technical knowledge) under the client project manager’s control or an in-house team’s. This model is characterized by the adaptable work scope (and the flexible rates, paid hourly or monthly). It is done for augmenting the client’s company staff.

To learn more, read our article concerning three types of outsourcing models and determine which one is appropriate for your business!

Outsource vs. Outstaff: What to Choose?

Fulfilling their business needs, most companies prefer to save time, money, and effort by outsourcing and outstaffing development services. However, they are not equal. Let’s find out the essence and differences of these terms.

Outsourcing is a remote software development process transferred to another company that wholly controls the project’s running. Outstaffing also means a remote development workflow; however, the hired specialists from the vendor’s company are transferred to the client’s staff for work, and the client is considered to be their new employer.

What is Software Development Outsourcing and Outstaffing: Key Differences



Higher than for outstaff


HR recruiting & management

Controlled by vendor

Controlled by the client, who functions as the PM, while the vendor runs the payroll

Responsibility for the project

The vendor’s one

The client’s one

Software/hardware purchase & other needs

On the vendor’s side

Needed to be bought by the client

Communication processes

Flexible: may be organized on demand

Can be complicated to organize

The choice of the described models entirely depends on your business needs and requirements. Outsourcing development company can save your time and money for the new project launch, especially if your in-house team is engaged in another one. You can use outstaffing services if you urgently need IT specialists and have no time and skills for hiring.

Main Geographic Regions for Outsource

Finding appropriate specialists for a project is a cornerstone of success. The question is, where to find them?

Let’s talk about the popular destinations for outsourcing. There are the following ones:

popular destinations for outsourcing of 2021

The most popular and perspective outsourcing destinations in 2022

To dive deeper into the popular places and regions to outsource software development, look through the table below.

Outsourcing destinations: popular countries and their information

Outsourcing destinationThe most popular countries for outsourcing developmentCharacteristics

Eastern Europe

Ukraine, Poland, Bulgaria, Romania, Hungary

The best location to obtain a top-notch and cost-effective product thanks to low operating expenses.

Western Europe & North America

United Kingdom, Germany, Austria, Netherlands, Belgium, Switzerland; USA, Canada, Mexico

The long-held traditions, the absence of cultural and language barriers with English-speaking countries. High outsourcing prices.

South America

Brazil, Colombia, Chile, Argentina

Adequate development quality and reasonable costs, the minimal time zone difference with North America. Outsourcing development is a new direction of this continent’s activity.


China, Singapore, Philippines, Indonesia, India

Prominent IT specialists pool, low costs for outsourcing projects, but the quality of the developed product may vary due to significant timezone and cultural differences.

It should be mentioned that Ukraine is one of the leading regions for outsourcing IT development due to its quality-price ratio and prosperous technical ecosystem, represented by a large tech expert pool, and absence of language barriers.

When to Outsource Software Development

Outsourcing can be your reliable helper on different occasions of software development. So, let’s take a closer look at the most common reasons you need to use outsourcing services the most.

Reasons to outsource

When to outsource software development?

Budget issues

Starting new projects and hiring skillful staff always costs much money, so the budget issue is crucial to choose outsourcing. You can also apply to outsourcing services in case you’re a startup owner with limited financing, or if your company would like to enhance expenses for digital optimization, or whether onshore services cost too much for you. Moreover, outsourcing is a transparent thing, you can always understand what you’re paying money for.

Time lack

Every project needs to be appropriately managed to obtain satisfying results. But what should be done in case you’ve already been running a complex project and need to start another one but have got no time for it? In this case, you can focus on your business and apply to an outsourcing software development team for help. An experienced vendor will carefully manage the building process and report all the results in time.

Need for staff

Imagine you’ve planned a large project based on complex technologies requiring the use of machine learning (ML). ML engineers are rare to hire for your in-house team, so you would waste a lot of time searching for them. But you can avoid these problems with the help of an outsourcing company having profile expertise in machine learning.

Security risks

You can hardly provide data safety and security without relevant experience. This is a severe challenge: one data leakage costs $4 million for your business due to stats provided by IBM. However, you can deal with it without expenses: apply to an outsourcing IT company, they’re handy at solving such issues.

Benefits of Turning to Outsource Services

Now we’ll provide you with the key reasons to outsource development:

Cost reduction

Cost-effectiveness is one of the essential benefits of outsourcing IT services. Choosing one of the outsourcing destinations with the most optimal hourly wages, you can hire a team that will assist you in building a successful product and reducing the expenses needed for development workflow.

Want to outsource IT development?

Start it right now with our team's assistance!


Outsourcing represents a large technical talent pool from all over the world. So, if you need to cope with new domains and build cutting-edge products (or whether you need more flexible and quick solutions while your in-house staff is growing in terms of quantity and quality), you can outsource software development. According to Clutch, 8 of 10 small companies want to outsource business functions, and scalability is one of the reasons to do it.

Flexibility improvement

Due to Capital Counselor statistics, 16% of startup businesses outsource their software development to reach flexibility. You can control the scope of work you obtain and allocate financial and human resources according to the workloads. However, it doesn’t mean you should have a large team and pay to all the specialists: outsourcing allows you to use only the funds you need to implement one or another task.

Boosting customers' loyalty

Top-notch services and well-trained staff, the things that make customers return to your company again and again. With the help of the outsourcing team, you may leave your consumers feeling cared for and satisfied with a bug-free product meeting their needs. Remember that the happier your customers are, the more profitable your business is.

We’ll illustrate now the outsourcing profitability using the benefit discussed above.

Basecamp, a successful company, providing services for teamwork, can prove the statements above. They found out that due to the increasing number of clients, their instruments become not so supportive and fast. So they transferred the work upon the improvements to an outsourcing company, and the result wasn’t slow to arrive. According to the stats, the number of Basecamp clients amounts to about 3.3 million users nowadays.

Outsourcing benefits for your business

Key outsourcing benefits for your business

The Main Challenges You Can Face When Outsourcing

Despite the evident efficiency, outsourcing isn’t a flawless process. So, what are the challenges you may pass through while collaborating with an outsourcing vendor?

Communication problem

This is one of the most widespread outsourcing problems connected to many reasons. For instance, your communication can suffer due to your vendor’s insufficient English level. To deal with it, choose an IT partner, check their English level beforehand, talking about it with the company’s representative or separately with team members.

Another widespread issue is the significant time zone difference. It can also be regulated by setting up the meeting schedule (appropriate for you and the vendor) that allows you to set up the communication properly. For instance, Cleveroad specialists choose the following instruments for external communication:

  • Google Meet, Slack, Zoom. Services intended to communicate with the customers via text messages and video calls
  • InVision, Figma. Web design instruments for cooperation with clients and visual part’s creation

Finding a vendor isn’t an easy thing. To know more, read how to choose a tech partner from Ukraine and make no mistake.

Choosing an outsourcing team

Outsource teams work remotely. It means you’ll hardly ever see any of them (certainly, if you don’t go to the vendor's company yourself). So, how to choose, check, and hire a team that would be physically far from you?

You should firstly think out your project aims and conduct a little business analysis. Defining your market niche, conducting competitor analysis, and planning the outsourcing software functionality will help you save money and understand what you want from the upcoming solution.

Next, select a company - the best way to do it is to read reviews on rating and hiring platforms, Dribbble/Behance sites, etc. Deciding on the particular vendor, dig deeper, checking their portfolio, business ratings, and expertise domains. The essential stage you should pass through is the discussion of data safety, the project budget, and all other issues that need to be solved with the company representative.

Improving Product Security

The data leakage issue is one of the most current issues nowadays, and cooperation with vendor always means sharing some info. You can solve it by turning to a partner company that offers an NDA — and signing it.

Moreover, you should also discuss with the vendor if they apply such security tools as user privacy policies, private info storage, and encryption, or whether their solutions meet General Data Protection Regulation (GDPR), etc.

Development Quality

If you appreciate quality above quantity, you should start caring about it beforehand. Check the skillset (the hard skills and the soft ones) of your upcoming team. Keep in mind that both kinds of skills are important for the successful development process.

Moreover, you should be involved in the software outsource workflow, attending every meeting to track the business situation and understand all the team’s everyday issues.

What Should be Done Before Signing a Contract?

You should care about the quality of future cooperation. This is the reason to take some necessary steps before signing a contract with your upcoming IT partner. But remember: you shouldn’t employ the first available team offering you quick results at rock-bottom prices. The trustworthy vendor will interrogate you with a lot of questions that will help them understand your needs and build a solution that meets all your business requirements.

Investigate the Feedback

Nobody will say better about the quality of the company’s work than the previous clients. To obtain their reviews, open the profile of your future IT partner on such platforms as Clutch, GoodFirms, or Upwork. If it’s not enough for you, don’t hesitate to apply to the review authors via social networks (or in any convenient way) and discuss everything about collaboration with the particular company.

Discuss and Listen

Speaking to the vendor, start with clarifying the goals you want to achieve. Find out the time they need to implement that. Tell about the improvements you would like to see and discuss the ways of doing that. During the conversation, you should note the level of creativity they show and their openness to collaboration.

Don’t hesitate to ask questions (even the awkward ones). For example, you can discuss with the vendor:

  • What is on a budget? What features and services does the price contain? Are there any alternatives?
  • What do the outsourcing software developers offer as to product maintenance?
  • Is it possible to amend the feature set during the development stage?
  • Could I bring my own design?

This is not a complete questionnaire to discuss with your partner company representative; however, you can expand it according to your project needs and questions you are interested in.

Ask for Their Portfolio

If you want to know more as to the tech expertise of your vendor, ask for their portfolio. You will obtain a more comprehensive picture of the company’s competence if you go over the examples of their projects. Check the domain they are experienced in to choose a partner with the relevant IT background. For example, in case you need to build an educational product, look for a company with expertise in e-learning.

Learn the Documents

You have discussed the app concept and other necessary details; however, you have to know how things are documented. The following documents are often used during the development process:

  • Service Level Agreement (SLA) is a mini-contract describing what you should wait for from the vendor as well as the quality level of their services.
  • Schedule of Values (SoV) can gradually show the project development from the very beginning until the end and help you get acknowledged with every item needed.
  • Software Requirement Specification (SRS) is the requirement set for the software products to help you understand their functioning.

Communicate and Track

At this stage, you should consider the ways to contact the team and the mechanisms to monitor the development workflow. You can communicate with the team through Google Meet, Zoom, and various messengers, but you should properly understand the project management approach that the company uses to gain results. Whether it is Agile methodology designed for flexible teamwork coordination or Scrum with its sprints, you may know it to determine the time of obtaining the final product.

Steps of Outsourcing Software Development

All the details are discussed, and all the contracts are signed. Now it’s time to start outsource software development. Let’s look at the steps it passes through with the example of Cleveroad:

Software development steps

Steps of outsourcing software development

Discovery (Planning)

This step's primary objective is to get the project organized and ready for development by identifying all requirements in more detail. It’s also time to discuss UI/UX design and other essential things while the project team creates a comprehensive estimation for two sprints of development based on agreed user stories/designs.

The discovery stage allows you to collect data essential for designers, developers, and other specialists who create the needed product. It includes rough estimates, sprint specifications, wireframes, and the project team composition for outsourced software development.

Design & Prototyping

After the specifications and the wireframes are approved, the design phase begins. The UI/UX designers care about creating a top-quality visual concept and start making prototypes. Prototypes are model sets of the app's final design that serve as the foundation for UI development. A separate prototype is built for every screen of the application.

Software Development

The development phase (considered to be the longest one in development) is intended to build the app architecture and create the solution that will meet all your requirements.

Due to the project complexity, you can collaborate with various specialists (like iOS/Android or web developers) who will give the proper embodiment for all the features you need. This process structure is divided into sprints (1 sprint is equal to 10 working days as usual), and each of them starts with planning in which the team discusses the workload they’re going to do.


When the codes are written, the crucial task of QA specialists is to verify if the project meets the set requirements. They test the frontend and backend of the product to find bugs and make a bug report for devs. After everything is fixed, the QA engineers verify the solution once again to make sure that it works properly.

Release and Maintenance

This stage is meant for publishing the product on the marketplaces. The specialists also look after the developed app to make its use more comfortable for the customers. So, the collaboration with the development team should be continued. Bug fixing, additional functionality supplementation, and modernization are often parts of this stage's workload.

How Much Will Outsourcing Software Development Cost You?

Now, we’ve come to one of the essential discussions: how much will software outsourcing development cost? To obtain an answer to this question, you should note the service set and team composition. The list of outsourcing software development team should include the following specialists:

  • A project manager (PM). It is a person that runs the project answering for planning, organization, and reports to the client about the tasks completed. They also check whether the created product meets the client’s requirements.
  • A front-end developer. This team member creates the product’s client-side.
  • A backend developer. It is a specialist that builds up the “brain” of the solution that includes all the product parts which are not visible for the client but essential (such as data processing mechanisms, integrations, etc.)
  • A UI/UX designer. This specialist is responsible for creating a seamless user experience (UX), intuitive navigation, and attractive interface which would satisfy the client.
  • QA engineers. These team players track every software building stage, ensuring that the product components meet the international development standards and prevent flaws.
  • Other specialists. The solution architects, DevOps, etc., may be required for your development outsourcing project depending on its needs.

Counting the costs, you can use the average hourly wages for the developers’ services in your chosen region indicated in the table below.

Average outsourcing hourly wages for devs’ services (according to Clutch & GoodFirms)

Outsourcing destinationsWages for an hour of work (in US$/h)

Eastern Europe


Western Europe


North America


South America




Based on the hourly wages above for East European developers’ services, we give our estimate on the example of web application development. Keep in mind that it is rough, and the costs may vary according to the project's complexity.

Web development cost estimate (rough)

Elementary feature setMediumComplex

Home page

Home page

Home page

Personal profile system

Personal profile system

Admin panel

Admin panel

API & third-party integrations

API & third-party integrations



Custom statistics

High user load




Choosing the software development outsource destination, bear in mind that the cost will also depend on it. Eastern Europe, as one of the most popular outsourcing destinations, offers the best quality to price ratio, and Cleveroad can prove it.

Why Choose Cleveroad?

Cleveroad is an outsourcing company located in Eastern Europe, Ukraine offering top-class web development and mobile app development services to help startups and businesses of all sizes acquire cutting-edge technologies since 2011.

Our values are as follows:

  • We are sure that honesty with customers, partners, and employees is a key to building qualitative software
  • A free consultation on your project from our Business Analysts
  • Fast development process meeting the set deadlines
  • A team of experienced and certified QA engineers working on your project

To discover more about our projects and services, have a look at our portfolio.

Decided to outsource development?

Obtain a free consultation from our specialists!

Wrapping up

Due to a range of attractive advantages, software engineering outsourcing is growing in popularity, being appropriate for projects of every type and size — from small startups to complex tech platforms. Companies can save their strengths, funds, and time working with outsourcing partners. However, to achieve such desirable goals, you should primarily choose an experienced vendor and build confident relationships with them.

Frequently Asked Questions

This is a process of delegating a software development workflow (or its part) from a client’s company to a vendor’s one. The vendor’s staff keeps working on their places and remotely completes the tasks given by the client.

Outsourcing means transferring business functions, processes, and responsibilities to another company working in the required field based on the contract.

Outstaffing is hiring the specialist that works in the contractor company (also called outstaffer) to proceed with the client’s project. Such a specialist becomes a member of the client’s staff (along with other team members), and the client's management team regulates their workflow. The client pays the outstaffer for the services provided. The outstaffer, in its turn, remunerates the specialist.

Here, in Cleveroad, our outsource software development workflow passes through the following steps:

  • Discovery (planning)
  • Design & prototyping
  • Software development itself
  • Testing
  • Release and maintenance
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