A Guide to Outsourcing Software Development


Tech businesses are often confronted with situations where experts are needed to carry out a job which cannot be handled in-house. This may be time-bound or long-term. Or sometimes you may need to scale-up your business and require human resources. 

In such scenarios, outsourcing can be an amenable solution. Outsourcing Software Development is nothing but a practice where a task or a project is delegated to an external team of experts rather than tackling it in-house. 

Significantly, outsourcing is helping start-ups which don’t have large resources to leverage external talent and grow their establishment. It is even helpful to large businesses to stay competitive while keeping their costs low. 

According to Precedence Research, the global IT services outsourcing market size was estimated at USD 525 billion in 2022 and is expected to hit around USD 1,149.24 billion by 2032. It is also poised to grow at a compound annual growth rate (CAGR) of 8.2% during the forecast period 2023 to 2032.

Types of Outsourcing

Homeshoring or Onshoring: In this type of outsourcing, you delegate the work within your home country. This way you have less of a cultural barrier

Nearshoring: In this type, you delegate the work in a neighboring country. This way you have less of a timezone difference

Offshoring: In this one, you delegate the work to a distant place. This gives you the chance to capitalize on varied and more informed expertise

Advantages of Outsourcing

Lower Development Costs: By contracting work to a third party, companies cut down on their labor costs, since out-of-house positions don’t require costly benefits such as insurance, training and leaves.

Flexibility: Unlike permanent employment, there’s no legal bound or obligation of maintaining a long-term contract so there is flexibility for specialists to choose a work of their liking and employers have to pay only for the duration of the project

Exposure: By contracting out-of-house labor, the company is exposed to different and newer technologies, which helps it add more dimensions to its ways of working

Faster Rate of Development: Since outsourced specialists may be more well-versed and experienced, they are able to complete the task quicker

Disadvantages of Outsourcing

Compromising on Quality: In an endeavor for cutting costs, sometimes quality of labor might be compromised affecting the overall quality of the application

Language and Cultural Barrier: While working with remote teams, language-related issues can crop-up. Differences in culture can also create mis-understandings

Security Risks: To work with external teams one has to share huge amounts of data, which can create privacy and security issues

Successful Stories

Whatsapp: This is the most popular messaging application, used by over 2.7 Billion people around the world. It was founded by Brian Acton and Jan Koum in 2009. To optimize costs they hired a professional team from Eastern Europe to build all the core iOS development. The App took off successfully with top rankings on App Store and Google Play

Alibaba: The Chinese Multinational eCommerce Conglomerate was started in 1999 by Jack Ma. At that time companies were just beginning to use websites for selling their products. What made the establishment really take off was the use of an English speaking remote team from the US. This allowed Alibaba to dominate the global scene.

SKYPE: This popular application was started in 2003, when the originators outsourced the actual back-end development to Estonian professionals. It achieved so much success that it became common to use the phrase “to skype someone” when wanting to have a video conversation with them via the webcam.


Outsourcing can take various forms and involve different types of tasks and services. Besides saving costs, it saves time and allows you to explore different types of technologies. This is really convenient for businesses as it allows them to focus on their core competencies while having the flexibility of on-boarding specialized contractual teams when required.

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