Software Outsourcing Guide for Business Stakeholders 

What does it take for businesses to stay at the top? Innovations, client-centric approach, scalability, constant delivery of new functionality, and AI would also be nice, all while keeping costs lean. Sounds like a healthy business strategy, right?  

In practice, companies are facing the reality of mass layoffs, rising customer demands, delays in product roadmaps, and a long-lasting hunt for top-tier tech talent draining their time and resources. There’s no remedy for that, but there is a solution that can work like a band-aid, a cast, and a vaccine — software outsourcing. 

Outsourcing proved to be an efficient way of managing business and scaling both up and down when needed. As for numbers, according to Gartner, worldwide IT spending is expected to total $5.74 trillion in 2025, an increase of 9.3% from 2024. This growing demand for technical expertise is one of the reasons why outsourcing IT services is a natural, strategic choice. 

In this article, we’ve compiled a comprehensive guide to software development outsourcing that will help answer questions for both CTOs looking to expand a tech team and small- to medium-sized business (SMB) owners aiming to make informed, strategic decisions. 

Outsourcing has been a buzzword for decades. With so much information dedicated to this topic, it’s easy to assume everyone fully understands what outsourcing is. Yet, as many people as there are, there are just as many interpretations. To ensure we’re all on the same page, let’s clarify the meaning of outsourcing in business.    

Software outsourcing is a cooperation model established between a client (a company) and a software service vendor (a third party) to manage specific aspects of a software development process. This collaboration typically covers software engineering, DevOps managed services, business analysis, project management, UI/UX design, system maintenance, and other support as needed.  

Reasons why companies choose to outsource work vary, but according to Deloitte’s Global Outsourcing Survey 2024, the top five drivers for the adoption of third-party outsourced services are:  

• Improved access to talent 42% 

• Increasing customer demands 35% 

• Spend optimization 34% 

• Improved quality/performance 33% 

• Adoption of global delivery model 33% 

When it comes to outsourced services, the most in-demand areas are IT infrastructure, emerging technologies (like generative AI, blockchain, and IoT), software development, and application support. 

Outsourcing allows businesses to focus on their core functions while a skilled external team handles specialized tasks. In addition, it eliminates the constant cycle of hiring, training, and managing specialized talent — a process that often takes 30+ days and drains both time and resources. The vendor is also responsible for the management of external employees, their tech equipment, motivation, and legal compliance.  

Additionally, this model of cooperation works for all types of businesses: enterprises, mid-size companies, and startups. All it takes is a clear understanding of your business needs and a trusted outsourcing partner. 

Outsourcing is a broad concept, and since every client has unique needs, various business models exist to meet them. These include the most popular: dedicated software development teams, staff augmentation, and full-cycle product development (project-based).  

Here we’ve summarized the most crucial points regarding each type and how they work at Aimprosoft: 

Staff Augmentation 

What it is: Staff augmentation involves adding external professionals to your in-house team (literally augmenting your internal IT department). These specialists work alongside your team as permanent or temporary reinforcements, filling specific skill gaps at any stage of your product lifecycle. It can be a software engineer, a PM, or a UI/UX designer – all you need is role requirements, and the vendor will hand-pick the best candidates. 

Best for: Scaling team capacity quickly. 

Pros: Preserves the culture of your team, gives you direct control, allows start work with a minimum budget. 

What it is: A dedicated team model involves a group of developers, project managers, and other experts working exclusively on your project. This expert group functions as an extension of your in-house team and can collaborate on the same project but focusing on distinct tasks or components. This model offers greater control compared to project-based outsourcing, as clients can interview candidates and manage the process directly through project managers or product owners. It is particularly well-suited for projects where requirements may change, as it provides the flexibility to scale the team as needed. 

Best for: Long-term, complex projects. 

Pros: The team becomes an extension of your organization, offering simplified project monitoring and management and enabling full control over the project. 

What it is: With project-based outsourcing, you hire an external team to manage and deliver a complete project. The project can range from a well-defined, specific scope to a general concept that requires further refinement during a discovery phase. The vendor manages the entire development cycle, from idea validation to design, development, testing, and ongoing maintenance. The team is responsible for delivering a complete project on schedule and within the allocated budget. 

Best for: Projects with a clear scope, timeline, and deliverables. 

Pros: Model offers lower commitment, provides clear project boundaries, and ensures full project accountability. 

To learn more about these types of outsourcing and levels of client involvement, read our article here. If you’re unsure which model is right, you can always contact us for a consultation. 

Once you’ve settled on the business model, we recommend clarifying the billing options. Aimprosoft offers two payment models: Fixed Price and Time & Materials, each with distinct advantages for different project needs. 

Fixed Price: 

• You pay a fixed amount for clearly defined deliverables. 

• Scope, timeline, and cost are agreed upon and formalized before development begins. 

• Risk costs are built into the price — you pay for anticipated risks, whether they occur or not. 

• Predictable budgeting — no unexpected costs, but potentially higher upfront prices. 

Time & Materials: 

• You pay for actual time and resources used (billed hourly). 

• Flexibility to modify scope and priorities as business needs change. 

• Transparent cost tracking — see exactly where your money goes. 

• You pay only for risks that materialize, not for anticipated risks. 

The key difference between these models is risk management: Fixed Price includes potential risks in the upfront cost and Time & Materials charges only for actual challenges encountered during development. This makes Fixed Price more predictable for budgeting but potentially more expensive. At the same time, Time & Materials offers more flexibility but requires closer project monitoring.

In-House or Outsourcing? 

Software development is about turning ideas into functional solutions. But before moving forward, businesses face a critical decision: should they outsource development or keep it in-house? 

In-house software development refers to developing and maintaining solutions with internal teams. This approach offers companies complete control over operations, instant communication, fast implementation of changes and fixes, and enhances knowledge retention. It also requires companies to engage in lengthy and costly processes of hiring, committing, training, and allocating resources to maximize the results. Outsourcing helps companies address these challenges by delegating software development (or specific parts of it) to an external partner. 

While some companies express concerns about control, security, and cultural alignment in outsourcing relationships, these problems can be solved by choosing a reliable software development company.  

This breakdown of in house software development vs outsourcing will help you identify the points to be considered when deciding whether to outsource or produce in-house for your business. 

When to develop in-house? 

• Regulations like GDPR, HIPAA, or industry-specific standards require full control over sensitive data. 

• Investors (especially for startups) don’t consider outsourcing development to ensure IP ownership and protect core assets. 

• It’s crucial to maintain a strong internal culture and ensure seamless team integration. 

• Businesses require direct, real-time control over development, strategy, and execution. 

When to outsource?  

• You need access to experienced teams with established processes for managing project risks. 

• You need to quickly scale up or down IT capacity without delays related to recruitment and onboarding. 

• Your project requires industry-specific experience (like fintech, healthcare, etc.) that isn’t available in-house. 

• Your project is rather small, and you want to reduce development costs by avoiding expenses related to salaries, fringe benefits, and office infrastructure. 

N.B. It’s worth noting that even though outsourcing and offshoring are often used interchangeably, there is a key difference between outsourcing and offshoring.  

Outsourcing refers to delegating work to an external vendor, regardless of their location. It can be in the same country (onshore), in a nearby country (nearshore), or in a distant country (offshore). In other words, outsourcing is about WHO doing the work (external vs internal team).  

Offshoring means moving business operations to a different country to reduce costs or access skilled labor. Here, operations can be handled by a company or an external provider. Offshoring is about WHERE the work is done (domestic vs foreign location). 

While offshoring can be a form of outsourcing, not all outsourcing is offshoring. For instance, if you’re a German company hiring a local software team in Germany, it is onshore outsourcing. Engaging a development partner in Bulgaria is called nearshore outsourcing, while working with a team in Colombia is considered offshore outsourcing. 

Where to Outsource?  

Choosing a destination for your outsourcing is another crucial moment for business since it can impact costs, quality, and launch velocity. While Silicon Valley has long been seen as the global tech hub, more companies are now turning to Europe as a top destination for tech talent — and for good reason. The region boasts 3.5 million IT specialists and is on track to hit $45B in tech investments, driving the growth of startups to over 35,000.  

These investments have already shown positive results by providing access to diverse skills and talents. According to the 2023 Kearney Global Services Location Index, Europe’s top 5 destinations for skills and availability are:  

• Poland 1.28 

• Czechia 0.97 

• Ukraine 0.81 

• Estonia 0.76 

• Bulgaria 0.71 

The numbers speak for themselves. These countries not only house exceptional talent but also showcase how skilled workforces contribute significantly to their economies. In 2024, Ukraine generated $4.6 billion, Estonia $802.5 million, and Czechia $8 million. In 2023, the Polish IT sector brought in $26 billion to the country, while Bulgaria generated $4 billion thanks to the export of their IT services. 

With such a diverse talent pool companies can easily choose the best countries to outsource software development and get the right skills to meet their needs. Aimprosoft makes it even easier with HQ in Cyprus and offices in Ukraine and soon the UK. Meanwhile, over 30% of our IT experts are distributed globally and work remotely. Such an approach allows us to connect clients with Europe’s top developers. 

Common Pitfalls to Avoid While Outsourcing Software Development 

Outsourcing, from the outside, may seem easy: find the outsource software development company over the Internet, make a deal, hire a few specialists, and receive a ready-made product. However, challenges like ensuring quality, maintaining clear communication, and protecting intellectual property can arise without the right approach. 

To support you and other businesses considering outsourcing, we’ve listed potential issues and our tips on dealing with them effectively. This section of the IT outsourcing guide will help you address common misconceptions and get the best value for money. 

Since the outsourcing market has much to offer, choosing the cheapest vendor is very tempting. Although cost savings are the most common answer to the question, “Why do companies outsource software development?” focusing solely on the lowest price can be a false economy. And from our experience, we know these issues can cause problems. To help you avoid them, we recommend considering the following points: 

• Check if a vendor has experience in your type of project (web or mobile development). 

• Request similar cases in their portfolio and analyze their approach. 

• Read reviews on Clutch or request direct references from their previous clients. 

Refer to this process as buying a car. If you’re looking for a fast, reliable, all-wheel-drive auto, buying it for $50 is unrealistic and will inevitably lead to frequent repairs. The same principle applies to software outsourcing. 

Indeed, when a company chooses to outsource, they delegate some of their tasks to an external team. But this doesn’t mean they will only meet on the first and last days of the software development life cycle. Even though the vendor’s team isn’t in the same building, there are proven methods to ensure full transparency.  

At Aimprosoft, we prioritize keeping clients fully aware and involved in our development processes. Aside from selecting and integrating task management systems like Azure, Jira, Trello, or others, our project managers provide clients with a communication plan. This document outlines key points, such as: 

• Project methodology (Scrum, Waterfall, Kanban, Lean, etc.) 

• Meeting frequency (daily, bi-weekly, or monthly check-ins) 

• Meeting coordination (who schedules and leads the meetings) 

• Meeting agenda (progress updates, feature reviews, and feedback discussions) 

All these points help the client be involved as they need it and ensure the team receives timely feedback, making it the best example of outsourcing. This approach enables on-time delivery, immediate fixes, and improved results. If your vendor hasn’t provided a communication plan, requesting one and discussing communication details before starting the project would be wise. 

While personal recommendations are common in business, they can’t replace proper legal protection. No matter how well a vendor performs for someone you trust, you need formal agreements in place. Ensure your vendor provides detailed contracts and NDAs to protect intellectual property, safeguard data security, and uphold data privacy. 

At Aimprosoft, we prioritize transparency and legal clarity in all our collaborations. For instance, our contracts establish that all code developed by our engineers belongs to the client. We include specific terms about intellectual property rights and explicitly state that we won’t use or claim the code for any other purposes. The contracts also outline clear penalties for any breach of terms – we take our reputation and our client’s trust seriously.  

While data security concerns are valid (and can affect in-house teams, too), we maintain robust security measures, including hard drive encryption, strong password policies, VPN access for external users, network segmentation, and more. 

At the start of any partnership, clearly defined requirements are the foundation for success. Yet, companies may require time and assistance to define and describe what they need. At Aimprosoft, we provide business analysis and discovery phases to cover those needs since we understand poorly defined requirements can derail even the most promising software outsourcing projects.  

During the discovery phase, our specialists research, analyze, and test the client’s general idea to assess its feasibility and effectiveness. This process clarifies whether the proposed solution will work. By the end of the discovery phase, the client either receives a clear scope and deliverables for their project or avoids the costs of developing a non-viable solution. This approach minimizes misunderstandings, reduces potential friction, and sets the stage for efficient, targeted project delivery, which is one reason why companies outsource.  

All discovery phase findings belong to clients, giving them the flexibility to choose a development partner, whether us or another vendor. 

How Does Outsourcing Look in Practice?  

While tips and recommendations can guide decision-making, it’s often easier to understand outsourcing through real-world examples. That’s why we’d like to share a success story from one of our recent projects: Reekolect.  

The client approached us with the idea of creating a platform to preserve and share cherished memories in a digital format. Despite lacking clear requirements and having no prior experience with outsourcing vendors, our team successfully transformed their concept into a fully functional product. 

Our process began with requirements clarification, the introduction of Agile methodology, and regular meetings with clear milestones. We ensured transparent communication by explaining technical terms and approaches to the client, making the process collaborative and accessible. 

While IT product development came with challenges such as tight timelines and budget constraints, Aimprosoft engineers delivered the project on schedule, including all requested features. Additionally, we ensured 70% faster media load time, significantly enhancing the user experience. 

Key Achievements: 

• 30% cost overrun prevented 

• 3x faster development 

• 0 deployment failures 
  
• 30% improvement in product performance 

Learn more about the details of this cooperation, selected tools, and delivered features in our case study. 

Conclusions 

Outsourcing has been, and still is, a practical business approach to achieve agility, innovation, and growth. All these factors prove why outsourcing software development remains a smart choice for businesses. But to maximize its benefits, it’s important to carefully select the right outsourcing model, destination, and vendor. Doing so not only guarantees the best results but also addresses common concerns and challenges associated with outsourcing. 

If you’re still uncertain if it is worth trying or not, ask yourself: 

• Do recruiting and retaining employees with the necessary skillsets become difficult or too expensive? 

• Is your internal team spending more time on routine maintenance and support tasks than developing new features or driving innovation? 

• Do you need more flexibility to scale your development team based on project demands? 

If you replied “yes” to any of these, it might be time to consider outsourcing. To make it work, you’ll need a reliable partner with vast practical experience, a client-oriented approach, and a skilled team of both tech and non-tech experts. This partner can be Aimprosoft.  

All you need to do is contact us, and our team will assist you in identifying, analyzing, and choosing the most suitable tools to reach your goals.

FAQ