How To Choose Software
Outsourcing Company

Freshcode Guide



The tech talent shortage and lack of domain expertise are key long-lasting reasons fueling the demand for IT outsourcing services. Cost- and time-efficiency is another turbocharge for businesses on the way to outsource their product development.

However, in recent years, companies are looking toward IT outsourcing solutions to achieve a variety of goals, beyond just a cost reduction, in accordance with Deloitte & Dubai Outsource City report.

As a business process, IT outsourcing has its targets, benefits, and issues. How to hand over the reins to the right IT outsourcing company? Here we want to help you make a decision you won't regret later.

The Freshcode team has prepared some ABCs of software outsourcing for a better understanding of how to choose a business partner to make your ideas happen.

1. What Is Software Outsourcing and When Do You Need It

The software development market encompasses a wide range of services that assist enterprises and small businesses in implementing, managing, and operating a variety of digital products.

According to Statista, spending on IT services is expected to amount to around USD 1.2 trillion globally by the end of 2021. This is 9.8 % more than the previous year, potentially due to the economic impact of the Covid-19 pandemic.

Certainly, IT outsourсing services demand has increased and become the only viable strategy for many companies considering crisis conditions. It could be the most profitable way to realize your projects or separate tasks when it's costly to hire in-house specialists. So, what is software outsourcing, and how to benefit from it? Here we go!

Let's start with the general term of 'outsourcing'.
Outsourcing is the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company's own employees and staff.
Thus, employers have the opportunity to hire outside contractors to perform a wide range of work. And exactly IT outsourcing is steadily gaining momentum.

As software outsourcing companies have been practicing remote work systems from the first day, long before the Covid-19 hit, their infrastructure, tools, and processes are perfectly prepared for distance collaboration.
    IT outsourcing is the use of external service providers to effectively deliver IT-enabled business processes, application service, and infrastructure solutions for business outcomes. <...> It helps clients to develop the right sourcing strategies and vision, select the right IT service providers, structure the best possible contracts, and govern deals for sustainable win-win relationships with external providers.
    Here we want to share with you our partnership experience and show what businesses can benefit from outsourcing IT services and the ways they can do it.
      Software outsourcing development

      2. Main Software Development Outsourcing Services

      In this block, we've briefly described types of outsourcing services, including their benefits and pitfalls.
        Outsourcing types
        Click on the image to enlarge
        1. Staff Augmentation

        It's a flexible outsourcing strategy that enables you to hire tech talent worldwide. You can 'borrow' the provider's IT specialists for however long you need it, combining existing resources and contract staff to achieve all business goals.
        Pros of Staff Augmentation
        • Cost efficiencies: lower staffing/HR/operational/infrastructure/development costs
        • Increased development capacity: getting to market quickly and iterating faster
        • Flexibility and scalability: fast and simple and scaling your team up or down
        • No recruitment risk: outsourcing provider supplies the specialist, and you can ask for staffing changes at any time
        Cons of Staff Augmentation
        • You should maintain the highest level of project control
        • Staff training and integrating new team members might take much time and resources
        Why Are Ukrainian IT Outsourcing Companies Worth Trying?
        There are several reasons
        2. Dedicated Team

        Within this outsourcing model, you and your outsourcing partner share ownership and responsibility for the project and its deliverables. It's the intermediate solution falling between Staff Augmentation and a fully Project-Based approach.
        Pros of Dedicated Team
        • Transparent management: your outsourcing partner shares the project's risks and final deliverables with you. This factor improves the management reporting process and transforms your project into the 'common cause'
        • Reduced time commitment: partner's team frees you of the need of day-to-day managing and take most responsibility themselves
        • Tight communication: perfect coordination is an essential skill core skill for any outsourced dedicated team. Enjoy it!
        Cons of Dedicated Team
        • Low efficiency for short-term projects: this model is more profitable within longtime projects
        • Further time for hiring the right team to be completely sure in the partnership
        3. Project-Based Outsourcing

        Finally, with a project-based approach, you hand off the requirements to the development partner for the full management of the entire process according to the specifications you'd provide. It's the most 'classic' of the three types of outsourcing engagements.

        Pros of Project-Based Outsourcing
        • Least amount of control: the responsibility and process are owned by your outsourcing partner, ridding you of the management burden
        • Clear timelines and outcomes: it's the best solution among other outsourcing models for mid-market and enterprise levels to
        • Best solution for non-tech-savvy businesses: this model can be a good fit for businesses with limited in-house IT capabilities
        Cons of Project-Based Outsourcing
        • High-cost considering the partner's engagement level (comparing to other models)
        • Defining full project's specifications at the beginning could be a challenging task

        3. Outsource VS Freelance: What Is Difference

        One more model to delegate work to the specialist is freelancing. For employees, it implies earning by working independently, while outsourcing is getting a job done by tech specialists through a third responsible party most often represented by the provider's project manager/account manager.

        Freelancers are paid based on the time expended and effort needed to complete tasks. The amount you pay for a freelancer is a fraction of the costs involved when hiring a new employee. Payment can be at a flat rate, at a per-project, or on a per-hour/per-day basis.

        You are in constant contact, and there is no need to monitor what they are doing because they are experienced gurus of self-organization. Professional and trustworthy freelancer is perfectly capable of working on their own without total guidance.

        Sure, bad things happen and sometimes things go wrong (missed deadlines, non-compliance with requirements, etc). Still, you can use time trackers to monitor progress, for example, Upwork's service.

        Let's compare IT Outsource vs IT Freelance work models: what is the difference and how to choose between them.
        IT Freelancing
        P r o s

        Hiring for part-time: you can recruit software developers and other specialists on the short-term project or even the task.

        Rapid assessment testing: you have an opportunity to understand in a short period of time if the result matches the declared competencies (and to break up on time without extra drama).

        Short time-to-market: with a freelancer, all tasks are assigned directly it significantly speeds up time-to-market.

        Cost efficiency: hiring freelancers is most often cheaper than outsourcing.

        C o n s

        High turnover: self-employed specialists most often have no long-term contracts (except for super-profitable and comfortable сlients' offers). There are no such reasons as career advancement or social insurance to stay in one place for a long time. So, freelancers can receive another more interesting and beneficial offer anytime (and it can take a while to find a new remote IT specialist).

        Multiple projects at once:
        freelancers have the freedom to take on unlimited offers from varied clients and do so conjunctly. As a result, they can be overwhelmed with tasks, so the output could be subpar to your specifications and expectations.
        IT Outsourcing
        P r o s

        Advanced project management: you can be provided with a 'full set' team, including PM and account manager who'll rid the burden of routine management. Issues are resolved inside the team and are handed to the client only in really reasonable cases.

        Dedicated team: there is no need to train your team members, introduce them to each other, and involve them in the internal processes. Pro dedicated team consists of experienced players, battle-tested old hands who learned IT outsourcing science perfectly.

        Knowledge sharing: knowledge sharing inside the team increases productivity and empowers employees to do their jobs effectively and smarter. An outsourced team can help you to gain insights and give worthy advice based on their complex distant outlook.

        Most guaranteed results: outsourced work services are performed with guaranteed required results with no unpleasant 'surprises' considering legal obligations.

        C o n s

        More pricey: considering the significant scope of work and high level of engagement, overall rates are higher.

        Slow time-to-market: the period from shaping your idea until it's released to the marketplace can be too long and drawn-out. Within the outsourcing model (in some cases), you walk through circles of hell tedious approval chains to assign tasks or even minor edits.

        4. Where to Look foR IT Outsourcing Company

        The client is always looking for a trustworthу IT service provider who is able to provide a professional, transparent and fully-fledged development process.

        So where to look for the best outsourced team and how not to be mistaken?
        how to find an outsourcing company

        The key searching channels are:
        • Upwork
        • LinkedIn
        • Google Search
        • Conferences and Online Communities
        • Business platforms, like Clutch, Manifest or GoodFirms
        • Networking and personal recommendations
        Need Help Developing an Application?
        Our team of highly skilled developers will create custom software for you and help achieve all business goals

        On the initial stage of the search, you have to be ready with the idea of what you need for your product and what you expect from an IT company: tech stack, rates, time-zone, language proficiency level, etc.

        Now you can already optimize your lists and carry out the 'pre-filtering' of applicants. There are some main criteria you should note firstly.
          • Company size
            Optimal employees number ≈ 50-200.

            This factor often impacts the cost rate regulation based on the range of specialists and their rate of employment.
          • Location
            Despite globalization and multiculturalism tendencies, location still matters. It relates to such crucial factors as:

            1. Time zone
            2. Cultural accessibility
            3. Benefits of in-person meetings
            4. Language barriers
            • Domain Expertise
              IT companies with experience in specific areas (FinTech, eCommerce, EdTech, Energy & Utilities, etc.) know about the unique challenges you can face.
            • Agility and Versatility
              The power of being versatile implies being an IT multi-instrumentalist who can provide a wide range of services.

            5. How to Choose Software Outsourcing Company

            When the shortlist of 10-15 IT outsourcing companies is ready, let's switch to the key (and probably more sophisticated) process of choosing the right IT partner.

            Before starting contacting potential candidates, prepare specifications, functionality docs, and other documents to define and describe clearly your business needs. This will allow you to economize time during the messaging and meetings.

            Pay attention to how much time the company representatives spent on the response. How quick and thoughtful are these responses? Is this team proactive enough? (not to be confused with annoying!)

            In good communication we trust. Firstly, it's about:

            • Mutual understanding
            • Client's data safe & security
            • Stable and high-quality
            • Passion for technology and best result as challenging ourselves
                Freshcode Tip
                Pay attention to the company website and look out for such key points as:

                1. Work results
                2. Testimonials
                3. Blog
                4. Ranking and Awards

                6. TAKEAWAY

                We are convinced that a professional outsourcing company should be a universal, multifunctional, and 'full-stack' partner that offers different services from business consulting to software development services directly. Such providers have the right tools at the right time for their partners' product growth.

                We at Freshcode are ready to help you to identify the market gap that your product can fill as well as provide end-to-end software development matching your requirements and your customers' expectations.

                Do you want to discover more digital solutions for your business as well as ways to implement them through outsourcing services? The Freshcode team is ready to help and discuss all possible opportunities in confidence. Book a free consultation here.

                And, while we are preparing a fresh batch of IT insights, check out our previous posts (you might find them equally useful):

                An excellent SRS is worth a thousand genius ideas. So what is a system requirement specification (SRS) or software requirement documentation (SRD) and why is it necessary for your project?

                Learn more about IT outsourcing companies in Ukraine, their services, primary industries they cater to, and their preferred marketing strategies. Choose the one to try partnership.


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