9 Best Practices for Outsourcing Software Development

IT Outsourcing is one of the largest industries in the new-age world.

Recent reports from Statista suggest that the market cap has reached an unprecedented height of $88.9 Billion!

Another report from CodingSans reiterates this by stating that 56% of the startups in the US have already outsourced their software development process.

So, if you really think about it, more than half the founders out there are placing a significant part of their entrepreneurial dream in the hands of their outsourcing partners.

Talk about industry validation.

The industry is continuing to grow.
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CTOs are increasingly becoming process driven and implement best practices to ensure project success.


In this blog we dive deep into 9  Best Practices followed by leaders when they outsource software development.

Best Practices to Outsource Software Development

1. Deciding the Perfect Outsourcing Partner

Choosing the right outsourcing partner may seem like an easy task.

But given the sheer amount of the companies and freelancers present in the market it is easy to get overwhelmed.

To save yourself from some sleepless nights, make sure you conduct the required background check on the companies.

Here are some priority heads to analyze while outsourcing:

Technological Capabilities: Which tech capability does the vendor specialize in? How does this fare with your requirements?
Past Experience: What kind of past projects has the vendor handled? Do they have any similar requisites as your project?
Founders/Management: Does the management team comprise of highly educated thought leaders of the industry?
Checking References: Have they mentioned any references/testimonials on their website whom you can contact for some insights?
Visiting their Workplace: Is it possible for you to visit their workplace and meet them in person?
Case Study: Can you read their use cases in similar spheres of development?

2. Leverage technology platforms for Better Coordination

Effective communication becomes high-priority during outsourcing.

Why? Because teams can be sitting on two different ends of the world!

Therefore, technological solutions can be actively utilized here to streamline communications and manage offshore software development teams:

LiquidPlanner: Project Management Software with a focus on collaboration and communication
Skype and Google Hangouts: Conference Video Calling
Slack: The best channel and team centered communication tool
Trello: Visual collaboration tool for teams

While all these channels are highly effective, they should be deployed on the basis of the Media Richness Theory of Alistair Cockburn.

What’s that you say? Refer to the self-explanatory graph below.

Media Richness Theory

3. Setting Realistic Expectations

This is probably the most important practice.

Chances are that you have not worked with the vendor in the past and a huge gap in expectations might exist as a result.

You should thrive to bypass this since day one by effectively communicating your exact requirements with detailed exemplification and case studies.

You can follow this by breaking the requirement into realistic milestones with a realistic timeline.

Moreover, you can even conduct support and training sessions for the vendor if the project calls to attune them with the existing technological infrastructure.

4. Determining the Center of Control

The core concept of outsourcing means freeing up internal company resources so that they can be deployed for more strategic tasks.

And since you have decided to outsource a project, chances are that it is less critical in nature in terms of priority.

This often tempts the companies to transfer full control of the project to the vendor, especially if they have a proven track record of delivering.



This temptation should be resisted at all costs!

While it is important to properly segregate the avenues of control, the vendor needs to be kept in check through regular quality measures.

A proper balance of control has to be achieved through co-management with the end-game being the management of the project.

5. Optimizing Costs

Notice that the focus here is on ‘Optimization’ and not merely ‘Reduction’.

In an ideal market, superior quality will always be accompanied with the right cost.


Optimized costs are one of the foremost reasons companies outsource in the first place. This is because hiring the right talent often proves to be an expensive and time-consuming deal.

Hence, you need to answer few crucial questions before the development process is kicked off:

● What is the expected cost of the project as per the existing market norms?
● What is your budget for outsourcing product development?
● What are the expected ROI and the break-even period of the project?
● What are the long-term cost projections of maintaining the software?
● Does the vendor have an opportunistic mindset? Can costs increase if an opportunity to do so comes up?
● Are there any hidden costs that might surface after the commencement of the project?

Here are some hidden costs that you should consider before outsourcing:

● Fluctuations in currency (applicable if outsourcing offshore)
● Fluctuating market conditions (for long-term projects)
● Errors due to poor communication
Complexity of the development process

6. Managing Conflicting Processes

“Effective management always means asking the right questions.” - Robert Heller

The criticality of figuring out the exact synergies between your company and the vendor reaches unparalleled heights here.

This involves, to begin with, communicating the details about the existing coding architecture and the resulting synchronization that needs to be explored with the new software.

Moreover, will there be any software migration need in the near future? Figure everything out before outsourcing.

Once the blueprint of the architecture is in place, you need to now figure out the risk mitigation processes that will contain the situation in the case a conflict does occur.

7. Measuring Project Progress and Quality

Quality control and management take center-stage when outsourcing product development.

This usually means involving the testing team during the delivery of every milestone of the project and comparing the outcomes with the set standards.

If expectations are not met, both vendor capability and the set standards need to be analyzed for any deviation.

To sum it up in one term - ‘Strategic Flexibility’ is the way to go.

Key Performance Indicators (KPIs) are one of the foundational methods of management that can help you achieve this.

Theories consider it to be the basic need of a company, even more than Strategizing and Vision.

KPIs when outsourcing


8. Getting the Right Cultural Fit

Depending on the region in which you and your outsourcing team are residing in, there may be a stark contrast in the work culture of the two.

Variables like timings and process of working, cultural holidays, and workplace norms may come into the picture.



Add in processes that are lacking face-to-face interactions and trust may soon take a backseat.

Thus, not only is it important to choose a vendor that syncs well with the work culture of your organization, Relationship Management should take the driving seat.

You can do this through more active and informal methods of communication in a way that imparts a friendly, positive, and professional atmosphere at the same time.

9. Ensuring IP protection

So you have found the perfect vendor, the project is delivered within deadlines and meets all your expectations. Happy ending? Not really.

Newsflash. Your code can be replicated and sold within a day if your vendor decides to do so.

Here are some practices that can help you mitigate this risk to some extent:

● Consult your lawyer and include proper contractual norms in the agreement that forbids the vendor from reusing the code and makes him/her agree to transfer all ownership rights of the code onto you.

● Sign an NDA with the vendor that disallows them to share any details of the project with any third-party without your written consent.

● If you are outsourcing overseas, ensure that the country has the requisite IP laws in place.


So these are the significant practices of the industry that will help you outsource your software development requirements the way you want.



While all of these are crucial in their own sense, choosing the right vendor, ensuring IP protection and cost optimization continue to lead the way.



We are also giving out an EXCLUSIVE e-book to "Executive's guide to Software Outsourcing." You can grab a personal copy here - 

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Are you still thinking about NOT outsourcing? Share your views in the comments section below!