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Buyer's guide

How to outsource software development: a step-by-step guide

Outsourcing means a company outside yours builds part of your software. It works when you decide what to hand over, brief it well, test the partner before you commit, and keep hold of the code and the decisions.

For founders, product owners and technical leaders11 min read

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What software outsourcing is

Software outsourcing means paying a company outside your own to build, test, run or look after part of your software, whether that is a business application, a mobile app or a website. The company can be in your city or on another continent, and the arrangement can be one project or a team that stays for years. You still own the product: you decide what it is for, and you answer to your customers for it.

Outsourcing
Handing a piece of work to an outside company, which is responsible for how it is done.
Project outsourcing
An outside company delivers an agreed scope for an agreed price.
Dedicated team
A group assigned to you for a long period, usually led by the provider.
Staff augmentation
Specialists from another company join your team and work under your direction.
Offshore, nearshore and onshore
How far the partner is from you in country and time zone. The guide to offshore, nearshore and onshore explains each.

Reasons to outsource, and reasons not to

Outsourcing solves some problems and creates others, so start by naming the problem you have.

Outsourcing, for and against
Reason Why it can help When it does not
A skill you do not have A partner may bring payments, mobile, data or security skills that take a long time to hire. Nobody on your side can judge the work, so you cannot tell whether it is good.
More capacity for a while You can add people for a launch or a backlog and release them later. The work is not ready. More hands do not fix an unclear plan.
A faster start Hiring takes time, and a partner may be able to start sooner. The partner must learn your business from nothing and nobody has the time to teach it.
Focus Your own people can stay on what only they can do. The outsourced part is the heart of your product and you cannot describe it.
Cost Rates differ between companies and places, and you pay for the time you use. Management, rework and delay cost more than the rate saves. Compare the total, not the hourly rate.

The pros and cons are not the same for everyone

What helps a start-up with no engineers can hurt a company whose product is its code. Write down which of these reasons is yours before you ask anyone for a price.

Decide what to hand over and what to keep

Keep the decisions and hand over the work. The more clearly a piece of work can be described and checked, the easier it is to outsource.

What to hand over
Work Hand it over? Why
Product goals and priorities Keep Only you know what the business needs, and priorities change.
Architecture and big technical choices Share A partner can propose them. You, or an adviser you trust, should understand and approve them.
Design, building and testing Hand over This is the work a partner is for, once the goals are clear.
Code, accounts and data Keep control They should be in your company's name from the first day.
Hosting and security Share Agree who runs what, and who is called when it fails.
Support after launch Decide early The team that built a system knows it best. Agree this before you sign, not after the launch.

Write a brief the partner can price

A partner can only price and plan what you can describe. A short, honest brief is worth more than a long, vague one. The guide to a discovery phase shows how to produce one with help.

  • The problem: what is slow, wrong or impossible today, and who feels it.
  • The people: who will use the system and what each of them does.
  • The first version: the smallest version that is worth using.
  • The connections: the systems, payments and data it must work with.
  • What must never go wrong: money, personal data, safety, lost records.
  • The limits: a date, a budget range, rules you must follow and technology you already use.
  • Who decides: one person who can say yes, and how fast.
  • How you will know it worked: the number or the behaviour that shows success.

Choose how you will work together

The model decides who carries the risk. Choose it before you ask for prices, so that every partner quotes the same thing. The guide to the cost of outsourcing and the guide to dedicated teams and staff augmentation go further.

Four ways to work with an outsourcing partner
Model How it works Works when Watch out for
Fixed price An agreed scope for an agreed price. The scope is clear and unlikely to change. Changes are charged extra, and a low price can mean corners cut.
Time and materials You pay for the time spent, usually against an estimate or a monthly cap. The scope will change as you learn. Costs can grow with no ceiling, so ask for regular reports and a limit.
Dedicated team A team is assigned to you for a long period and led by the provider. There is a continuing flow of work. Paying for people when no work is ready for them.
Staff augmentation Specialists join your team and work under your direction. You have managers and engineers and need more hands or one missing skill. You carry the management, and quality depends on how you lead.

Shortlist, then test with a paid pilot

Choose a partner by testing it, not by reading its website.

  1. Make a shortlist of three to five

    Use directories, referrals and your own network, and not one source alone: a directory can be curated, and a recommendation is only as good as the person who gave it.

  2. Send each the same brief

    Compare how they respond. A good partner asks questions and challenges assumptions instead of sending a price at once.

  3. Ask for proof

    Working software like yours that you can try, and two references you can call. The guide to choosing a partner has the full checklist.

  4. Meet the people who will build it

    Not only the sales team: the lead and, if you can, the engineers.

  5. Run a small paid pilot

    A short, real piece of work with a clear end, such as one screen or one integration. Judge the communication as much as the code.

  6. Decide, then sign

    Only after the pilot, agree the full scope and write the terms down.

Agree the contract and keep the access

A contract settles what happens when something goes wrong, which is the only time you need it. What follows is general information, not legal advice: have a lawyer who knows the law that applies read the final text. The contract checklist goes through each point.

  • Ownership: the code, designs and documents belong to you by a written assignment, and you know what the partner keeps, such as its own tools.
  • Access: the repository, the servers, the domain and the cloud and app store accounts are in your company's name from the first day.
  • Confidentiality and data: who may see your data, where it is kept and how it is protected.
  • Acceptance and payment: payment follows work that you have seen and accepted, not only time that has passed.
  • Change and exit: how changes are priced, how much notice each side gives, and what you are handed if it ends.

Run the work so that you stay in control

Handing over the building does not mean handing over the product.

  1. Start with a kick-off

    Agree the goal, who decides, the hours you share and the process for raising a problem.

  2. Work in short periods

    Plan a period of a week or two, and end each one with a demonstration of working software.

  3. Measure delivery, not hours

    What was shipped, how well it works and what it cost to change. Hours worked say little about progress.

  4. Keep one person in charge of priorities

    Priorities that change every day with no reason are paid for in work thrown away.

  5. Check quality yourself or with an adviser

    Ask for code reviews, tests and a security check, and have somebody you trust look at them from time to time.

  6. Plan the handover from the first day

    Documentation, a shared repository and a second person who understands each part, so that the work does not depend on one individual.

Red flags

Any one of these is a reason to ask more questions.

  • A price with no scope and no assumptions written beside it.
  • A partner who agrees to everything and asks nothing.
  • You are not told who will build your system, or you may not meet them.
  • The partner holds the code or the accounts.
  • There is no demonstration of working software, only slides and reports.
  • Nobody will say what is outside the price.
  • A long commitment and no written way out.

Outsourcing the work does not outsource the responsibility

You remain answerable to your customers and your regulators for what the software does. Choose a partner you can check, and keep somebody on your side who can read what is delivered.

Keep reading

Common questions

What is software outsourcing?

Software outsourcing is paying a company outside your own to build, test, run or look after part of your software. It can be a single project or a team that stays for years, and the partner can be in your city or in another country.

How do I start outsourcing software development?

Write a short brief of the problem, the users and the limits, choose how you want to work, send the same brief to three to five partners, check their proof and meet their people, then run a small paid pilot before you sign a larger contract.

What should I outsource and what should I keep?

Keep the goals, the priorities and the control of your code, accounts and data. Outsource work that you can describe and check, such as design, building and testing, and agree early who looks after the system after launch.

What are the risks of outsourcing software development?

The main risks are an unclear brief, a partner you cannot check, code and accounts you do not control, quality you cannot judge and a contract with no way out. Each has a remedy: a written brief, a paid pilot, ownership in writing, regular demonstrations and an exit clause.

Is outsourcing software development worth it for a startup?

It can be, when you need a skill or a speed that you cannot hire quickly and you can describe what you want. It is risky when nobody on your side can judge the work. Start with a small, defined piece, and keep the code and the accounts in your name.

How do I protect my code and ideas when I outsource?

Sign a confidentiality agreement before you share details, take ownership by written assignment, keep the repository and accounts in your name, limit access to what each person needs, and ask a lawyer to review the contract under the law that applies.

How much does it cost to outsource software development?

It depends on what is built, who builds it and how you work together. Ask for the price as a fixed price, a monthly team fee or a time and materials estimate, with what is excluded, and compare the total cost, not only the hourly rate.

Planning to outsource?

Tell us what you want built and how you would like to work. We will say plainly whether we are the right partner and how we would start.

Talk to us about your project