Outsourcing of IT Services. What Is It and How Does the Custom Development Process Work?
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Industries show a great demand for digital transformation. But businesses usually don’t have the in-house expertise to develop IT solutions. Companies that lack technical capabilities turn to software development outsourcing companies.
IT outsourcing companies enables businesses to:
- Reduce development costs while maintaining quality
- Access specialized skills and expertise
- Focus on core business activities without the burden of software management
- Accelerate time to market by leveraging external development teams
This article explores what outsourcing software means. We talk about its various models. We also offer a guide to how the outsourcing development works.
What Do We Call IT Outsourcing?
Source: generated with DALL-E 3
The Main Types of IT Outsourcing
| Type | Description | Example Services |
| Onshore | Partner with a company in the same country | Local software development agencies, managed IT services |
| Nearshore | Hire a company from a neighboring country; better with a similar time zone | U.S. companies outsourcing to Mexico; European companies outsourcing to Poland |
| Offshore | Work with development firms in distant countries, often for cost savings | India, Vietnam, the Philippines for software development |
Common IT Services That Companies Outsource
Businesses can outsource a wide range of IT services.
- Custom web and mobile app development;
- Cloud computing and IT infrastructure management;
- Cybersecurity and data protection;
- AI, machine learning, and blockchain development;
- IT support and customer service.
What Companies Should Choose IT Outsourcing?
Startups
Startups often have limited budgets. But they need high-quality digital solutions. Outsourcing IT services allows them to:
- Reduce development costs compared to hiring an in-house team
- Launch products faster by leveraging external expertise
- Access global talent without geographical limitations
- Scale teams quickly based on business needs
Small and Medium Enterprises
For SMEs, outsourcing development offers flexibility and cost efficiency.
- Improves scalability by allowing businesses to expand IT capabilities on demand
- Frees up resources to focus on core business activities
- Provides technical expertise that may not be available in-house
- Reduces operational expenses while maintaining software quality
Large Enterprises
Even large companies engage in outsourcing software development to optimize costs and improve efficiency. Enterprises benefit by:
- Collaborating with the biggest software outsourcing companies for large-scale projects
- Expanding their IT capabilities without hiring full-time employees
- Enhancing innovation by working with specialized tech firms
Non-Tech Businesses
Retail, healthcare, and other industries turn to software development outsourcing companies. They want to build digital solutions without managing in-house IT teams. Companies looking to outsource software development do so to:
- Develop e-commerce platforms for online sales;
- Build mobile apps for customer engagement;
- Implement AI-driven analytics for better decision-making;
- Enhance data security and compliance.
How the Custom Development Process Works
Defining Requirements
Before working with a software development outsourcing company, businesses need to establish:
- Project goals and expected outcomes;
- Technical requirements (features, platforms, integrations);
- Budget and timeline considerations;
- Preferred pricing model — fixed price vs. time and material.
The Green Flags for an Outsourcing Partner
The right outsourcing development firm defines the project success.
| Criteria | Details to pay attention to |
| Expertise | Experience in relevant technologies and industries |
| Portfolio | Case studies, client reviews, and past projects |
| Communication | Language skills, responsiveness, collaboration tools |
| Pricing Model | Fixed price vs. time & material vs. dedicated teams |
Planning and Project Kickoff
Once a partner is chosen, the project planning phase begins. Key steps include:
- Defining milestones and deliverables
- Assembling the development team (developers, designers, project managers)
- Setting up collaboration tools (Slack, Jira, Trello)
Development and Iterations
Most software development outsourcing services follow an Agile approach to ensure flexibility.
Agile Development Process:
- Sprint Planning – Define tasks and timelines
- Development – Build features in short iterations
- Testing – Perform automated and manual QA checks
- Feedback & Refinement – Adjust features based on user feedback
- Repeat Until Completion
Deployment and Post-Launch Support
After the software is developed, it is deployed to production. However, ongoing support is necessary.
Post-Launch Services Include:
- Bug fixes and performance optimization
- Security updates and patches
- Scaling the product based on user growth
Common Challenges and How to Overcome Them
| Challenge | Solution |
| Communication barriers | Regular video meetings, clear documentation |
| Time zone differences | Overlapping work hours, async updates |
| Quality control issues | Continuous testing, defined acceptance criteria |
| Security risks | Strong NDAs, data encryption, compliance checks |
Conclusion
No matter the size of your company, a software development outsourcing company helps you achieve your goals quickly.
To ensure success:
- Clearly define project requirements before outsourcing;
- Choose the right outsourcing partner based on past performance;
- Maintain clear communication to avoid misunderstandings;
- Implement quality control measures.
Еhese steps can maximize their investment and bring high-quality products to market faster.