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Why do companies outsource software development?

by Ashley Zimmerman
It’s common knowledge that most companies outsource much of the software development. But why wouldn’t the companies just hire software developers? This article will talk about the key reasons that lead many industries to outsource rather than hiring software developers Deloitte  conducted a detailed survey on the topic, and we reviewed their report for these articles.

About Outsourcing

Outsourcing is the process of hiring outside of your own company. When most people think about outsourcing, they think about hiring workers from other countries where work is likely to be cheaper. This is not always the case. Outsourcing can mean hiring workers for competitive rates from your country or even from your own neighborhood.
One of the most common ways to outsource is to contract with individual freelancers. Freelancers are talented professionals who have gone into business for themselves. They may charge by the hour or by projects or milestones.
The other most common method of outsourcing is to do so through an agency. Some agencies have their own worker pools or employ workers full time, while other agencies hire freelancers. Agencies most often charge by the hour.

The per-hour rate that agencies charge will include the cost of paying their workers as well as paying for their overhead and administrative costs. This means that outsourcing through an agency is usually more expensive than hiring a freelancer. Going through an agency, however, takes a lot of the stress out of choosing your own freelancers or hiring your own dedicated staff members.


Why Companies Outsource Software Development?

software outsourcing As will be explained in this article, outsourcing is often cheaper than hiring software developers. There are more complex advantages as well. Companies often choose to outsource because it is usually cheaper than hiring a dedicated software development team or specialist. They may also outsource because it can be easier than hiring themselves. It can also be difficult to find quality software developers in some areas. Some companies also outsource to gain insights into their own corporate culture.

Cost Cutting

One of the best-known reasons to outsource software developers is to cut costs. Outsourced software developers often cost less than adding software developers to the payroll.
This may be true for a number of reasons. Your business might not always need software developers. You may be able to pay software developers for their work but not any bonuses or benefits that your regular employees get. If you’re a younger company, you may not be able to pay software developers as much as your regular employees.

Enabling Focus on Core Business

Many businesses who outsource software development do so not to save money, but to focus on their core business.
Unless you are a software development company you have more important things to worry about than software development. Outsourcing your software development is one way to take this concern off of your shoulders. This allows you to focus on what your business really does.

Solving Capacity Issues

Many companies outsource software development because they don’t have room to have a dedicated software development team on the payroll. This concern can be related to both cost-cutting and focusing on the core business.
One of the key benefits of outsourcing software developers is that you get the work without needing to give up floor space. After all, you might need that floor space for sales staff, production, or any number of things depending on your core business.

Enhancing Service Quality

Many businesses find that outsourcing enhances service quality for everyone. Having some issues dealt with by the core business and others dealt with by an outsourced software development team means that everyone can focus on their jobs.
Having a dedicated staff and outsourced software development can help to ensure that the company doesn’t lose focus chasing software development. It also frees up the software development team to provide their best services.

Critical to Business Needs

 The location of your business doesn’t have to limit the quality of your website. If your business is in a small town, it can be hard to find good software developers near you. In these cases, outsourcing your software development is probably the best way to meet your business’s needs.

Accessing Intellectual Capital

 Sometimes, outsourcing your software development is simply the best way to get the best minds on the job.
Software developers that are members of agencies have obviously been vetted for quality. Any freelance software developer is at least good enough to make their living working at their trade without being a member of a company or agency. Trusting a freelancer or an agency can be awkward at first. It can still be easier than personally hiring a software developer onto your regular team.

Managing Business Environments

Your business can have a very different atmosphere than that of a software developer’s. Some businesses find that everyone works more efficiently if software management is handled separately from the more core aspects of the business. Different business environments can be more easily handled if they operate separately. This is, of course, in that nature of outsourcing.

Driving Broader Transformational Change

Some businesses find that outsourcing software development is also a good way to find fresh ideas from a wide variety of new people.
Every freelancer or company that you can outsource with will come from a different background. Each will have different insights that you can incorporate into your company’s corporate culture.


This article has talked about many of the benefits of outsourcing your software development team. There are also likely to be many more advantages unique to your particular situation. There are many other things to consider, however, including difficulties and potential issues.
For example, outsourcing can create legal and payment complications that hiring your own workforce doesn’t. It can also be more difficult to know what kind of people you will be working with, to ensure quality, and to enforce deadlines. If you outsource through an agency, it can also be more expensive than hiring someone yourself. Just like advantages are unique to your situation. However, you may not encounter all of these challenges.
For a more complete guide to outsourcing your software development, download our “Due Diligence List On Outsourcing” whitepaper.

Download whitepaper on Outsourcing due diligence

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