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Software Development Outsourcing: Key Benefits Explained

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With this era's rapid technological advancements and shifting market demands, businesses are under constant pressure to innovate and stay ahead of the curve. One way to secure a company’s longevity is via outsourcing its software development responsibilities. However, outsourcing can seem intimidating for enterprises that are new to this. 

This is where Deazy comes in. 

As a tech-enabled company, Deazy stands at the forefront of this movement, providing a unique approach to software development outsourcing for medium and large businesses, enterprises, VC-backed scale-ups, and agencies. By giving these companies access to vetted, flexible nearshore developers and high-performance development squads, we can enable them to accelerate their digital delivery.

But first, what does outsourcing one’s software development responsibilities entail? What are the benefits of outsourcing software development? This comprehensive guide will enlighten you on everything you need to know concerning the benefits and advantages of software outsourcing. 

Let’s begin. 


What Does Outsourcing Software Development Mean?

Consider this perspective: as a forward-thinking business owner keen on leveraging technology, you have distinct needs. Perhaps you aim to develop a mobile application or website, enabling clients and customers to conveniently interact with your products and services. 

On another front, enhancing your business through upgraded software technology, improved cybersecurity, efficient cloud migrations, adept data management, and a robust digital infrastructure might be necessary. 

In any scenario, the requirement is clear – you need either an individual developer or a team of top-tier programmers to craft scalable software solutions that meet these diverse and evolving business needs.

Outsourcing vs in-house software development has their differences. Outsourcing refers to the practice of hiring a third-party company, team, or individual to handle the development tasks of a business instead of using in-house resources. Traditionally, IT outsourcing was seen as a cost-cutting measure, enabling companies to reduce expenses by hiring offshore developers. However, this perspective has evolved. Today, outsourcing is about saving costs and accessing a global pool of talent, accelerating time-to-market, and fostering innovation.

Furthermore, as an SME or agency, finding skilled professionals in this niche is nerve-wracking and establishing an in-house development team requires recruiting, hiring, training, and integrating new employees into the company culture, which will cost you more in time and resources. For this reason, so many companies within and outside the UK outsource their IT responsibilities to experts in the field. In fact, the IT outsourcing market is so large that in the US, it is projected to reach $425.19 billion by 2026. [1]


5 Case Studies: Successful Companies Leveraging Software Outsourcing for Growth and Innovation

The many advantages of software outsourcing are instrumental to the success and longevity of modern businesses, which in turn creates a high demand for the service. But before we dive into what your enterprise stands to gain from outsourcing its software development needs, let’s highlight some successful companies that, just like you, once contemplated taking this decision and identified the best time to outsource software development and are now on the other side, reaping the benefits. 

Case Study 1: Slack

Slack, now a household name in office collaboration tools, made a strategic decision early in its development to outsource its app development and design. This move was primarily driven by the need to conserve resources and focus on their core competencies. 

By partnering with external experts from Metalab, which took care of Slack’s development website maintenance, logo design, and web and mobile apps [2], the company launched a polished product that quickly gained traction. This decision to outsource helped Slack to conserve capital and efficiently scale operations. More specifically, within two weeks of its launch, Slack had already acquired 15,000 users, and by 2014, it had become a startup unicorn. This success underscores the value of outsourcing in accelerating product development and market penetration​.

Case Study 2: WhatsApp

In its early days, WhatsApp was a small organisation with limited human and financial resources. With only 30 full-time employees and a modest seed capital of $250,000, the company had to find a way to develop a high-quality product without overspending.

WhatsApp turned to Eastern Europe, a region known for its tech talent and cost-effective services. This move was strategic in accessing the required web development talent while keeping costs under control. The results paid off handsomely as the company could maintain low operational costs while developing a product that would eventually become the world’s most popular messaging app with over two billion users. 

Case Study 3: Citigroup

Citigroup’s venture into outsourcing dates back to 1992, making it one of the pioneers in the financial sector to adopt this strategy. The multinational investment corporation sought ways to optimise its operations and reduce costs. The challenge was to do so without compromising on the quality of its IT services.

In 2014, the company took a significant step by cutting 11,000 jobs at its headquarters [3], many of which were IT-related, and moving these roles offshore. They then began hiring offshore workforce from countries like India, the Philippines, and Poland to fill these positions. This strategic shift was part of a broader cost-saving measure and led to substantial annual savings of around $1.1 billion. 

Case Study 4: Basecamp

Basecamp, a project management tool provider previously known as 37signals, faced the classic "cobbler's children" problem. Despite providing tools for efficient project management, they struggled with internal workflow and client support issues. Recognising this challenge, the company opted to outsource key development functions.

This strategic move allowed Basecamp to focus on its core business operations while leveraging external expertise for software development. This way, they could effectively address internal challenges and streamline their processes. This shift demonstrates the importance of identifying internal weaknesses and using outsourcing to strengthen those areas.

Case Study 5: Google

Google, despite its vast resources and in-house capabilities, also engages in strategic outsourcing. One notable area is its AdWords project, which significantly contributes to its revenue. The decision to outsource parts of this project was driven by the need to access a global talent pool and reduce labour costs. 

By collaborating with external teams, Google has been able to maintain its innovative edge and manage operational costs effectively. This move highlights the importance of rational and strategic outsourcing, even for companies with substantial in-house capabilities. 

For a deeper dive into this topic, check out our detailed discussion on when to outsource software development.


Benefits of Software Development Outsourcing

As highlighted above, outsourcing software development has become a strategic business practice for many companies, offering a range of benefits from cost savings to access to specialised talent. Let’s take a closer look at these advantages.

1. Financial Advantages

  • Reduced Labour Costs: Hiring and training an in-house software development team can be very expensive. Outsourcing allows companies to tap into a global talent pool where labour costs can be significantly lower.
  • Operational Cost Reduction: Beyond labour, it reduces the overhead operational costs associated with software development, such as infrastructure, technology, and overhead expenses. Companies don't have to invest in expensive software or hardware, as the outsourcing partner typically provides these.

2. Strategic Advantages

  • Global Market Integration: Outsourcing one’s software development responsibilities can be a vital tool for businesses looking to integrate into the global market. Working with international teams not only opens doors to new market insights but also helps in understanding diverse consumer needs and behaviours.
  • Business Agility: In today's fast-paced business environment, agility is crucial. Outsourcing allows companies to quickly adapt to market changes and emerging trends by leveraging external expertise and resources. This often leads to unique products or services, providing a competitive edge in the market.

3. Operational Advantages

  • Streamlined Operations: As a business tool, outsourcing can significantly streamline operations. By relinquishing this responsibility, companies can eliminate many of the complexities and time-consuming tasks associated with managing an in-house development team.
  • Enhanced Capacity for Large Projects: For large-scale projects, building an in-house team with the necessary skill set and capacity can be daunting. On the other hand, software development outsourcing leverages the availability of skilled labour to handle large projects efficiently without overburdening internal resources.
  • Improved Business Focus: With critical software development tasks handled by third-party experts, business leaders can devote more time and attention to strategic planning and core business activities.
  • Scalability and Growth Support: Outsourcing partners can support a company's growth by providing scalable solutions and resources that align with the changing needs of the business.

4. Technological Advantages

  • Access to Cutting-Edge Technologies: Outsourcing firms like Deazy often specialise in a wide range of technical areas and stay abreast of the latest developments. This gives businesses access to state-of-the-art technology without the need to invest heavily in research and development.
  • Cross-Industry Insights: Many outsourcing companies work across various sectors, bringing a wealth of cross-industry insights, experience and expertise that can be invaluable in crafting innovative software solutions.

5. Quality and Compliance Advantages

  • Adherence to Standards and Best Practices: Outsourcing companies often provide access to teams that adhere to international standards and best practices, ensuring high-quality outputs. This is particularly important for industries where compliance and quality are non-negotiable.


Different Models of Software Development Outsourcing

Before you decide to use a third-party team for your business, you should know that there are several different software development outsourcing models. Each type has its unique characteristics, use cases, advantages and disadvantages, and the choice of which to apply depends on factors like project size, complexity, budget, duration, and the level of control and involvement desired by the client (you). Hence, it’s essential to carefully evaluate these factors and choose the model that aligns best with the project's goals and the company's overall strategy.

Here's an overview of the different models:




Ideal Use Case

Staff Augmentation

- Easily scale team size

- Maintain project control

- Seamless integration with the in-house team

- Increased management overhead

- Fluctuating costs

When needing extra expertise or capacity without losing grip on the project.

Project-Based Outsourcing

- Access to specialised skills

- Focus on core activities

- Fixed costs for predictable budgeting

- Limited control over execution

- Dependence on vendor for quality

For projects outside core competencies or when in-house resources are limited.

Offshore Development Center (ODC)

- Significant cost savings

- Dedicated resources

- Easy scalability

- Potential cultural and time zone challenges

- Requires long-term commitment

Long-term projects with continuous development needs.

Managed Services

- Full coverage from development to maintenance

- Reduced operational management

- Access to broad expertise

- Generally higher costs

- Limited direct control over processes

Complex projects where offloading IT management is beneficial.

Hybrid Outsourcing

- Balance between in-house control and outsourced efficiency

- Cost savings on non-core elements

- Flexibility in team management

- Management complexity across teams

- Potential for communication gaps

Combining core in-house development with outsourced non-core activities.

Build-Operate-Transfer (BOT)

- Gradual buildup of offshore capabilities

- Low initial investment and risk

- Eventual full ownership

- Time-consuming to establish and transfer

- Initial dependency on vendor

Establishing a presence in a new market or technology sector with minimised risk.

Time and Materials (T&M)

- Adapts to project changes

- Payment for actual work, ensuring transparency

- Unpredictable overall costs

- Requires close oversight to manage expenses and progress

Projects with evolving requirements or uncertain scope.

Fixed Price Contract

- Clear budgeting from fixed pricing

- Minimal management needed post-agreement

- Limited flexibility for changes

- Possible compromises on quality to meet budget

Well-defined projects with specific requirements and outcomes.

Now that you’ve understood most of what software development outsourcing entails, from how it works to its advantages and deployment models, you can set your sights on finding the best outsourcing provider for your company. 


Deazy: The Perfect Software Development Outsourcing Partner for You

Rather than independently scour the ends of the internet for the best sites to hire software developers, Deazy will build a solution that combines the best quality, global talent and UK-based product management to power your company’s digital acceleration. 

Here’s what we offer: 

Deazy's Unique Approach to Digital Solution Delivery

Deazy stands out in the software development outsourcing landscape by ensuring that clients receive high-quality, high-performance teams that can integrate seamlessly into existing in-house teams or operate independently to deliver digital roadmaps swiftly and effectively.

Technology-Driven Service Offering

The core of Deazy's offering revolves around its delivery methodology built using a bespoke software platform, enhancing the speed and efficiency of vetting, matching, and onboarding developers. This approach allows us to quickly assemble the right team for each project, ensuring a perfect fit for skills and project requirements.

Flexible Engagement and Global Impact

We offer flexible engagement options, allowing clients to scale development resources up or down as needed. Our global presence in 24 countries and a network of over 6,000 vetted global developers contribute to the diversity and breadth of expertise available to clients, supporting global economies and fostering talent development worldwide.

Client Testimonials and Proven Track Record

Talk is cheap, which is why we prove our efficacy with years worth of reviews and testimonials from organisations like RAC, Laing O’Rourke, and others, which highlight our ability to ensure quality and flexibility in digital product delivery. Our clients have also noted significant increases in software delivery speed, which happens on time and within budget. Hence, the consensus is a high-quality performance from all sides of Deazy's software dev teams.

So, what are you waiting for? Get in touch today and build effective tech teams to power your growth!



To round up, the benefits of outsourcing software development impact contemporary businesses to maintain competitiveness and foster innovation. Hence, it is not just a tactical choice but a strategic necessity crucial for operational efficiency, technological advancement, and sustainable business growth in today's dynamic digital landscape. 



Why would a company outsource its needs to a software development agency?

Companies outsource to software development agencies to access specialised skills and innovative technologies, reduce costs, and focus on their core business activities.

What is the purpose of software outsourcing?

Software outsourcing enables businesses to leverage external expertise and resources for efficient software development, allowing them to focus on their primary business goals.