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

Outsourcing software development can be a game-changer, true.

But only if you do it right.

Too many companies jump in without a clear plan and pick the wrong partner, misjudge the budget, or lock themselves into the wrong model. 

And the result? Wasted time, blown budgets, and products that never make it.

It doesn’t have to be that way. 

With the right approach, outsourcing can help you move faster, tap into real expertise, and build better software – without the overhead of hiring in-house.

In this article, we’ll break down the entire process, from figuring out if you should outsource, to signing the right contracts and kicking off the project.

Let’s dive in!

When should you outsource software development?

Outsourcing works when you’re trying to move fast, reduce risk, and avoid building a huge in-house team too early. 

But that doesn’t mean it’s always the right call.

Here are the most common reasons to outsource:

• You’re building your first product – You need to move fast, test ideas, and want to avoid long-term hiring commitments. A product-focused partner will help you validate before you scale.
• Your internal team is overloaded – If you’re facing tight deadlines and your devs are already stretched thin, outsourcing lets you keep shipping without burning out your team.
• You’re missing key skills – Whether it’s mobile, backend, QA, or DevOps, outsourcing gives you access to specialists without the time and cost of hiring full-time.
• You need flexibility – Product priorities can shift fast. An outsourced team can ramp up or down depending on your needs without hiring freezes or layoff stress.
• Your budget has limits – Hiring a full in-house team is expensive. Outsourcing helps you build high-quality software while keeping fixed costs low.
• You want to reduce risk – Working with a team that’s done it before helps you avoid the common traps like scope creep, bad architecture, or rework.

Outsourcing isn’t about cutting corners. It’s about choosing the right people to build the right thing – so you can focus on the bigger picture.

But don’t outsource just because it’s cheaper. If cost is your only reason, you’ll pick the wrong partner.

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Cheap code without product thinking leads to expensive mistakes. Your goal shouldn’t just be to spend less, it should be to spend smarter.

And that means choosing a team that’s aligned with your goals, takes ownership, and communicates clearly. 

Next, we’ll show you how to do just that.

How to successfully outsource development

Here, we’ll show you how to successfully outsource development, step-by-step.

Define your goals and success criteria first

This is where outsourcing succeeds or fails. If your goals are vague, your results won’t be any better..

You need to start by getting brutally clear on why you’re building the product. Then define what success actually looks like – for you, your team, and your users.

“I want an app” isn’t a goal.

Here’s what is:

• Launch an MVP in 3 months to validate demand
• Rebuild an outdated mobile app to improve UX and retention
• Add a new payment feature that works across EU markets

Also, the more specific your goal, the better.

If you’re not sure how to get there, the SMART goals framework is a good place to start:

Here’s a couple of SMART goals, for reference:

• Cut user onboarding time by 50% within the next 3 months
• Increase app store rating from 3.8 to 4.5 or higher within 4 months after key updates
• Reach 5,000 active users within 6 months

Goals like these will help you keep everyone on the same page throughout development and define what your product needs to achieve.

But, your goals almost certainly go beyond your product.

Maybe success means getting investor-ready. Maybe it means freeing up your internal team. Maybe it’s just shipping something on time without losing sleep.

Write it down and share it with your potential partner. A good team will tailor the engagement around that.

Remember, a good partner doesn’t just want a brief – they want to understand the problem behind it.

The more they understand, the more they can contribute. Not just code, but ideas for improvement, too.

Once you’re on the same page, everything else becomes easier: budgeting, timelines, team structure, and delivery.

And that’s why this step is so important.

Set your initial budget

A lot of projects fail because of bad budgeting, not bad tech.

It’s easy to burn through your funds without even noticing. One extra feature. One delay. One change in direction. Suddenly, you’re out of runway.

And the stats back that up. According to McKinsey, 66% of large IT projects end up going over budget:

source: McKinsey

So, what’s the fix? 

You need to be intentional and budget for reality, not just best-case scenarios.

And instead of just asking “how much does it cost?”, ask “what do I get for that price“?

You don’t need to have a perfect figure in mind. But you should know your range and what you want to get out of it.

A good partner will help you refine the scope to match. But only if you’re honest about the limits.

Also, don’t forget that development is just one part of the equation.

You also need to budget for product discovery, design, sales and marketing, iteration, and unexpected changes.

Here’s an example of how you might break your budget:

• Discovery – 10-15%
• Initial development – 30-40%
• Launch and marketing – 20-30%
• Post-launch iteration and updates – 15-20%

Now, this is just an illustrative example and the exact ratio will depend on your specific project and your specific needs.

But, the point is this – don’t put all of your eggs in one basket right away. 

Spending 80-90% of your budget on just version 1.0 will leave you no room to actually grow your product.

And one last thing – don’t be scared to build less.

Scope creep is a project killer and the best way to protect your budget is to build only what matters.

Start with the core problem and focus on solving it well. Everything else can wait.

Choose the right outsourcing model

There’s no one-size-fits-all approach to outsourcing.

The way you work with an outsourced team depends on what you’re building, how fast you need it, and how much control you want.

Pick the wrong model, and everything becomes harder – scope, delivery, communication, ownership.

Pick the right one, and your outsourced team will feel just like an in-house team.

There are 3 main engagement models you can choose from: team augmentation, dedicated team, and the project- based model.

Here’s a more detailed comparison:

Team augmentation vs. dedicated team vs. project-based model: comparison

Team augmentation is perfect if you need to extend your internal team with external experts to fill skill gaps or temporarily boost capacity.

A dedicated team, on the other hand, is ideal when you’re building a product from the ground up and need a long-term, focused development team you can trust.

Finally, the project-based model is a good fit when you have a clearly defined scope and just need a team to get your project across the line.

You also have to choose the right pricing model. Here, you have 2 options: fixed-price and time and materials.

Here’s a quick overview of their key differences:

Fixed-price vs. time and materials: overview

The fixed-price model works if your scope is clear and well-defined.

But, there’s a catch – any changes you make to the original scope have to be negotiated separately and you’ll have to pay extra.

The time and materials model, on the other hand, is a fairer pricing model – you pay for the time spent and resources actually used during development.

It’s a much better fit if you need flexibility or if your project’s scope changes mid-development.

The model(s) you choose shape every aspect of collaboration with your outsourcing partner.

So, you can’t afford to get this wrong.

Start searching and create a shortlist

Finding the right partner isn’t about volume.

You don’t need twenty proposals. You need a small list of teams who actually get what you’re trying to build.

So, where should you start?

Begin with your network. Ask founders, PMs, and engineers you trust – personal referrals are often the most reliable source.

Then go deeper. Use Google to find companies who offer the services you’re looking for.

Visit their websites, but don’t just skim the homepage – read their case studies, look at how they write, and pay attention to how they talk about process, not just results.

Here’s what you should look for:

• Transparency – Do they explain their process? Share how they collaborate? Publish valuable and technical content?
• Focus – Do they try to do everything? Or are they focused on specific platforms or technologies?
• Team structure – Can you tell how many people work there? Are they a one-person show or a real team with processes and structure?
• Relevant experience – Have they built products like yours? For your market? On your platform?
• Case studies with detail – Look for clear outcomes, not fluff. What problem did they solve? How? What did they actually build?

Next, you want to narrow down your initial list. Check third-party review platforms like:

• Clutch
• G2
• Goodfirms
• DesignRush

Look at real client reviews, not just five-star ratings. This will help you create a focused shortlist.

Narrow it down to 3-5 potential partners max. That’s enough to compare their approaches, pricing, and chemistry without drowning in back-and-forth.

Reach out with a clear brief. Not just “we want an app,” but what problem you want to solve, who (you think) your users are, and what success looks like.

The good ones will follow up with smart questions, not just a price tag.

You’re not just looking for someone who says yes to everything. You want a partner who challenges your vague ideas, sharpens your scope, and brings product thinking to the table.

Vet the shortlist

This is where things get real. 

You’ve found a few promising partners, now it’s time to find out who can actually deliver and who just knows how to sell.

Now, the vetting process isn’t about finding the flashiest pitch. It’s about finding the team that fits how you work and thinks like you do.

This is important because cultural incompatibility is one of the main reasons why outsourced projects fail.

First, though, you should start with the basics.

Before diving into their processes and culture, make sure the fundamentals are in place:

• Do they have experience with products like yours?
• Have they worked with companies at your stage?
• Can they scale the team up or down if needed?
• Are they open about how they price and deliver?

If any of that’s unclear, ask directly. A strong partner will explain without hesitation.

Then, you need to dig deeper. Don’t stop at “how do you work?”, ask:

• Who exactly will be working on my product?
• How do you handle changing priorities or scope?
• How do you ensure quality throughout the process?
• What happens when something goes wrong?
• How often will I hear from the team?
• Can I speak directly with everyone on the team?

Also, you don’t want a team that blindly follows instructions – you want a team that takes ownership and asks “why” as much as “how.”

If the team you’re vetting asks thoughtful questions about your goals, not just the features they’ll build, that’s a green flag.

Skills matter. But like we mentioned, a bad cultural fit kills more projects than bad code ever will.

If the vibe feels off, trust your gut. This needs to be a long-term relationship, not a one-off transaction.

Vetting isn’t about filtering out the weak. It’s about finding the team that can take your project to the next level.

Do it right, and you’ll avoid the pain of switching partners mid-project. Do it well, and you’ll find a team that builds better than you imagined.

Start small and test the waters

Before you commit to a long-term partnership, you should run a small test – especially if your project is a huge commitment.

You’ll learn more from two weeks of real work than hours of meetings and sales calls.

Even the most promising partner on paper might not be the right fit in practice.

A small test project shows how they really work:

• Do they hit deadlines?
• Do they ask smart questions?
• Are they product-minded or just code monkeys?
• Do they communicate clearly and often?

So, what should a test project look like?

It depends on what you’re building and where you’re starting from.

Here are a few low-commitment ways you should consider:

• A discovery sprint to explore features, tech, and scope
• A UX workshop to validate your design direction
• A prototype or clickable mockup
• A feature spike to test out backend or mobile functionality

These don’t take long and a good team can complete them in 1–2 weeks. You’ll walk away with something tangible – code, designs, documentation, or new insights.

The goal isn’t just to build something. It’s to see how they operate under pressure.

Pay attention to how quickly they ramp up, how they handle feedback, and whether they own their tasks or need hand-holding.

Test projects help you avoid costly mistakes like picking the wrong partner or starting without enough context.

It’s better to learn those lessons early, when you still have time to adjust. So, don’t skip this and don’t rush the relationship.

Sign the right contracts

You’ve picked your partner and tested how you work together. Now it’s time to make it official.

This isn’t just legal paperwork, it’s protection – for your product, your IP, and your budget.

Don’t treat this step as a formality. Get it right, and you’ll avoid surprises down the line.

There are 3 essential contracts you need to sign before any serious work can begin:

• NDA (non-disclosure agreement)
• MSA (master services agreement)
• SOW (statement of work)

Each plays a different role. Together, they define the relationship, the work, and the rules of engagement with your outsourcing partner.

Here’s a quick overview:

NDA vs. MSA vs. SOW: comparison

The NDA is simple but important. It ensures everything you share, like ideas, strategy, designs, and user data stays confidential.

You should have this signed before sharing anything detailed. If they push back, that’s a red flag.

The MSA is the backbone of your relationship and sets the rules of engagement with your partner going forward.

Finally, the SOW is your project blueprint and lays out the specific details for your project, like the scope, timelines, deliverables, and so on.

The most important thing you need to clarify is IP ownership. Make sure your contract states that all code, designs, and assets belong to you once paid for.

And even if the contract looks (and is) straightforward, have a lawyer review it – especially the MSA.

Take this step seriously, be clear and detailed. Because once the paperwork is signed, you’re not just a prospect anymore. You’re a partner.

Kick off the project

The contract’s signed. Now it’s time to for the magic to happen.

But before the first commit or sprint, you need a proper kickoff. 

A good kickoff makes the difference between a smooth launch and weeks of confusion.

This is where everyone gets on the same page, responsibilities are clarified, and the real work begins.

So, how do you do it?

Start with a kickoff call. Don’t just send Slack invites and repo links, get everyone on a call – the whole team, on both sides.

Here’s an explainer in how to do it:

source: The Digital Project Manager

Even if you already shared the SOW, walk through it again:

• Revisit core features
• Clarify priorities
• Confirm any assumptions
• Break down the first milestones

Good teams will challenge parts of the scope. That’s a good sign, it means they’re already thinking ahead.

Also, make sure you know exactly who’s doing what:

• Who’s the main point of contact?
• Who owns delivery on each side?
• Who’s responsible for design, QA, dev, and planning?

This avoids the “wait, who’s handling that?” moments later on.

And don’t forget to give your team access to everything. Sounds obvious, we know, but it’s often overlooked.

Make sure the team has access to:

• Repos and branches
• Design files
• Past research
• Credentials and environments
• Any relevant documentation

No one should be waiting around for a password or link three days in.

After the call, send a simple recap with the key takeaways, links to shared tools and documentation, assigned action items, and the date of the first sprint/milestone.

This will get everyone moving in the same direction.

The best kickoffs will feel like the start of something meaningful, not just another project.

Invest the time and make sure everyone is on the same page from the start.

A strong start makes everything that follows smoother, faster, and better.

How to outsource development: FAQs

Want a long-term outsourcing partner?

Do you want to outsource development but can’t seem to find a partner you can trust for the long haul?

We’ve got you covered.

We’re an EU-based, full-service software development company with 12+ years of experience working on complex, high-stakes projects for some of the world’s biggest companies.

If you’re looking for a stable, experienced outsourcing partner you can rely on, you’re in the right place.

Feel free to reach out – our team will get back to you as soon as possible!