Software Outsourcing: Why, When, and How It Works Best

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It’s 2023, a digital age where remote work attracts the most talented, where location no longer defines a team.

Nowhere is this more true than in the world of software development. Software outsourcing is an increasingly popular strategy adopted by efficient companies for product development. Just look at Google, Amazon or Facebook.

What does this approach look like? Companies that adopt software outsourcing create a symbiotic relationship with their internal development team. An internal team works on proprietary components. an outsourced team helps support them. You pay high wages for high-impact work and then outsource the rest to free up in-house engineers. This approach leverages the advantages of both internal and external outsourcing to create a scalable model.

(For a look at the pros and cons of in-house development, see our analysis here.)

Now, there are other ways to leverage software outsourcing beyond how the Big Dogs do it. So how do companies effectively outsource their software development? In this outline, we’ll break down what outsourcing is and when you should consider it.

What is software outsourcing?

Software outsourcing is the process of contracting software developers to work on your scope of work. These developers are contractors, not employees. In other words, it’s a 1099, not a W-2. Software outsourcing is an increasingly common strategy that companies use to build their development teams.

Everyone from early-stage startups to Fortune 500 companies outsource their software development needs in some capacity, whether it’s the entire team or complementary departments.

When should I outsource software development?

Let’s address an elephant in the room first: outsourcing is not a black box solution. Software outsourcing is not for everyone, not everything. Companies that fail at outsourcing are those that approach it as the only solution to a problem. In fact, software outsourcing is a tool that, when performed correctly, is incredibly effective. However, when misused, mistakes can have significant consequences.

There are a few common approaches we’ll outline as to when you should consider software outsourcing. Remember, the most effective companies outsource, but they do so with a strategy.

Cost saving

The most common reason a team is going to outsource their software is to save money. When you look at the global economy, you can effectively manage your local dollar by working with developers in a weaker economy. That way, paying a handsome salary in one’s local currency still serves as a lower salary than one would otherwise pay in one’s home country.


Flexibility is a huge draw for outsourcing given the nature of contractual relationships. When you outsource, you’re not hiring internally, which means it’s not a contractually long-term relationship that’s hard to leave. Firing an employee is expensive, firing a contractor is not. As a company, you can outsource to a freelancer or agency to work on a single project or a backlog. Scale your resources up or down as you wish. You as the Customer have the flexibility to make your roadmap and adapt it frequently to your company’s needs.

specialized expertise

A more current and recurring attraction to outsourcing is expertise in leverage. Many companies these days are looking to get into Web-3 or AR/VR technologies. When your business wants to leverage these emerging technologies to complement your business rather than as the core business itself, it may be more cost-effective to hire individual experts rather than build a costly in-house team.

Staff complement

This is the secret sauce, the way the Big Dogs approach the software outsourcing we talked about earlier. Supplementing your internal team is one way to speed up your development cycles. Instead of continuing to hire employees (costly and time consuming), you can fill out your team. Let your in-house developers work on what they find interesting and outsource the rest. This allows you as a company to scale incredibly efficiently while keeping your operations fluid and flexible. Missed your sales target? Reduce your complementary team. Landed a huge contract? Scale your complementary team. Don’t worry about the recruiting infrastructure you would otherwise have to manage throughout this process.

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So how do I get started?

Well, that depends entirely on where you are as a company and what strategy best aligns with your business goals. Remember, don’t see outsourcing as a possible solution, see it as a tool. Does it make sense to use this tool? Or will using it hurt you for now and leverage later would be better? You can use a sword to spread butter on a piece of toast, but is it really worth the risk?

When considering software outsourcing, you’ll want to talk to experts to help you think about the best strategy. Aloe, for example, promises to get to know you as a business first to determine if outsourcing makes sense. If it makes sense, Aloa can guide you to the best approach.

Regardless of your path, be sure to invest time and energy into creating the best strategy so you can set your development team up for success.

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