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Why US companies outsource software development

Cost is the reason most often given, but it is rarely the only one. Here are the real reasons to outsource, the real risks, and how to go about it.

  1. Brief
  2. Scope
  3. Build
  4. Test
  5. Launch
  6. Handover

The main reasons

Companies usually outsource for a mix of these reasons.

Access to skills
Specialists in areas such as smart contracts or AI can be hard to hire locally.
Lower cost
Rates in many countries are lower than in the US, though management effort has to be counted too.
Speed
An existing team can often start sooner than a new hire can be recruited.
Flexibility
Capacity can grow or shrink with the roadmap without permanent headcount.
Focus
Your own staff can concentrate on what makes the business different.

When outsourcing is the wrong choice

Outsourcing does not fix unclear priorities; it tends to expose them. It is also a poor fit when nobody on your side has time to make decisions, or when the software is your core advantage and you have no plan to bring the knowledge in house.

The real risks, and how to manage them

Most of these can be managed with simple, written arrangements.

Ownership
Assign the work to your company in writing, and keep the code and accounts under your control.
Communication
Agree overlap hours, one decision-maker and a written record of decisions.
Quality
Use your own code review or an independent reviewer, along with automated tests.
Security
Grant the least access needed, and remove it when the work ends.
Lost knowledge
Require documentation, and plan the handover from the start.
Legal differences
Take advice on governing law, data transfer and enforcement in the vendor's country.

Outsourcing models

Choose by how much direction you can give. With staff augmentation, you manage individual developers. A dedicated team works only on your product under your direction. In a fixed-scope project, the vendor manages delivery of an agreed result.

How to outsource software development

Write down the outcome you need, then shortlist a few firms using the same brief. Compare how they think as well as what they charge. Start with a small paid phase, keep the repository and accounts in your name, and hold regular reviews of working software.

Why consider Pakistan?

Pakistan has an active software export industry and many English-speaking engineers, and firms there are widely listed on the major directories. Working hours overlap more easily with Europe, while US teams usually need to plan their overlap. As anywhere, the individual firm matters more than the country.

Common questions

Is outsourcing the same as offshoring?

Not quite. Outsourcing means hiring another company to do the work, wherever it is. Offshoring means the work happens in another country.

What about nearshore?

Nearshore teams are in closer time zones, which makes live collaboration easier, often at a higher rate than farther-away teams.

Who owns outsourced code?

Do not assume you do. Ownership should be assigned to you in the contract, covering everyone who works on the code.

Looking for help with this? See Dedicated teams.

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Why US Companies Outsource Software Development | BSI