Why Do Companies Outsource Software Development?


Today, software has become the backbone of operations for companies across many industries. The ability to develop, maintain, and upgrade software efficiently has a direct impact on competitiveness, innovation, and cost-effectiveness. To navigate this complex terrain, an increasing number of companies are turning to a strategic approach known as software development outsourcing.

Outsourcing software development is not a new concept, but its significance has grown exponentially in recent years. Companies of all sizes, from startups to Fortune 500 giants, are leveraging the power of outsourcing to gain a competitive edge, reduce costs, and access specialized skills and expertise. In this article, we delve deep into the intricate world of software development outsourcing, exploring the driving forces, benefits, and considerations that lead companies to make this strategic choice.

Why Outsource Software Development?

Companies increasingly choose to outsource software development for various reasons, evolving from primarily cost-saving motivations to a focus on more strategic benefits. Here’s a comprehensive exploration of why organizations are turning to outsourcing:

Focusing on Core Business Functions

One of the foremost reasons companies opt to outsource software development is the desire to concentrate on their core business functions. In today’s competitive business environment, organizations must allocate their resources wisely to maintain a competitive edge. 

By outsourcing software development, companies can offload the time-consuming and often complex task of designing and building software to specialized partners. This allows them to redirect their in-house talent and resources towards areas that directly impact their core competencies and strategic objectives.

Access to Specialized Talent

Staying ahead of the curve often requires access to specialized talent and expertise. This is where outsourcing software development becomes a strategic advantage. By partnering with external software development firms, companies gain access to a vast pool of highly skilled professionals who are well-versed in the latest technologies, programming languages, and industry best practices.

Faster Time to Market and Improved Quality

The ability to bring software products and solutions to market swiftly can be the difference between success and stagnation. Outsourcing software development can significantly accelerate the development process, leading to a faster time to market.

External software development firms are often equipped with well-established development processes, agile methodologies, and efficient workflows. This allows them to streamline the software development lifecycle, from project inception to deployment. When companies partner with these experienced teams, they can benefit from shorter development cycles and quicker release timelines.

Driving Innovation

Innovation is the lifeblood of business growth and competitiveness in today’s technology-driven world. Companies that seek to push the boundaries of what’s possible often turn to outsourcing software development as a means to inject fresh perspectives and innovative ideas into their projects.

External software development partners frequently bring diverse experiences and viewpoints to the table, having worked with a wide array of clients and industries. This exposure equips them with a unique vantage point, allowing them to identify novel solutions and innovative approaches to complex problems.

Reduced Labor Costs

While many companies explore outsourcing for its strategic benefits, cost efficiency remains a significant driver behind this decision. Outsourcing software development can lead to substantial reductions in labor costs, making it an attractive option for organizations aiming to optimize their budgets.

The cost savings associated with outsourcing are multifaceted. First and foremost, companies can leverage lower labor costs in outsourcing destinations, such as offshore development centers in countries like India, Ukraine, or the Philippines. These regions often offer competitive hourly rates for skilled software developers and other IT professionals, making it more cost-effective than hiring equivalent talent locally.

Scalability and Flexibility 

Scalability and flexibility are paramount in today’s dynamic business environment, and outsourcing software development offers companies the agility they need to adapt to changing circumstances and project demands.

One of the key advantages of outsourcing is the ability to scale development resources quickly and efficiently. Whether a company’s project experiences sudden growth or needs to downsize temporarily, external software development partners can easily adjust the size and composition of the development team to match the evolving requirements. This ensures that companies always have the right level of expertise and manpower to execute their projects effectively.

Reduced Risks

Mitigating risks is a critical concern for businesses of all sizes, and outsourcing software development can play a pivotal role in minimizing various types of risks associated with complex projects. Experienced outsourcing firms can manage and deliver projects with reduced risks of delays, errors, and budget overruns​​. 

Niche Expertise

In an increasingly specialized and competitive business landscape, having access to niche expertise can be a game-changer. Outsourcing software development allows companies to tap into highly specialized knowledge and skills that may be difficult or expensive to cultivate in-house. This gives a business a competitive advantage by using a software outsourcing vendor.

Niche expertise is particularly valuable when dealing with highly specialized or emerging technologies, industries, or domains. For example, artificial intelligence (AI), blockchain, quantum computing, and biotechnology are areas that demand deep and specialized knowledge. By outsourcing to experts in these domains, companies can ensure that their projects benefit from the latest advancements and best practices.

Worldwide Talent Access

Outsourcing opens doors to a diverse range of expertise and capabilities globally, enhancing the quality of the development team​​. By outsourcing globally, companies can tap into a rich tapestry of skills and expertise that may not be readily available in their local talent market. Whether it’s expertise in cutting-edge technologies, multilingual capabilities, or domain-specific knowledge, the global talent pool offers an array of options to match the specific needs of a software development project.

Managed Teams

One of the increasingly popular models within the realm of outsourcing software development is the concept of managed teams. This approach offers companies a unique blend of control, flexibility, and expertise in managing their software development projects.

A managed team typically consists of skilled professionals, including developers, designers, project managers, and quality assurance specialists, who work exclusively on a company’s projects. However, instead of functioning as external entities, these teams are seamlessly integrated into the client’s organization and workflow.

24/7 Development and Support

Leveraging time zone differences, companies can ensure continuous development and customer support by outsourcing to offshore locations​​. The global distribution of software development teams enables companies to implement continuous development cycles that operate around the clock. 

This “follow-the-sun” approach allows for faster project progress, quicker issue resolution, and improved responsiveness to customer needs, ultimately reducing time to market vs using an in-house team.

Enhanced Compliance and Security

Software outsourcing firms are often well-versed in compliance regulations and security practices, ensuring robust data protection and adherence to industry standards​​. In an era of increasing data privacy regulations and cyber threats, compliance and security are paramount concerns for businesses across various industries. 

Outsourcing software development can provide organizations with enhanced compliance and security measures, helping them navigate complex regulatory landscapes and safeguard sensitive data.

Real-World Case Studies

Here are several notable companies that outsourced software development at one time or another to great success.


In its early days, Slack outsourced the development of its app and website design to MetaLab, allowing the company to focus on core activities. This approach contributed to Slack’s success, now boasting millions of daily active users​​.


GitHub outsourced the development of its powerful backend to Scott Chacon, significantly contributing to its growth and current status as a major platform for developers​​.


IKEA partnered with various software development outsourcing companies for its Home Smart segment, realizing the complexity of the Internet of Things and the benefits of joining forces with specialists in the field​​.

Outsourcing software development is not just a cost-saving measure but a strategic decision that enables companies to focus on their core competencies, access specialized talent, innovate, and quickly adapt to market demands. 

By leveraging the expertise of an outsourced software development team, companies can improve their products’ quality and time-to-market, while managing risks and costs effectively. The success stories of companies like Slack, GitHub, and IKEA underscore the potential benefits of this approach.

Work with Elevato for Software Development

If you are looking to outsource your software development work to a capable team, look no further than Elevato. Our engineering team has the knowledge and skills to help your business reach its goals.

Contact us today to schedule a free consultation