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    The Five Stages of The Software Outsourcing Process

    By Hai Huynh
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    Let’s say you had a software product idea, and you made the decision to outsource development. What happens next? What, exactly, is the software outsourcing process?

    If you don’t know the answer to this question, you’re not alone. The process can be quite daunting for anyone without direct experience in the industry. So today let’s take a look at what you can expect so that you can avoid walking in blind.

    In summary, the software outsourcing process includes five steps:

    1. Foundation Formulation: Setting goals and high-level requirements.
    2. Partner Selection: Choosing the right outsourcing model and partner.
    3. Product Development: The actual software creation process.
    4. Quality Assurance: Conducting thorough testing to ensure software standards.
    5. Deployment and Maintenance: Launching the software and providing ongoing support.

    1. Foundation Formulation

    Setting goals is the first step in turning the invisible into the visible.

    Tony Robbins

    In the realm of software development, particularly within the software outsourcing process, the meticulous gathering and defining of goals and requirements is paramount. This step serves as the foundation, setting a clear path for the entire project. It ensures that the project aligns with its ultimate aims, ensuring a well-coordinated approach towards the desired results.

    Specifically, you should be able to clearly and concisely answer the following questions:

    1. How would you explain what this app does to your grandmother? No, we’re not trying to be insulting to grandmothers. The point is that you should be able to explain the app’s main functionality, and explain it in layperson’s terms.
    2. What pain points does this app solve and for whom? A lot is baked into this question:
      • Who do you picture using this app?
      • What pains or problems are they having?
      • How can your app solve this problem?
    3. Why isn’t there another app out there solving this problem? If there is really a pain point out there, you’d think someone else would already be solving it. Some possible answers to this question are:
      • Someone else is already attempting to solve it, but they’re solving it badly. Or maybe someone else thinks they’re solving it, but you could solve it better.
      • Someone else was solving it, but something (technology, preferences, etc) has changed recently. A good example of this is that Flickr was solving the online photo-sharing problem until the rise of cell phone cameras. Then Instagram made a product better suited for the new technology.
      • The marketplace has just plain missed it (note: this is very rare).
    4. How are you going to finance this venture? Self financing? Fundraising?
    5. Who is your team and what are the roles and responsibilities of everyone involved? Specifically, who will have day-to-day responsibility of managing the outsourced development team?
    6. In a general sense, what do you want this app to look and feel like? You’re ultimately going to have to provide guidance to your designers so you’ll need to tell them which app experiences you like and which you don’t like.

    If you can answer the above questions, you’ll be well prepared for the next few steps.

    2. Partner Selection: Choosing the right outsourcing model and collaborator.

    The next step of the software outsourcing process is choosing a partner. This means that you want to be sure to choose both the right outsourcing partner, and the right contract terms. We covered partner selection in a recent blog post so we don’t need to re-hash that here. However, we will briefly review the possible outsourcing models. It is essential to choose the right model in order to align everyone’s incentives towards meeting your goals.

    2.1. Time and Material Contracts (also called “Cost-Plus”)

    This model means that the outsourcer will charge you a percentage of their out-of-pocket costs times a percentage (over 100%) in order to cover overhead. So if the total labor costs for a project turn out to be $100k, and the contract terms state 150% of costs, they’ll charge you $150k.

    This model is ideal for projects with dynamic and evolving requirements. It offers the flexibility to adapt to changes while keeping in step with the project’s shifting objectives. It’s especially effective for long-term projects where requirements might fluctuate over time. Time and Material Contracts are particularly beneficial for businesses that:

    • Require a flexible, agile approach to software development.
    • Value adaptability in project management and execution.
    • Seek transparent budget management and detailed process visibility.

    The downside of this approach is that it doesn’t include any release plan targets. Consequently, these projects have a tendency to “scope creep”. You tend to hear “Once we finish adding X feature, we’ll be ready for launch” a lot. But then once that feature is added, they decide to add one more, and the process repeats. Before you know it, years have passed and still no release.

    2.2. Staff Augmentation Model

    This model means that the outsourcer provides development resources to augment the client’s existing staff. These resources look to the client each day to tell them what to work on. It’s the most “hands off” option for outsourcers.

    Consequently, it’s ideal for companies looking to expand their team’s capabilities without relinquishing managerial control. It’s an ideal fit for businesses that:

    • Need extra support on specific projects, either singularly or across multiple initiatives.
    • Experience fluctuations in workload and project demands.
    • Lack of a particular technical skill that is needed for a project.

    The downside of this model is that it’s the most “hands on” option for the client. It only works if you have the managerial bandwidth to ensure that the outsourced resources are pointed in the right direction.

    2.3. Dedicated Development Team

    This model is similar to the Staff Augmentation Model in that the outsourcer is providing development resources to augment the client’s existing staff. It provides a dedicated team entirely focused on your project. However, the difference is that a dedicated development team works under the direction and supervision of the outsourcer. Therefore, the client doesn’t need to tell the developers what to do each day. They only have to agree upon a scope of work that needs to be completed in X amount of time.

    This model is best suited for clients who have an in-house product and development team, but they have a particular project that they don’t have resources to build.

    The downside of this model is that it only works in that particular aforementioned situation. You have to have internal expertise in software development and you have to have a project that is well-suited for an external development team.

    If you’re new to software development, this is most likely not the model for you.

    2.4. Fixed Price Model

    In this model, the client tells the outsourcer exactly what they want the app to do, and what they want the product to look like. The outsourcer then tells the client how long it will take and how much it will cost. If the client wants to change anything, then they have to create a “change order” to the contract which changes the cost and delivery date.

    The advantage of this approach is that the client knows exactly what they’re going to get and when they’re getting it. For that reason, this used to be the standard contract in the industry. Clients liked having a contract that they could use to manage any possible disputes between the two parties.

    The downside is that there is zero flexibility. If you get an idea of how to make the app better, you have to wait until the end of the contract in order to implement the new idea. This is often infeasible in the quickly-moving world of technology.

    2.5. Outsourced Product Development

    This model is similar to the Time and Materials contract, except it includes some controls to help manage the scope-creep issue. It’s also the model that we typically employ at CodeStringers.

    Here’s how it works:

    • The outsourcer works with the client to develop a Minimum Viable Product (MVP) release plan. In other words, they come up with an outline that explains what the first version app will do and what it will look like.
    • The outsourcer will give the client a release date.
    • The outsourcer provides a list of resources needed to hit that release plan by that release date. The resources are billed monthly at a fixed rate which covers the outsourcers costs and overhead.
    • In CodeStringers’ case, we even provide a guarantee that we’ll hit that release date (see our Keeping Our Promises page for more details on this).
    • The client can change the scope along the way, however it may affect the release date if it’s a substantial change.

    This model applies best in most situations, particularly for startups in which requirements evolve over time. It provides the flexibility of the cost-plus contract, however it gives you some of the predictability of the fixed price model.

    3. Product Development

    In the software outsourcing process, the development phase is where plans turn into action. This crucial stage involves transforming detailed blueprints into actual software through coding and development. A well-devised strategy is essential here, ensuring meticulous attention to every aspect of the software creation process.

    Key Components of the Development Phase:

    • Preparation and Planning: This initial step involves setting up the development environment, selecting appropriate technology stacks, and establishing coding standards. It lays the groundwork for a smooth development process.
    • Release Planning: You develop a list of all the features that you want the app to have. You also sketch out what you want the app to look like so that you ensure you and the outsourcer are on the same page visually.
    • Design: You draw out exactly what the app will look like so that there are no surprises when the app is built.
    • Iterative Development: Employing agile methodologies, the development follows an iterative process. Or in lay terms, the developers work in “sprints” of from one to two weeks in which they build a predefined set of features. At the end of the sprint, they review their work with the client and then discuss the next sprint. This approach allows for continuous refinement and adaptation to changing needs or feedback, ensuring the project remains aligned with client expectations.
    • Collaboration and Communication: Regular communication between the outsourcing team and the client is vital. It ensures that the project stays on track and aligns with the client’s vision. At the very least, there should be communication at the beginning and at the end of each sprint. The client should also be notified if there are any “blockers” that are preventing development from proceeding.
    • Code Quality and Consistency: Maintaining high standards of code quality is crucial for the software’s long-term success. Regular code reviews and adherence to best practices are integral to this stage.
    • Feedback Integration: The development process must be flexible enough to incorporate feedback and make necessary adjustments efficiently.
    • Progress Tracking: Monitoring progress against milestones helps in managing timelines and budgets effectively, ensuring the project remains on course.

    4. Quality Assurance: Conducting thorough testing to ensure software standards.

    Testing is an indispensable phase in the software outsourcing process, serving as the quality gatekeeper before the software reaches users. It involves a thorough examination of all developed features and functionalities to ensure they meet the expected standards and perform as intended. This phase not only guarantees software reliability and functionality but also prepares it for deployment. As a client, you probably won’t have to worry about the details of Quality Assurance (QA); however, it’s good to have a general understanding of what should be occurring. Therefore, let’s delve into the various types of testing that are integral to this stage.

    4.1. Unit Tests

    Unit tests are the first line of defense in software testing, focusing on individual units or components of the code. All it means is that someone needs to make sure that the feature actually does what it’s supposed to do. These tests are essential for verifying the functionality of each part in isolation, thus ensuring a strong foundation for the overall system integrity. By catching issues early at the unit level, these tests contribute significantly to the stability and reliability of the software.

    4.2. Integration Tests

    These tests are designed to assess how different units or components of the software interact with each other. They are vital for confirming seamless communication and functionality between various parts of the software, ensuring that they work together as a cohesive whole.

    4.3. Functional Tests

    Functional testing is centered around checking whether the software behaves as expected in response to specific inputs and actions. It verifies the software’s compliance with predefined requirements, ensuring that all functionalities align with user needs and expectations.

    4.4. End-to-End Tests

    End-to-end tests are comprehensive evaluations that simulate real-user scenarios to assess the software’s overall performance. This testing ensures that all integrated components of the system function correctly in unison, from the beginning of a process to its end, thus validating the complete workflow of the application.

    4.5. Acceptance Testing

    Acceptance testing is a critical phase where the software is evaluated to confirm it meets the criteria agreed upon with the client. It is usually done by people who are completely removed from the day-to-day project efforts. This test ensures that the software is ready for deployment, aligning closely with client expectations and market requirements. It’s the “last line of defense” before the product goes in front of real users.

    4.6. Performance Testing

    Performance testing involves assessing how the software behaves under various conditions, particularly focusing on its stability, responsiveness, and speed. This type of testing is essential to ensure that the software can handle real-world usage scenarios, including high user loads, and maintain its robustness and reliability.

    Additional Testing Considerations:

    Security Testing
    Security testing is another vital aspect, especially in today’s environment where data security is paramount. It involves evaluating the software to detect vulnerabilities and ensure that it is secure against unauthorized access or breaches.

    Usability Testing
    This testing focuses on the user experience, assessing how intuitive and user-friendly the software interface is. It ensures the software is not only functional but also accessible and easy to navigate for the end-users.

    Compatibility Testing
    Compatibility tests are conducted to ensure that the software performs well across different devices, operating systems, and browsers, providing a consistent user experience regardless of the platform.

    Regression Testing
    Every time a new feature is added or an existing one is modified, regression testing is conducted. This ensures that new changes do not adversely affect the other, existing functionalities of the software.

    5. Deployment and Maintenance: Launching the software and providing ongoing support.

    The deployment phase signifies a major milestone in a software outsourcing project, where the extensively tested software is released into a live operational environment, ready to fulfill its purpose for end-users.

    It’s important to celebrate your victory when you get to this stage. You’ve actually made your dream into a reality. That is no easy task. So be sure to congratulate yourself.

    After deployment, however, the focus shifts to maintenance, a critical aspect for ensuring the software’s performance. This stage involves adapting to changing needs, updating features, and swiftly addressing any issues that arise post-launch.

    There is a saying in the industry that “software is never done”. This is definitely true. You’ll learn a lot once your app hits the market, and you’ll want to make changes to the app based on user behavior. That’s what we mean by the term “maintenance”.

    Effective maintenance is key to the software’s longevity and relevance, as it helps in continuously refining the application to meet evolving user demands and technological advancements. This continuous care and enhancement ensure that the software remains a robust and efficient tool, contributing to its long-term success and user satisfaction.


    As we have explored in this blog post, each stage of a software outsourcing project carries its own unique significance and set of challenges. From laying the foundational groundwork and selecting the right outsourcing partner to embark on development, ensuring rigorous testing, and finally deploying and maintaining the software, every phase is crucial in its own right. Alongside these stages, mastering the art of effective communication, setting clear objectives, and being adaptable is pivotal for the success of any software outsourcing project.

    Software outsourcing presents a strategic opportunity for businesses to leverage external expertise and technological capabilities. It’s a journey that requires careful planning, collaboration, and a deep understanding of both your own goals and the dynamics of the outsourcing relationship. By following the outlined stages and best practices, organizations can navigate the complexities of software development with greater confidence and efficiency.

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    Director, Software Development & Delivery

    About the author...

    Hai Huynh is oversees software development for CodeStringers including product management, engineering and quality assurance.

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