US-based startups, mid-sized businesses, and large enterprises are all relying on external teams to move faster, build smarter, and handle complexity. Development scope has shifted. It’s not just mobile apps or landing pages but ML systems, HIPAA-compliant healthcare platforms, secure fintech pipelines, microservice backends, and production-grade AI. Companies are offloading this work because the pressure to deliver is higher than their internal capacity can match.
The global IT outsourcing market is heading toward $812 billion by 2029. More than 50% of companies outsource their application development (APIs, UIs, integrations), plus internal tooling, cloud migrations, and AI pipelines. The problem now isn’t whether outsourcing is acceptable but whether you can find the right vendor in a saturated landscape where every dev shop has a slick portfolio and an eager sales team. Which brings us to this guide.
The article is based on case studies of a software development outsourcing company, Belitsoft. To overcome expertise gaps, deliver faster, and solve complex technical challenges that internal teams can’t handle alone, companies need outsourcing partners, not just contractors. Belitsoft delivers specialized skills while working within budget constraints.
Benefits of Outsourcing Software Development
1. Cost & Financial Impact
Keeping a developer in-house costs what it says on the contract and then another 1.7x to 2.7x on top of that for things like payroll taxes, hardware, office space, insurance, and the weekly foosball tournament.
An outsourcing software development firm, especially offshore, gives you predictable per-hour or per-month pricing. That includes their coffee budget, not yours. So if you need burst capacity or temporary hands, outsourcing wins.
2. Control and Alignment
There’s a psychological comfort in walking across the hall and yelling at your front-end dev. You can’t do that across an eight-hour time zone shift. So if you need that type of control, you build in-house.
3. Expertise & Talent Availability
At times, your team just can’t do the thing you need. In some cases, no one in your city even knows the tech. Often it’s cheaper and faster to just hire someone who’s already solved the exact problem three times. Outsourcing gives you access to global expertise, and (unless your internal recruiters are miracle workers) you won’t match that reach.
4. Quality & Accountability
The myth is that internal teams always care more. But in reality, vendors live or die on client feedback and portfolio wins. Good outsourcing partners are obsessed with not getting roasted in a testimonial. In some cases, they’ll bring better QA or security practices than your own team has time for. But yes, you’ll still need to manage them. They’re not mind-readers.
The 2025 Outsourcing Landscape: What Clients Are Looking For
Most companies continue to cite cost savings as a core reason for outsourcing software development, with typical savings in the 20–30% range. What clients are solving for now is capacity and capability, not cost alone. Most businesses reported outsourcing specifically to access expertise unavailable internally.
A fintech startup may want to outsource ML model development to a data science firm because there’s no way to recruit that kind of team on short notice. A hospital may hire an external vendor with experience integrating with EHRs because training an internal team to that level would take months.
Speed is the other pressure point. In a timeline-driven market, hiring internally is too slow. Recruiting a developer takes approximately 40 days on average. Getting an outsourced team onboarded takes half that. Startups racing to MVP don’t have time to staff. Enterprises trying to hit quarterly delivery targets don’t have time to train.
Industry specifics define expectations. In fintech, security and compliance are foundational. Vendors that don’t understand FINRA, PCI DSS, or how to handle banking APIs don’t get calls back. Companies in financial services outsource app development because they need specialized execution with built-in regulatory fluency.
In healthcare, the outsourcing software development rate is lower, but that’s changing. What holds clients back is compliance. HIPAA, FDA, and EHR integration are non-negotiables, and vendors that can’t show experience there are ruled out. But when vendors can prove it, clients move forward. The bar is just higher.
In SaaS, expectations center on scalable architecture and clean UX. Clients want vendors who know how to build for scale: multi-tenant systems, API extensibility, cloud-native deployments. They expect the stack to match modern expectations (React, Node, serverless, etc.) and for the team to be fluent in how to ship SaaS products that actually survive scale.
Clients aren’t looking for code-for-hire anymore. They want domain understanding. They want teams who contribute ideas, who offer suggestions, who’ve solved similar problems and can flag risks before they become blockers.
Case studies matter. Clients want proof: Who else did you work with in my space? What did you deliver? How long did it last? Did it launch? Did it survive?
A healthcare SaaS startup evaluating a vendor doesn’t want to read “We built a HIPAA-compliant telehealth platform for Company X.” That kind of evidence paired with client references who talk openly about communication, clarity, and responsiveness is what moves a vendor forward.
Clients still outsource globally, but proximity matters more now. Nearshore partners in Latin America and Eastern Europe are gaining ground. Teams in these regions work U.S. hours, use the same tools, and operate with a cultural alignment that speeds up iteration. Clients are also still willing to work with Asia-based vendors.
The Decision-Making Journey in IT Outsourcing
Outsourcing software development starts as a need to “get something built” and quickly turns into a strategic choice that pulls in product, engineering, legal, and finance.
1. What Are We Building, and Who’s Actually Doing It?
It starts with a requirement: something new the business needs to ship. A fintech startup needs a payment app. A healthcare company needs a patient dashboard. An enterprise wants AI analytics layered into their existing stack.
That idea turns into a basic scoping conversation. And right after that, the leadership team (usually the founder, CTO, or product head) starts asking: “Are we doing this internally, or are we going outside?”
This is where the in-house vs. outsource discussion gets real. Clients start with constraints:
- Do we have people with the right skills internally?
- Do we have capacity without derailing what’s already running?
- Do we have time to recruit and onboard new hires before this needs to ship?
If the answers tend toward “no,” outsourcing moves from idea to inevitability.
If the project involves handling sensitive health data, banking compliance, or national security issues, many organizations either rule out outsourcing software development or segment the work: keep data handling in-house, outsource front-end or APIs. That partitioning model has become standard in 2025. The business keeps control where it needs to and pushes execution elsewhere when the risk is lower.
2. What Type of Vendor Are We Even Looking For?
Most companies start with Google, Gartner, G2, Goodfirms, peer referrals, and LinkedIn scans. The filter is “Has this vendor done work like ours, for companies like us, in our vertical, and in our stack?”
SaaS startups seek vendors who’ve built scalable SaaS tools before. Healthcare CIOs look for vendors who speak EHR, HIPAA, and HL7. Fintech founders want devs who’ve touched Stripe, PCI DSS, and or blockchain integrations.
Company size also affects the search. Startups are often open to boutique agencies or freelance collectives. Enterprises skew toward established consultancies with delivery scale. But either way, the lens is domain fluency and technical match, not vendor size.
During this phase, clients dig through:
- Case studies that look like their project
- Stack alignment (React Native vs Flutter, AWS vs. Azure, etc.)
- Proposals that reflect an actual understanding of the use case
- Initial outreach responses that either add clarity or don’t
If a vendor responds quickly, asks good questions, and avoids vague generalities, that’s noted. Some clients start soft: a few emails, an exploratory call. Others run a formal RFI. Either way, the goal is to narrow the pool to 3–5 viable vendors who pass the initial sanity check.
3. Side-by-Side: Interviews, Proposals, and the Gut Check
Clients send out real specs or RFPs. Vendors reply with proposals: timelines, team structure, budget estimates, and delivery models. The decision turns into an apples-to-apples comparison across key axes.
Pricing models
In 2025, many clients are open to:
- Fixed-price (for tightly scoped builds)
- Time-and-materials (for agile, evolving projects)
A few vendors offer hybrid pricing like base rates plus bonuses.
Interviews are where most deals are won or lost
Clients talk to the PM, tech lead, and sometimes the UX lead. The CTO listens to how the vendor talks about architecture. The CEO tracks how they frame product value. Clients look for:
- Technical precision
- Communication fluency (especially in regulated domains)
- Evidence the vendor listens, not just talks
- Shared mindset about process, iteration, and risk
If a vendor talks like a collaborator, not a contractor, they move forward.
Technical validation happens next
Some clients ask for a code sample or architecture deep-dive. Others commission a short pilot sprint (common with startups). Large enterprises often run reference checks and full security audits, especially in fintech and healthcare, where HIPAA or PCI requirements demand verification.
By the end, clients compare vendors across internal scorecards:
- Tech stack match
- Past project relevance
- Communication and cultural fit
- Price transparency
- Risk profile
- Velocity to deploy
It’s rarely a clean winner. One may be cheaper. One may be sharper. One may have the best references. But the best-fit vendor checks the most boxes and doesn’t raise red flags on the rest.
4. Selection, Contracting, and the Final “Are We Sure?”
For startups, that may mean a founder looped in with a lawyer. In enterprises, it’s procurement, legal, IT security, and possibly finance all reviewing the deal.
Clients check:
- MSA and SOW for clarity
- IP clauses (vendor assigns all code to client)
- SLAs (for uptime, response time, delivery targets)
- Penalties or bonuses tied to timeline
- Security and confidentiality terms (especially with user data)
At the same time, internal planning kicks in. Who owns vendor coordination? What tools will be shared (Slack, Jira, Confluence)? Who runs the daily syncs? What are the kickoff deliverables? Most clients lock this down before the contract is even signed because onboarding chaos is expensive.
There’s also a final comparison against newer options. Could this be done with a low-code tool? Would two contractors be faster than one agency? But for complex systems (web apps, AI tools, enterprise platforms), the choice usually settles into one of two options: vendor or in-house build.
Key Criteria for Evaluating and Comparing Outsourcing Software Development Vendors
No one enjoys the vendor evaluation phase, but it’s the part where most of the damage (or progress) gets made. By the time a client is comparing offshore development partners, they’ve already done some reading, had a few calls, and started to see who’s pretending and who may actually deliver something of value.
1) Technical Expertise & Stack Alignment
If the client is building a cross-platform mobile app, they aren’t about to hire someone Googling “What is Flutter?” If it’s a machine learning platform, you better hope someone on the vendor side has touched PyTorch in the last year without breaking something.
Clients run checklists. Just “Do they know our stack?”, “Have they done this before?”, and “Can they prove it?” Certifications are fine (AWS Partner, etc.), but case studies carry more weight. Bonus if they show a system with real complexity like, say, an actual PCI-compliant banking API.
Expectations here are clear:
- Know your languages and frameworks (Swift, Java, React Native, TensorFlow, etc.).
- Know your domain (HIPAA, PCI DSS, HL7, FHIR, banking integrations).
2) Features and Solution Innovation
The client’s question here is: “Will they help us build something worth releasing?” A SaaS founder may ask for “multi-tenant analytics”. A good vendor says, “Here’s how we’d do that without melting your cloud bill.” Clients reward vendors who propose meaningful upgrades. A better onboarding flow? Yes. A cute animation no one asked for? No. UX and UI also matter. If your portfolio looks like it was built in 2013 on a budget, you’re not getting a callback.
3) Pricing Models & Cost Transparency
Clients don’t always know what a project should cost, but they do know when a quote is lazy or suspicious. The best vendors spell things out: hours per role, phase estimates, known risks. They name what’s out of scope. In 2025, vendors who still offer vague pricing structures are rarely selected.
On the pricing model itself:
- Fixed-price is safe for well-scoped work, but inflexible.
- T&M is fine if trust exists and someone’s watching the burn rate.
- Dedicated teams are helpful for long-term products.
Clients compare vendors not just on total cost, but the cost of failure. The low bid may be the most expensive if it leads to overruns, rework, or missed go-to-market.
4) Communication & Cultural Alignment
The bar is low: speak English clearly, respond to emails on time, use modern tools (Slack, Jira, Zoom), and don’t vanish. Clients want collaborators. A team that sits quietly on every call and agrees to everything without questions? That’s not seen as polite, but dangerous. If your team culture feels like 1990s corporate bureaucracy and the client is a fast-paced startup, you’re not getting past procurement. Team chemistry counts. Clients often go with the group they trust the most, not the cheapest.
5) Security & Compliance
This is where “good enough” stops working. If the project involves sensitive data (finance, health, even B2B SaaS with real customer info), security is a non-starter.
Clients ask:
- How do you manage developer credentials?
- Do you use secure repos?
- Are your employees trained on HIPAA, GDPR, or whatever matters to the client?
“Don’t worry, we’re careful” is not a compliance strategy. If the vendor handles sensitive data and doesn’t have a disaster recovery plan, or worse, refuses to show one, they don’t get the work.
Also, no one is amused by a vendor reusing code snippets across clients without confirming IP rights.
6) Experience, Reputation, and Team Quality
Clients care less about the brand and more about the brains. They want to know what this specific team has done, for what kind of client, and what the outcome was. Bonus points if the references are in the same sector. Extra bonus if the person pitching the project is the same person leading it.
If the vendor has a track record in fintech, clients want to see proof that goes beyond “we built an invoice app once.” Same in healthcare—saying “we’re passionate about healthtech” doesn’t mean you know anything about HL7, FHIR, or audit trails.
The people matter. If the proposed tech lead has a habit of jumping roles every 8 months, clients will notice. If the designer has never worked on mobile, they’ll ask. Clients aren’t looking for perfection, but they are allergic to risk.
7) Flexibility & Scalability
No one builds static products anymore. Clients want to know:
- Can the vendor add headcount in 2 weeks if the scope balloons?
- What happens if priorities shift mid-sprint?
Clients have seen too many “sorry, we don’t have bandwidth right now” moments at the worst time. If the vendor doesn’t have a way to handle pivots (either in process or team structure), they’re probably going to struggle on anything more complex than a portfolio site.
About the Author
Dmitry Baraishuk is a partner and Chief Innovation Officer at a software development company Belitsoft (a Noventiq company). He has been leading a department specializing in custom software development for 20 years. The department has hundreds of successful projects in such services as healthcare and finance IT consulting, AI software development, application modernization, cloud migration, data analytics implementation, and more for US-based startups and enterprises.
