The Pros and Cons of Subcontracting with a Software Development Agency

Software Subcontracting

Looking to launch your own software solution but aren’t sure if a DIY approach is the best answer? Some of the biggest names in software subcontract a significant amount of their operations to external agencies, and now many smaller development firms are beginning to follow suit. According to Grand View Research, the IT Software Development market size was estimated at $343 billion dollars in 2020 and is projected to reach a staggering $410 billion dollars by 2027. With a market share that large, there are clearly advantages to subcontracting some of your development operations. Still, there are a number of pitfalls and challenges that need to be maneuvered carefully, or you could find yourself missing deliverables and manually cleaning up poorly written code. Join us as we weigh the pros and cons of subcontracting your software development project.

Benefits of Subcontracting Development

Cost Efficiency

Think about all of the costs associated with getting a development team up and running. Renting office space, hiring recruitment services, paying developer salaries, scaling development costs, and perhaps most important of all, investing considerable amounts of your own time. When subcontracting your development, there’s no need to worry about payroll taxes, personnel training, and bonuses which can eat up significant amounts of a company’s budget. Subcontracting also means your business won’t have to invest in expensive hardware, software, and development tools for your team to work with. It can also provide financial stability and consistency through monthly or annual billing so there are no surprise expenses when it comes to your budget.

An Expert for Every Task

If you are a business with an idea for a unique and specialized software project, subcontracting the labor allows you to entrust the task to experts. Take, for example, a large clothing manufacturer. They focus on sourcing the highest quality fabrics and turning them into desirable, trendy products. It’s what they’re good at. Their focus does not include the transportation and shipping of their products to retail stores. The clothing brand instead relies upon subcontracting their transportation needs to a company that specializes in that task. Why? Because the clothing brand’s time is better spent invested in what they’re good at. Sometimes it’s better to leave specialized tasks to the partners.


Trying to develop software on your own can be costly, difficult, and time consuming, even in the best of circumstances. If something were to take a wrong turn, expenses would begin to mount and project timelines could be impacted. Sometimes projects unexpectedly change directions mid-development, or a client has a last-minute request. Subcontracting the work to an experienced software firm means they will be well-equipped and flexible enough to react to the changes without needing to rebuild the entire project from scratch. Beyond that, the expense of subcontracting ends when the project completes development. A development firm could be contracted to work on your project for as long (or short) as necessary to fit any budget constraints.


Any software development company worth their salt will take full responsibility for the quality and performance of projects they develop. A formal and legally binding contract will be drawn up that dictates payments, deadlines, penalties, intellectual property protections, and other facets of partner cooperation. It’s a mutually beneficial agreement that protects both parties and grants peace of mind.

Drawbacks of Subcontracting Software Development

Communication Issues

While subcontracting doesn’t always mean the work is going overseas, it is important to keep in mind differences in time zones and languages with overseas outsourced partners. These problems can lead to frustrating communication issues if not considered beforehand. Scheduling a meeting at 11:00 a.m. Eastern would mean a meeting at 10:00 p.m. in India or midnight in parts of China. Working diametrically opposing hours can lead to lapses in communication and the inability to check on the project’s status throughout the working day. Moreover, what happens when the outsourced firm has limited or no English skills? How can you be sure that they truly understand what you and your business need? Communicating feedback and revisions through a translator tool is dodgy at best; and when it comes to delivering a quality product you can be proud to put your company’s name on, clear communication is key.

Security Risks

When contracting out software development, there will inevitably be the exchanging of ideas, innovations, and sensitive data. Signing an NDA (non-disclosure agreement) can mitigate many of the risks, but there is always the chance that some unscrupulous companies might “borrow” your ideas for their own benefit. It is impossible to have absolute control over an outsourced project, especially when the team working on it lives thousands of miles away. Some firms (Lithios included) give their clients total control over their IP.

Differing Business Approaches

The structuring, organization, and operation of your business might be completely different from the company you outsource your project to. Management systems and progress tracking tools can vary wildly and sometimes it may feel like you’re losing control of your own project. Fortunately, this can be avoided by outlining, discussing, and harmonizing the business process during the initial steps of contracting. It is also worth noting that differing approaches to business, management, and operations can potentially breathe new life into projects by offering a fresh perspective.

Possible Hidden Costs

One of the most alluring aspects of subcontracting software development is the ability to pay less while still receiving an exceptional product. Unfortunately, some companies offer such low price tags because they bake hidden fees into several aspects of their operations. This is particularly important to keep in mind if you decide to offshore your project. Some of the more common hoaxes include double-billing or hidden fees for meetings, phone calls, consultations, travel expenses, progress reports, false overtime reporting, and more. If you only catch on to these practices mid-development, it may be too late to back out and start over again, leaving your business to foot an ever-mounting bill. It is important to work with an outside agency that will not nickel-and-dime you.

Final Thoughts

In the end, subcontracting your software project can be a viable, efficient, and affordable option if you want a high-quality product developed quickly. There can be challenges and risks, but that is not a problem unique to this industry. Taking the proper precautionary steps to protect yourself and doing the necessary due diligence in selecting a trustworthy, reputable company to partner with means that in the vast majority of situations subcontracting is a smart choice. If you are ever interested in subcontracting your development to a trusted vendor, Lithios avoids hidden costs, maintains all design and development in the U.S.A, and gives clients total control over IP.

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At Lithios we value outside opinions. This blog was written by one of our guest bloggers, Jonathan Baker, with feedback from the Lithios team.

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