Custom software outsourcing: How to actually cut costs

Outsourcing your software development can feel like trying to pick a PR agency — there’s too many options, they all make bold claims, and if you choose wrong, you’ll end up paying for something that never delivers. Custom software outsourcing can absolutely cut costs, but there’s a big “but” that follows that sentence…

The harsh truth is that offshoring doesn’t necessarily save money. Sure, the per-hour cost of resources is lower, but if you spend 8x the hours, it doesn’t end up helping your bottom line at all (and hurts your time to market, quality of build, etc.).

So yes, custom software outsourcing can save you money… but only if you do it right.

(There’s the big ‘but’ I was talking about)

I’ve been part of 200+ custom software projects at this point, and I can tell you that the question isn’t “onshore or offshore?” The real question is, “What stage of the build are you in, and what kind of collaboration does that stage require?” Because geography matters… but only once you know what problem you’re actually trying to solve.

Check out the video above for the full breakdown.

We cover a ton in this episode of ENO8 Answers, but at the heart of it is this: your team structure should evolve as your product evolves. Trying to optimize for cost too early (by going all offshore from day one) is usually the fastest way to lose money — not save it.

There’s three main stages of software development, and how you structure your custom software outsourcing depends on the stage.

Let’s get into it.

Stage One: Clarity and Design (aka the Danger Zone for Cutting Corners)

This is the part of the process where everything’s a little fuzzy. You’ve got a big vision, maybe some sketches, maybe a deck you’ve been showing to investors. But you don’t yet have a fully-defined scope, a clear MLP, or a plan for how you’re actually going to execute.

This is where people get tempted to go offshore to “save money,” and nine times out of ten, that’s a mistake. At this stage, the biggest risk isn’t cost… it’s misalignment. You need tight collaboration between a few key players: your product owner, your design lead, and your technical lead. You need to be having real-time conversations. Working sessions. Debates. You need to clarify not just what you’re building, but why, and for whom.

If those roles are spread across time zones and language barriers at the outset, it’s going to take twice as long and cost you more in the end (and that’s assuming you actually have the staff internally to manage it well).

That’s why I always recommend using mostly onshore resources during Stage One — even if it’s just fractionally. A few senior folks plugged in at 5–10 hours a week can be more valuable than a full offshore team running in the wrong direction.

One quick tip I love during this phase: the demo script method. It’s simple — just imagine sitting down with a user or investor and walking them through your product. What do you show them? What do you click? What matters most? Writing that out (step-by-step) forces clarity. You don’t need a 40-page spec doc. Just a clear outline in a Google Sheets. (Bonus: that sheet can double as a QA guide later, or even be imported into your ticketing system to jumpstart backlog grooming).

Stage Two: MLP Build — the Sweet Spot for Blended Teams

Once you’ve got clarity and a real plan, now we’re off to the races. This is the moment where you start writing code, designing real UI, and preparing to launch the v1 of your product. You’ve defined your MLP (that’s minimum lovable product, by the way. Not just “viable,” not just a checklist of features, but something your users will actually enjoy using. Something they’ll prefer over the next-best alternative).

This is where blending offshore and onshore starts to make sense in the custom software outsourcing equation.

In stage 2, execution is the name of the game, and here’s where you can begin to layer in offshore resources — developers, QA, DevOps, specifically — to scale your capacity and move faster. But here’s the trick… don’t cut the original leads loose just because “design is done.” Keep that same product owner, design lead, and tech lead involved. They don’t have to be full-time, but their ongoing involvement keeps the whole team aligned and reduces the risk of scope drift.

We’ve seen a lot of teams try to throw everything over the fence at this point — full handoff to an offshore team — and while that can work, it almost never does. 

Now, if you have excellent governance in place (think structured ceremonies, daily standups, sprint planning, retros, clearly defined acceptance criteria, sprint demos, the whole nine yards), you can manage an offshore dev team. But just throwing the design over the fence will almost never yield a great result when they throw it back.

When teams skip these insights, misalignment creeps in. Executives get frustrated. Users get confused. Budgets get blown. A little process discipline here makes a massive difference — especially with distributed teams.

Stage Three: Scale and Sustain

Now your product is live, users are giving feedback, and you’re entering the “ongoing product development” phase. Here, going heavier on offshore resources starts to make more sense. The product is defined. The roadmap is clearer. You’ve worked out a lot of the kinks.

That said, you still want some roles closer to home. We’ve seen teams do really well with a “governance pod” onshore — the team that owns the roadmap, defines scope, and manages quality — and then distribute pods of developers offshore. You get the cost savings, but you keep the decision-making close to the business.

And if you’re thinking about support, nearshore might be your friend here too. Especially if you’ve got users in the U.S. and need someone available during business hours to triage production issues. 

One developer who’s nearshore and familiar with the system can save your neck when things break mid-day.

Other Things to Consider when Custom Software Outsourcing

Let’s talk engagement models.

This part gets overlooked way too often. Before you even worry about team composition, ask yourself: do you want to own delivery? Or do you want a partner to own it?

If you’ve got the skillset and capacity in-house, a team extension model might work beautifully. That’s where a partner helps staff your team, but you manage delivery. You’re running the show.

But if you’re early-stage or wearing twelve hats already, a fully outsourced model might be better. In that case, your partner owns scope, timeline, delivery — the works. 

The key is to be brutally honest with yourself. Do you have the experience? Do you have the time? Are you building just the product, or the whole company? Your answers will point you toward the right model.

And whatever route you take, choose your partners wisely. Look for a track record of follow-through — did they deliver what they promised? Do they play nice with your team? Do they offer flexible, fractional roles when you need them? Ask for references. Talk to past clients. This is not the place to cut corners.

There’s a lot more in the video — including some pro tips for managing distributed teams, mistakes to avoid when hiring your first product roles, and why documentation is your future best friend (even if you hate writing it now). 

If you’re anywhere in the process of building a digital product, this episode will help you make smarter custom software outsourcing staffing decisions — and avoid some of the expensive traps we’ve seen too many teams fall into.

And if you want to go deeper on our Innovation Lab — the framework we use to help teams build clarity, gain traction, and launch smarter — head here.

Got questions? Feedback? A topic you’d like us to tackle in a future episode? Shoot me a message on LinkedIn or drop us a note. We’d love to hear from you.