After you've solved the nuts and bolts issues of your product, it's time to push it to grow. Outsourcing is a fine way to go about it. The Philippines is an excellent country of choice.

This short post will give you tips on how to successfully outsource your software development to the Philippines.

First things first: let's go through what you need to know if it's your first time to outsource software development.

What are the things to look for when choosing a country to outsource to?

Highly developed IT market.

The Philippines saw an uptick in the demand for its software development services in 2020. Currently, more than 400 software companies in the Philippines serve U.S.- and European-based clients. It is a large number when compared with the country's size.

Lower costs.

India is arguably the Philippines' biggest competitor in the realm of outsourcing software development. The two countries share similar rates as well. In India, developer salaries range from $19 to $40 an hour. The Philippines offers more competitive pricing, ranging from $13 to $25 an hour. The actual upper and lower limits may vary.

High levels of education.

The Philippines is ramping up its IT curriculum with backing from the government. This initiative is inspired by the country's success in the call center and software development industries.

Ability to communicate in your preferred language. In the Philippines, English is both a government-recognized language and a lingua franca. Foreign clients find conversing with Filipinos is easy because Filipinos have a fairly neutral accent.

Which part of your software development can you outsource to the Philippines?

Development: Writing code for a new feature or a minimum viable product.

Modernization: Rewriting outdated software to make it faster, more secure, and compatible with new app integrations.

Testing.: Using manual and automated methods to deliver quality software faster.

UI/UX Design. Creating new designs or improving existing designs to improve the usability of software or increase conversion.

Project management. Deploying strategies to increase the efficiency and quality of software development.

What are the different pricing models for software development in the Philippines?

Fixed price = pay for the cost of the project

In the fixed-price model, your outsourcing partner bills a specific price for a project.

A fixed price model is ideal if your project meets the following criteria:

• The scope and requirements of your project are clear and unlikely to change.
• The project delivery method is clear.

Advantages of a fixed contract:

Low financial risks. Unforeseen costs are shouldered by the vendor.

Predictable scope and timeline. The contract is planned out in detail.

Disadvantages of a fixed contract:

Miscommunication is a huge risk. The software you will get can be completely different from what you want if you miss a detail or write unclear requirements. It's important to choose a software company that communicates well and helps you write clear software requirements.

The fixed price model is not ideal for complex projects. Projects like e-commerce websites or multi-functional web apps have too many dependencies, integrations, and complex functions. It is hard to accurately predict the costs and timeline of projects of that nature.

The scope is limited because adjusting the scope means adjusting the price and timeline of deliverables.

Time-and-materials = pay for the time it takes to complete a project

In this model, you pay for the expertise of the software development team that you hire.

Benefits of a Time-and-materials model

The scope is flexible so you can respond to changes in the market and customer behaviors.

You can build more and plan less. Instead of writing a 20-page software requirement document, you can ship features in small increments.

Disadvantages of a Time-and-materials model

The project can drag on without any feature being released, especially if no prioritization framework is implemented.

The overall cost of the project is hard to estimate because the timeline is flexible.

How do you decide between a fixed cost and a Time-and-materials contract? It depends on the nature of your project. Time-and-materials is ideal for complex and large-scale projects. On the other hand, fixed-price contracts work best for small projects with tight deadlines, such as building a minimum viable product.

How can you increase the likelihood of a successful software outsourcing?

Fixed price = pay for the cost of the project

In the fixed-price model, your outsourcing partner bills a specific price for a project.

A fixed price model is ideal if your project meets the following criteria:

• The scope and requirements of your project are clear and unlikely to change.
• The project delivery method is clear.

Advantages of a fixed contract:

Low financial risks. Unforeseen costs are shouldered by the vendor.

Predictable scope and timeline. The contract is planned out in detail.

Disadvantages of a fixed contract:

Miscommunication is a huge risk. The software you will get can be completely different from what you want if you miss a detail or write unclear requirements. It's important to choose a software company that communicates well and helps you write clear software requirements.

The fixed price model is not ideal for complex projects. Projects like e-commerce websites or multi-functional web apps have too many dependencies, integrations, and complex functions. It is hard to accurately predict the costs and timeline of projects of that nature.

The scope is limited because adjusting the scope means adjusting the price and timeline of deliverables.

Time-and-materials = pay for the time it takes to complete a project

In this model, you pay for the expertise of the software development team that you hire.

Benefits of a Time-and-materials model

The scope is flexible so you can respond to changes in the market and customer behaviors.

You can build more and plan less. Instead of writing a 20-page software requirement document, you can ship features in small increments.

Disadvantages of a Time-and-materials model

The project can drag on without any feature being released, especially if no prioritization framework is implemented.

The overall cost of the project is hard to estimate because the timeline is flexible.

How do you decide between a fixed cost and a Time-and-materials contract? It depends on the nature of your project. Time-and-materials is ideal for complex and large-scale projects. On the other hand, fixed-price contracts work best for small projects with tight deadlines, such as building a minimum viable product.

How can you increase the likelihood of a successful software outsourcing?

Start with a small project

Test the waters instead of jumping right in. Portfolios and online reviews are great. But what works well for other clients may not work for you. A reputable software company will not mind letting you evaluate their skills thoroughly--instead of forcing you to sign a contract that might be expensive to get out of.

Choose the right outsourcing strategy for your project [create graphic]

There are three main outsourcing strategies when hiring a software developer:

Staff augmentation

Managed team

Dedicated team

Staff augmentation is when you hire one or more personnel to work with your internal team. A managed team is an individual or a team that works with your internal team. The difference between an augmented staff and a managed team lies in what they deliver.

In staff augmentation, you pay for the number of hours a developer puts into contributing to your project. A managed team does the same, except that they need to meet a certain level of service quality.

A dedicated software development team works on your project for longer periods. Just like a managed team, they commit to a level of service quality. Their long-term commitment helps them learn more about your software product as it evolves.

Unlike a managed or augmented team where you take part in hiring each team member, a dedicated team is hired and supervised by the vendor.

The team model you need depends on your project, expertise, and the amount of time you can put into managing a team.

A dedicated team is ideal for longer-term projects where you want a high level of service and minimal supervision. A managed team or augmented staff is ideal for shorter-term projects where you have the technical expertise to select the best people.

Establish project goals and KPIs

Project goals ensure that the money you invest in outsourcing is not wasted. KPIs determine what works and what needs to be improved so that your outsourced team can meet project goals. The following are examples of KPIs for software development:

Lead time determines how fast you go from drawing board to working software.

Active days measure how much time a developer spends writing code for the project. Active days help you gauge the costs of interruptions such as meetings and admin tasks.

Production measures the output of a software team. Different approaches to software development use different ways of measuring production.

KPIs can be broad and nuanced. A project manager is the best person you can discuss this topic with.

Review Your Non-disclosure Agreement (NDA)

When you outsource your development to a Philippine vendor, you will need to share sensitive information for the project to succeed. The vendor might do so as well. To protect sensitive information, you and the vendor will sign a non-disclosure agreement.

As the disclosing party, you have the right to:

• determine which sensitive information the company can access; and
• limit the people who can access sensitive information.

Here's one thing to keep in mind: Some privacy and intellectual property (IP) rights, which are protected in the United States, may not be protected in the vendor's country. Plus, pursuing legal action in a foreign country can be an arduous and time-consuming ordeal.

Ideally, you should seek legal advice regarding intellectual property protection and contract laws.

Look for verified client reviews

In place of legal certainties, the next best thing you can count on is an outsourcing partner's reputation. Verified client reviews are a good way to determine the service quality and legal compliance of an outsourcing vendor.

Define your exit clauses

An exit clause is needed when you want to terminate a contract with a vendor before project completion. Depending on the circumstance, you or the vendor will need to pay for the exit management cost.

If you want to terminate a contract for internal reasons (reasons with your company that exclude the vendor), you should pay for the exit cost.

If you terminate a contract because of poor performance by the vendor, they should pay for the exit cost. You want to avoid signing a contract in which you are obliged to pay for the exit fees, regardless of the reason.