To choose a software development company, define your project scope first, then compare vendors on relevant experience (case studies and client references), a clearly explained development process such as Agile or Scrum, security credentials like ISO/IEC 27001 or a SOC 2 report, contract terms covering pricing model, code ownership and confidentiality, and how well you communicate with the team. Compare price only after quality and fit.
Key Takeaways
- Learn the basics of your project’s technology first, so you can judge each software development company’s answers.
- Ask for case studies and references from similar projects; an NDA does not stop a vendor from describing its process and results in general terms.
- Choose a pricing model deliberately: fixed price suits a well-defined scope, while time and materials suits changing requirements.
- Check security credentials such as ISO/IEC 27001 (current edition 2022) or a SOC 2 report, and read what each one actually covers.
- Get code ownership, confidentiality and handover terms in writing before work starts.
Choosing a software development company is a key step towards your company’s growth. A well-run software project can improve how a business sells, serves customers and operates, while a badly run one can waste months of budget.
That’s why you should carefully choose your partner and find a software development company that has the necessary knowledge and experience to deliver the results you expect. In this article, we will show you five of the essential factors you should consider when choosing a software development company. Let’s just dive in!
Finding a reliable, experienced software development company can be tricky. There are hundreds of them out there, and each one claims to be your perfect match. If you’re struggling to find an agency that will materialize your vision, no worries! Read on, and discover elements that really matter.
Gain some knowledge about software development
Get acquainted with the software development world, at least to some extent. For instance, try to find out what technologies and frameworks are used in projects similar to yours. Such an approach has some significant benefits.
- The more you know about your future project, the more accurate questions you can ask and assess the quality of the agency’s answers.
- You can assess if the solution you originally had in mind really should be implemented.
Price first last
When it comes to software development, price should not be the first thing you compare. After all, you want to build an app that will attract hundreds of customers! Therefore, it should be designed with high quality in mind, and the cheapest bid is often the one that leaves out testing, documentation or support.
Make sure that the software development company you pick can deliver the quality you expect. Show them your vision, provide a list of functions you expect to see, and help them understand the big idea behind your project. Once the scope is clear, ask for an itemized estimate, so that quotes from different companies can be compared on the same basis.
Verify experience
That’s true, most likely, your agency has already signed dozens of NDAs. But the agency you choose should not hide behind them. On the contrary! They should be able to show you some real numbers or case studies.
Have they executed a similar project anytime in the past? How did it go? Was the client satisfied? It would be best if you asked all of these questions before signing a contract.
Find out how they work
When it comes to software development, there’s no place for guessing or for empty promises. The software development company of your choice should be able to talk you through the entire development process, show you the crucial stages and milestones, and assign you a project manager.
If they can’t describe what their work is going to look like, or their explanations are vague, you’d be better off with some other company.
Do you like working with them?
Although it may sound unscientific, you should trust your gut. What do you feel during meetings with your agency?
Do they seem like they know the drill? Are they pleasant and helpful? If there’s no chemistry between you and your agency, the cooperation will most likely be problematic. You have to feel this cooperation.
Following these rules will not guarantee success, but it greatly improves the odds of choosing a partner that can deliver your project.
This article was created with substantive support of Polidea.com.
Which Pricing Model Should You Choose?
Software development companies usually quote under one of two contract models, and the choice decides who carries the cost risk. Under a fixed-price contract, the client pays a lump sum for the agreed work, so the contractor absorbs any overrun. Under a time and materials (T&M) contract, the client pays for the hours worked and materials used, so the client carries the risk unless a guaranteed maximum price is added.
| Factor | Fixed price | Time and materials |
|---|---|---|
| How you pay | One agreed sum for a defined scope | Hours worked plus materials, billed as the project runs |
| Who carries cost risk | The software development company | The client (unless a guaranteed maximum price is agreed) |
| Best for | Well-defined projects | Projects whose requirements are uncertain or expected to change |
| Main drawback | Changes need new negotiation and often cost extra | The final cost is not known at the start |
For context on labor costs, the US Bureau of Labor Statistics reports a median annual wage of $135,980 ($64.44 per hour) for software developers in May 2025, the newest figure available as of October 2026. Agency rates differ widely by country and seniority, so compare itemized quotes rather than headline hourly rates. Our guide to the best countries for offshore software development covers the regional trade-offs.
How Do Agile and Scrum Affect the Way a Vendor Works?
Most software development companies describe their process as Agile, so it helps to know what the term means. The Manifesto for Agile Software Development was published in 2001 after a meeting of 17 developers in Snowbird, Utah. It values individuals and interactions over processes and tools, working software over comprehensive documentation, customer collaboration over contract negotiation, and responding to change over following a plan.
Scrum is one of the best-known Agile frameworks. Its authoritative reference is The Scrum Guide by Ken Schwaber and Jeff Sutherland, last revised in November 2020. Work is delivered in sprints that usually last between one week and one month, two weeks being the most common, and a Scrum team has three roles: a Product Owner, a Scrum Master and Developers. In practice, ask the vendor:
- How long their sprints are and what you will see at the end of each one.
- Who acts as Product Owner, and how much of your own time that role will need.
- How changes to the scope are requested, estimated and approved.
Teams that prefer a continuous flow of work instead of sprints often use Kanban; see our tips for Kanban project management. For more of the vocabulary, our overview of Agile certifications explains the main credentials.
Which Security Credentials Should You Ask About?
A software development company will handle your code, data and often your customers’ personal information, so security evidence matters. Three references are worth knowing:
- ISO/IEC 27001 sets requirements for an information security management system. The current edition dates from 2022, with an amendment added in February 2024. A certificate applies only to the scope stated on it and does not promise that no security incident will occur, so ask to see the scope.
- SOC 2 is a suite of audit reports defined by the American Institute of Certified Public Accountants (AICPA) covering security, availability, processing integrity, confidentiality and privacy. A Type 1 report examines how controls are designed; a Type 2 report tests whether they worked in practice over a period of months. SOC 2 reports are intended for customers and other stakeholders, not the public.
- The OWASP Top 10 is the Open Worldwide Application Security Project’s list of critical web application security risks. As of October 2026, the most current edition is the OWASP Top 10 2025. Ask how the company tests its code against it.
What Protects Your Code and Confidential Information?
A non-disclosure agreement (NDA) is a contract that defines confidential information and restricts who can access it. A unilateral NDA protects one party’s information; a mutual (bilateral) NDA protects both sides, which is common when both will share sensitive material. A typical NDA states what counts as confidential, how long the obligation lasts, which disclosures are allowed by law and what happens to the material when the agreement ends.
Beyond the NDA, make sure the main contract states in writing who owns the source code and other deliverables, where the code is stored, and how it will be handed over if the relationship ends. Laws differ between countries, so have a qualified lawyer review the contract before signing.
Step-by-Step: How to Shortlist and Choose a Vendor
- Write a short brief: the problem, the main users, the must-have features and your budget range.
- Shortlist three to five companies that have built similar products, in your industry or on the same platforms.
- Ask each one for case studies and at least two client references, and call the references.
- Ask them to walk you through their process, sprint length, reporting and who your project manager will be.
- Request security evidence (ISO/IEC 27001 certificate and scope, SOC 2 report, or a description of their testing).
- Compare itemized proposals under the same pricing model.
- Agree contract terms on ownership, confidentiality, warranties and handover, then start with a small paid phase, such as a discovery workshop or prototype, before committing to the full build.
If you are building a mobile product, our guides to hiring local vs remote app developers and mobile app testing cover the next decisions.
Red Flags When Choosing a Software Development Company
- No case studies, no references and no willingness to describe past work even in general terms.
- A fixed quote given before the company understands your requirements.
- Vague answers about process, testing or who will actually write the code.
- No named project manager or regular progress demonstrations.
- Reluctance to put code ownership and handover terms in the contract.
- Pressure to sign quickly or to pay most of the budget up front.
Frequently Asked Questions
What is the most important factor when choosing a software development company?
Relevant, verifiable experience is usually the most important factor. A software development company that has delivered similar projects can show case studies and references, explain its process in detail, and spot risks early. Price matters, but only when comparing vendors that already meet your quality bar.
Is fixed price or time and materials better for software development?
Fixed price is better for projects with a clearly defined scope, because the vendor carries the risk of overruns. Time and materials is better when requirements are likely to change, because you pay for the work actually done; adding a guaranteed maximum price can limit the client’s risk.
What questions should I ask a software development company?
Ask about similar projects and references, their development process and sprint length, who your project manager will be, how scope changes are handled, how they test code and protect data, who owns the source code, and what support they provide after launch.
Do I need an NDA with a software development company?
An NDA is advisable whenever you share business plans, data or unreleased product details. A mutual NDA protects both sides if the vendor will also share confidential material. An NDA does not replace a clear clause in the main contract on who owns the code.
What does ISO 27001 certification mean for a software vendor?
ISO/IEC 27001 certification means the company’s information security management system was found to conform to the standard, whose current edition is from 2022. It covers only the scope stated on the certificate and is not an assurance that no security incident will happen.
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