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According to Statista, the global market size of outsourced services reached the level of $92.5 billion in 2019 and this number tends to grow.
This statistic shows that more and more companies tend to delegate a certain part of functions to third-party vendors. It makes outsourcing SaaS product development a common practice for most industries, especially for product development companies.
What’s more, top global product companies like Skype, Opera, and WhatsApp (we will discuss them later) have successfully outsourced product development that resulted in success.
But why so many product startups like SaaS companies and others actively use IT outsourcing?
In this post we share top cases when product outsourcing is a good idea, discuss how your startup can benefit from outsourcing, and explain outsourced product development meaning.
Simply put, outsourcing development or software outsourcing means that you delegate specific functions to a third-party vendor that has deep expertise and solid experience in a certain sphere.
Example: Insurance tech startup from California outsources machine learning functionality to get access to machine learning experts they don’t have on a team.
Most often, outsourced product development makes sense when you want to get a turn-key software solution fast and on budget.
People usually use the software product outsourcing term to emphasize that they will get a complete software product as a result of it.
However, you can also find those who mean product support, legacy software modernization, new feature development, or anything else.
This model allows you to avoid spending days, weeks, or even months on talent acquisition to gather the right specialists in your software development team.
It works especially well when you want to build a minimum viable product (MVP) to validate your product idea.
What is outsourcing in software engineering?
In simple terms, outsourcing means that the right software development company can provide skillful and experienced technical specialists whose expertise is ideal to cover your project needs.
As you can see, there is not much difference between those terms, and you can safely use any of them when you want to talk about software outsourcing.
Now, when it is clear, I want to share with you some prominent outsourced product development examples of the well-known global brands and top reasons why startups should consider outsourcing.
Offshoring purpose: cost optimization
The most popular global mobile messenger app with 1.6 billion monthly active users as of 2019, WhatsApp has initially been an outsourcing offspring. In 2009, the founders of the mobile messaging app hired Igor Solomennikov to handle iOS development.
Then, most platform’s core development was outsourced to software companies from Eastern Europe and found success. WhatsApp quickly became one of the top-ranking apps on App Store, Google Play, and other platforms as an SMS technology breakthrough.
Offshoring purpose: get specific expertise
One of the most popular video chat and voice call platforms with over 300 million monthly users, Skype has mostly begun as an outsourced product development initiative. In 2003, the application’s founders offshored back-end development to experienced professionals from Estonia and totally succeeded.
Real-time messaging, video chat, and file sharing are some of those features created through software development outsourcing.
To confirm the level of Skype success, we should mention that the platform was acquired by eBay for $2.5 billion in 2005 and ultimately by Microsoft for $8.5 billion in 2011.
This case was one of those that attracted much attention to outsourced product development with reasonable rates, superior talents with deep expertise from Ukraine, Estonia, Poland, and other countries.
Offshoring purpose: cost reduction and higher scalability
One of the world’s largest Internet consumer brands with over 380 million monthly active users, Opera is also a great example of successful outsourced product development.
Dozens of developers from over 25 locations worked remotely to build the browser’s C++ codebase and the accompanying software and this offshoring model got on track.
The key purpose was to decrease financial risks along with lesser investment.
As we mentioned above, a firm is most likely to outsource services when they are looking for financial benefits, need an expert opinion, or want to access rare skills.
When you come up with a new product idea, you start building a business plan which should include solutions to each project development stage.
Here you realize the lack of resources, experience, and expertise in most or several aspects of building and launching a product.
Add to that the shortage of software developers and competition with established businesses with generous remuneration packages.
Outsourced product development means that you can gain access to all competencies in a time- and cost-effective way. Consulting, analytics, marketing, UI/UX design, viable MVP development, and custom software development services are only a drop in the bucket that you can benefit from within your product.
If you want to build and launch your startup in a fast way, then outsourced product development will become a great fit for your business.
But the good news is that nowadays software outsourcing companies can provide you with turn-key solutions that meet most of your project needs, specifics, and budget.
IT outsourcing wasn’t always a success story for Ascendix and it took us to five different IT outsourcing locations before we found the optimal outsourcing model for a product company like ours.
When outsourcing product development back in 2005, we wanted the ability to use the development team of the vendor as an extension of our software team, and eventually we found a software outsourcing company from Eastern Europe that assembled a team for us and then let us do its buy-out.
This model today is known as a dedicated team or staff augmentation.
In this scenario, you will select from vetted employees of the outsourcing vendor, they might work only on your project, communicate with you directly and follow your processes and management style.
Quite often, the outsourcing company might recruit developers to match your specific requirements if you are looking for a long-term engagement (typically, one year or more).
There are vendors that would require full-time employment for all team members, there are also those that can provide temporary, on-demand professionals, e.g., designers, business analysts, quality assurance, DevOps, and more.
What’s more, a product development outsourcing company may provide flexible and demand-specific engagement models for your startup.
For example, at Ascendix we have 10+ years of successful software development services that allow us now to offer versatile contract options.
Depending on your project needs, you can select a fixed price, time & material, or a dedicated team. Also, you can hire either several developers or a whole technical team that will take care of your project from scratch till launch and further support.
Ultimately, you can choose whether you want to personally manage the team or avoid active involvement and focus on other product aspects.
In case you want to fully delegate, an experienced outsourcing company with many years of expertise will fully coordinate the work through a project manager.
This professional will become your contact person who solves any challenges that may emerge, update you on the project progress, and answer your questions.
A project manager is a professional that will discuss your project specifications, requirements, schedule, and budget during the initial discovery phase.
He/she will be responsible for micromanagement in terms of planning sprints, creating a backlog, setting and meeting deadlines, and preparing product demos.
As one of the Founding Fathers of the US, a polymath, politician, leading writer, and diplomat, Benjamin Franklin once said:
We’re at your service with 10-year expertise. Just fill in the form and we’ll send an estimate.
“ Time is Money. ”
One of the benefits of outsourcing software development is time savings.
An experienced software development company will form a technical team of professionals according to their skill set and your project requirements.
Everything you need is to conduct a discovery phase where you provide project specifications, budget expectations, and the desired timeframe. The company will take care of the rest.
As a startup, you most likely carefully monitor allocated financial resources and outsourced product development may become your coachfellow.
It allows you to gain access to a worldwide talent pool and hire technical specialists that suit your budget.
But don’t fall into the trap of selecting the cheapest outsourcing vendor.
Make sure to check the competence of the team that will work on your project:
According to the Silicon Valley Bank’s U.S. Startups Outlook 2017, over 30% of companies are outsourcing software projects from the USA.
What’s more, as we mentioned earlier, such global giants as WhatsApp, Skype, Opera, and others are among those companies that used outsourced software products to decrease financial risks.
Building an in-house team may become a much more cost-intensive challenge that requires your time, effort, and dedication. However, this is definitely a great choice if you have already launched a startup and you are confident and satisfied with your in-house team.
Benoit Mandelbrot, mathematician, and polymath with broad interests in the practical sciences, once said:
“ There is a saying that every nice piece of work needs the right person in the right place at the right time. ”
These words can be greatly applicable to launching a startup when the time is right. The more you are waiting for, the more your competitors gain customers’ hearts, and the more difficult it will be for your product to compete and grow recurring revenue.
Outsourcing software development for startups helps them build, test, launch, and scale a software product in a fast way. There is no need to spend much time on hiring a complete in-house team, and verifying its skills. What’s more, you can avoid the potential risks of losing your in-house tech specialists during your product development that may result in wasted time and financial losses.
When you hire an experienced outsourcing software company to help build your product, you automatically gain ample opportunities.
An IT agency can provide valuable consultation services about your product idea, business plan, and the way you want to move forward. It becomes possible when an outsourcing company has solid experience in building, launching, and supporting similar software products.
This way, they can help you choose the most relevant monetization strategy, suggest on adding/removing/modifying your provided software features (if any), and share market insights based on previous experience.
Some companies also offer the CTO as a service when they act as your technology consultant, but without a stake in your company.
So, if you successfully outsource software development to a third-party vendor, you get a wide range of opportunities in the future that can greatly influence your SaaS product development strategy.
Agile software development has been a trend for years because it reduces time to market and gives you the flexibility to change the roadmap on the go. If you are completely new to Agile and Scrum, check out our post on scrum metrics we use to measure software productivity and where we explain what Agile is.
As a startup, you most likely want to take baby steps and see the results at the moment. It allows you to make changes on the go, continuously improve the product aligned to the new market trends, provide stakeholders with fractional parts of working software, and gather feedback from early users even before the startup launch.
Software companies that provide outsourced product development following the Agile methodology may become a great option for your business. They can provide experienced project managers (Scrum masters) that together with a development team will break down the project into sprints (1-2 weeks). Each sprint has a goal that stands for a key feature or a software component that will be tested and demonstrated at the end of a sprint.
For sure, you can complement your in-house team with a Scrum Master, but then again deposit time for hiring and onboarding.
Quite often, outsourcing companies provide Agile training and help to set up the right processes to ensure the high productivity of your team.
As you can see, it’s much easier and faster to implement the Agile methodology and avoid micromanagement with an outsourcing software development partner.
No matter how big your product is, cost reduction and digital security improvement are the cornerstones of the win-win strategy for both your customers and profit growth.
One of the SaaS-based product development aspects that you can outsource is cloud migration which allows you to transmit the required data to a cloud computing environment.
First, cloud migration services enable your startup to reduce hardware maintenance costs and avoid costly data centers support expenses by only paying for what you use.
Second, you get an automatic backup feature and logging of primary metrics which is crucial to perform disaster recovery. The logs will help your startup identify critical issues and their root causes to avoid such experiences in the future.
Third, cloud migration allows you to achieve higher flexibility and better product team collaboration. No need for a specific place to deploy, update, or fix issues.
Among the top cloud providers, we recommend you consider Amazon Web Services, Microsoft Azure, and Google. At Ascendix, we can help your startup handle cloud migration to all these platforms, provide 24/7 tech support, DevOps services, or even build a scalable cloud solution.
A minimum viable product is a must-have product development process stage for your startup. An MVP is a Lean Startup methodology approach that allows you to build a product with enough features that provide the key-value through minimal time and fund investments. So, let’s discuss the benefits of MVP outsourced product development.
First, a minimum viable product is a perfect way to collect feedback and verify your product idea. You need to build only the core features, share your limited product version with early adopters, and gather feedback about the value proposition.
Second, product MVP development is about time and cost savings. It helps you validate the value proposition before developing complex functionality that requires sufficient investments.
You should get clear answers to these questions and decide whether you need to build a full-featured product or change your business idea.
MVP development outsourcing is a common practice even among the top product companies. For example, despite 90,000 in-house developers, Google decided to outsource SaaS product development of AdWords phone and email support MVP in order to cut down costs.
Concierge Service & Support
No matter how great or perfect is your product, it will definitely generate bugs and issues after the launch. Here come tech support and concierge services that can be outsourced to third-party vendors so that you can focus on continuous delivery and improvement of your product.
According to The CMO Council study, the #1 way to improve the product ownership experience for users is to provide 24/7 tech support and assistance.
At Ascendix, we provide 24/7 tech support and concierge services after product launch to handle all issues and bugs that may arise. This way, we can help you improve customer service and focus on product improvement instead of bug fixing.
CRM Development and Consulting
When you roll out the product to the market and start attracting customers, it’s of utmost importance to process requests in a fast, convenient, and effective way. Customer relationship management systems are the best way to manage your product leads and customers.
So, you can outsource CRM development or CRM consulting to get a personalized system that perfectly suits your business processes and operations.
What are the benefits of CRM outsourced product development for your startup?
These points are crucial for your startup as they allow you to increase sales, scale your sales process, and improve customer retention. So, why not outsource CRM development?
At Ascendix, we have over 25 years of consulting, development, implementation, customization, and all other CRM-related services.
We have helped multiple top companies like Jones Lang LaSalle (JLL), Transwestern, Colliers, Calson, and others improve their sales processes, optimize costs, and increase sales by times.
Below you can see a clickable case study on how we helped JLL customize their CRM and reach a six-time Dynamics 365 adoption increase.
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Outsourcing development is not the one and only solution to build a software product, but definitely beneficial in multiple cases. If you want to save time and funds, get access to a worldwide talent pool, and get a rate-expertise balance, then we recommend trying this model for your business.
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Daniil specializes in content marketing and has a deep knowledge of promoting the company's products and services through high-quality content. On the Ascendix blog, Daniil shares his tricks and tips on custom software development, provides technology trends and insights, and helps you get valuable content to make your business even more successful and profitable.
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