Outsourced Product Development – The Premier Choice for Startups

A report shows that 74% of businesses are outsourcing IT services, and 87% plan to maintain or increase their use of IT outsourcing. Working with remote product development teams is now a present reality, not just a trend.

When you do outsourced product development, external teams can help find new technological solutions and speed up development at a lower cost. With outsourcing’s rise in popularity, it’s important to know which functions to outsource and the factors to consider when transitioning.

I. Why Do Companies Outsource Product Development?

There are many compelling reasons why businesses consider outsourcing product development. Here are some key points:

1. Access to Expert Knowledge, Skills, and Experience

Outsourcing product development means engaging with a third-party company that excels in its field. These companies have spent years honing their skills and knowledge, becoming proficient in various aspects of product development.

Product Development Outsourcing

Outsourcing becomes viable when your business lacks the necessary resources, experience, or expertise to develop or deploy an application. The shortage of skilled software professionals and competition from established companies offering attractive salaries also make outsourcing appealing. It provides access to skilled product designers and technology partners with expertise in new technologies.

Outsourcing product development allows you to access a wide range of skills cost-effectively and timely. Services include consulting, analytics, marketing, UI/UX design, MVP development, and bespoke software development.

2. Reduce Time Spent on Hiring and Onboarding

One of the main benefits of outsourcing product development is saving time. Many businesses spend countless hours hiring and onboarding talent, only to find unsatisfactory results. This process consumes valuable time and delays the goal of speeding up time-to-market.

An expert software development company will assemble a team of technical professionals based on their skills and the project’s requirements. You only need to go through a discovery phase where you provide project details, budget expectations, and the desired timeline. The company will handle the rest.

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3. Significant Cost Savings

The idea that businesses choose outsourcing only for cost-effectiveness is outdated. While cost reduction is a major benefit, there are several other advantages. Hiring and training employees in-house is expensive. You must also consider the costs of acquiring and maintaining technical equipment and human labor. These large initial investments can be risky if the project doesn’t go as planned.

Outsourcing new product development teams is less expensive and removes the need to worry about overhead costs like software licenses, upgrades, equipment upkeep, and employee benefits. It also provides infrastructural benefits, saves on hiring and training costs, and other significant unexpected benefits.

4. Speed in the Process

Many businesses choose outsourcing a product for its speed. Outsourcing enables companies to speed up their development process, which is why it has become popular. The outsourced workforce helps shorten the time to market for the product, which is exactly what every business wants.

Every business owner wants to get their products or services to customers quickly. Outsourcing achieves this by speeding up the development process and ensuring the finished product is delivered on time. Companies around the world outsource teams to hasten their development process.

II. Important Factors When Outsourcing Product Development

Work with Top Experts: Outsourced product development expands your options, allowing you to hire the best product developers worldwide.

Find Cheaper Sources than In-House Development: In a survey from last year, 70% of respondents cited cost reduction as the top reason for outsourcing. To handle development internally, a business must create an IT department, which requires time and money. Outsourced product development is usually cheaper than maintaining in-house teams; you can save on recruiting, training, and paying salaries while still working with experts.

Find Teams with Similar Experiences to Start Up Quickly: Building an in-house team and setting up a product development base can take months. Outsourcing can allow you to finish a prototype in just a few weeks.

Speed is crucial in product management. Software outsourcing services provide skilled teams with experience on similar projects and familiarity with the same inspection methods and tools you use. Ensure you have a clear implementation plan and understand how the outsourced team will work alongside your own work culture. Scale before the market changes. Outsourcing is often the best solution for quickly implementing and scaling projects.

Concentrate on Core Activities: When starting and running a business, an entrepreneur must consider many factors. Handling these roles can be difficult if a business owner is not a finance specialist, lawyer, personnel officer, or analyst.

Choosing a partner with a proven track record in your industry can help ensure the high quality of your product. To ensure smooth operations, align the development methodology of your internal and outsourced teams. This includes sprints, record keeping, issue tracking accounts, general reporting standards, and testing approaches. All this will help you seamlessly integrate an outsourcing team into your workflow.

Identify Your Current Stage: Figure out what stage you are at. Most experienced product development providers can make even a basic idea successful. You can get support and guidance if you are still creating a plan or already have a working prototype. Working in these early steps allows you to grow a team in other areas to meet your business’s growing demands.

III. When You Should Outsource

High competition in the market pushes organizations to find faster ways to develop new products. Often, customer demand outpaces suppliers’ ability to innovate. When the market requires new products faster than companies can deliver, outsourcing products and services can help companies operate more efficiently.

Instead of debating if outsourcing product development suits your company, consider these situations where delegating a project to an experienced outsourcing team is best.

Lacking In-House Resources and Skills

Effective product development needs specific skills. It’s one thing to have a product idea and another to bring it to life. The process requires understanding prototyping, deep scanning, documentation, testing, and more. Outsourcing to a specialized company is advisable if your in-house team lacks expertise in any of these areas.

Meeting Tight Deadlines

Managing all stages of product development internally can be difficult, especially with tight deadlines. Hiring remote developers who offer outsourcing services can help if you need your project completed swiftly. Outsourcing parts of the work allows you to handle multiple stages simultaneously, speeding up the overall development process.

Factors to consider when outsourcing product development

Development Is Not Your Core Business

Software development needs a strong knowledge base and solid expertise. If your main focus is not on product development, it makes sense to outsource the tasks that require specialized developers.

Launching Your Product with Market Barriers

Many countries have high barriers to new products. For instance, financial products often face several regulatory hurdles that can cause long delays. If you have a tight budget and schedule, outsourcing can help you launch your product successfully.

Needing a Dedicated Team to Design a Unique Product

Hiring a remote team can help create unique products. Bringing in top talent can add creativity to your organization. While working with the same in-house developers over time provides experience, it can also lead to repetitive models. A skilled professional can offer fresh ideas, adding new energy and excitement to the development process.

IV. Things to Avoid in Your Outsourced Product Development Process

Product developers are in high demand as the local talent pool shrinks. Therefore, outsourcing product development is an effective way for both startups and established companies to grow while keeping costs low.

Despite the benefits, you should avoid some common mistakes when selecting your development partner.

Poorly Defined Software Requirements

When outsourcing, it is crucial to have clear and complete software requirements to ensure project success. A common mistake is not providing well-defined, structured requirements. Both parties need a solid understanding of the project needs, not just a vague idea.

Solution: Ask your project manager or hire an outsourced one to create a detailed scope of work. This should include everything from the project’s main goals to specific tasks that need attention. Having a technical cofounder for your needs guarantees that both teams fully grasp and prevent unreasonable timelines. 

Don’t Understand the Full Cost of Your Project

A common mistake organizations make is not thoroughly examining the estimated cost or contract of the project. Often, the initial estimate may seem appealing, but a closer look reveals that several essential items are not included in the quote.

Solution: Request a complete quotation from your product development partner. Check what services are included and compare the global prices for the same services. Ask questions about the developers involved and the time needed to complete the project to better understand the actual costs.

Don’t have a Clear Project Plan

When you outsource a project, having a clear plan is essential. This plan will outline your requirements and help meet your deadlines. A comprehensive outline will offer a clear course of action for all parties involved.

Solution: Reflect on these questions when drafting your project plan:

• What are the primary objectives of your project?
• What is the deadline for completing the product development?
• What are the developers’ working hours?
• How many remote developers are required?
• Does your dedicated team have experience with the new technologies?

Ensuring both you and the outsourced team have a copy of this plan will help everyone stay on track. It will also reduce miscommunication and frustration during the project.

Things to avoid in your process

Lacking Clear Communication

Establishing clear communication with your offshore team is essential for successful product development. Outsourcing product development doesn’t mean you should stop sharing your thoughts. It is important to keep communicating with the developers in the outsourcing team.

Solution: Engage properly to involve developers in the entire development process. Share your thoughts and listen to feedback from experienced IT professionals to improve your software. Also, respect the time of the outsourcing team to maintain a healthy development process.

Not Staying Updated on Development Technologies

Building the perfect product according to your vision is not enough. Ensure your remote team builds a great product that can be deployed once fully developed. It’s not wise to test small features separately, as this increases the time-to-market and costs.

Solution: Ensure your remote partner delivers a fully developed product. Communicate clearly with your remote team about the methodologies used to develop your software. Ask about your outsourcing partner’s choices and options for different development methodologies.

V. The Actual Cost of Product Development Outsourcing

Let’s examine how much developers worldwide charge and how businesses can save on software development costs.

• North America
  The USA and Canada are among the most expensive places to outsource product development. Developers in these countries charge more than those in other regions. On average, they charge $100-$150 per hour. For a company like Netflix, product development costs range from $303,800 to $455,700. This high cost drives many tech companies to look for cheaper outsourcing options.
• Oceania
  Oceania, including Australia and New Zealand, is also costly for hiring remote developers. The average rate is $100-$120 per hour, making the total cost of product development $250,000-$375,000. Outsourcing locally can offer better control over your team if you are in Oceania. However, outsourcing to India is better for those with smaller budgets and tighter deadlines.
• Eastern and Central Europe
  Eastern and Central Europe are major tech hubs with many skilled developers. The average rate here is $40-$55 per hour. This makes the cost of outsourcing product development between $200,000 and $300,000. Many entrepreneurs prefer this region for its availability of developers with modern tech skills at a lower cost.
• Western Europe
  Western Europe also has many talented developers. The rates vary from $50-$150 per hour. For example, developers in Germany charge $50-$99 per hour, which is reasonable if you are outsourcing within the region. In contrast, Portugal has fewer developers and specialized engineers, so companies charge $150 per hour, leading to a total cost of $159,100 to $477,300 for product development.
• Asia
  Asia offers some of the most competitive outsourcing rates. Developers in India, for instance, charge $20-$49 per hour. This means the cost of developing a product like Netflix’s would be $60,760 to $148,862. Besides the lower cost, you can also expect high-quality work from developers in this region. If your budget is tight and you must stick to financial plans, outsourcing to Asia is a practical solution.

Conclusion

The benefits are clear: access to expert talent, reduced hiring and onboarding time, significant cost savings, and faster time-to-market. By outsourcing, you can focus on your core activities while leveraging specialized skills to bring your product ideas to life. However, having clear requirements, understanding project costs, maintaining a solid plan, ensuring effective communication, and staying updated on development technologies are crucial to avoid common pitfalls.

Don’t let your competition outpace you. Partner with TECHVIFY for exceptional Outsource Product Development Services and transform your product vision into reality. Contact us now to get started!