Outsourcing Product Development: How to Do It Successfully – The Complete Guide

You have a clever product idea and a blueprint, believing now is the time to expand your business. In the fast-moving software field, late launches can cost you business opportunities. According to a KPMG study, 85% of software projects extend beyond their original schedules.

As a startup CEO, deciding whether to outsource product development is critical due to its risks. Markets and business environments are dynamic, and there is a steep learning curve when transitioning from an in-house team to outsourcing. Many companies initially rely on an in house development team as their primary internal resource, benefiting from close collaboration and cultural alignment.

While in-house development offers control, it poses challenges like maintaining security and managing budgets and deadlines. To address these challenges, companies often turn to external developers to supplement or replace their internal teams, increasing capacity and accessing specialized skills. How can you organize an outsourcing workflow to benefit from it?

Organizing an effective outsourcing workflow can streamline your development process. Outsourcing can also help companies save costs compared to maintaining a full in house development team, especially when leveraging regional differences in wages and operational expenses.

What is Outsourced Product Development (OPD)?

We define the outsourcing engagement model as hiring a third-party firm to handle a project for your company, while outstaffing involves hiring developers and engineers through a software development agency. There are several types of outsourcing models, such as location-based, relationship-based, and end-to-end frameworks, which determine how product development tasks are delegated. Outsourced product development helps reduce costs, speed up delivery, and tap into third-party expertise.

It saves time by eliminating the hiring process and ensures access to competent staff, even if you lack technical expertise. Outsourced development firms can manage the entire process of product development, from concept to deployment. Companies like ProCoders provide reliable and skilled teams, making it easier to bring your product to market efficiently.

Startups and SMEs use outsourced software product development to supplement their existing R&D capabilities. This approach will result in greater focus on their core competencies and gain a competitive advantage over others by bringing in experts from other fields to develop products. Outsourced development firms are the providers of these specialized services. It also reduces the risk of creating an inferior product by getting feedback from experts early in the process.

Outsourced Software Product Development vs In-house Team: What is More Gainful for You?

Outsourcing software product development can give your company a competitive edge, allowing you to focus on your core competencies by utilizing the expertise of a team of professionals who specialize in software product development. This can be beneficial for startups that are still trying to find their niche in the market, regardless of the industry, whether manufacturing, healthcare, education, etc. Hiring an outsourced team allows you to augment your staffing needs.

Outsourcing is most popular in countries like China, India, Mexico, Malaysia, etc. When deciding between an in-house development team and outsourcing, project cost is often a key factor, as detailed cost breakdowns and estimates help maintain financial transparency and avoid budget overruns.

This is the case for Same Day Courier Network, a client of ProCoders that needed developers to enhance their transport trading exchange platform to maximize mobile reservations. ProCoders’ developers were assembled via a flexible time and materials hiring structure, leading to a 35% faster time-to-market, as well as a 27% increase in user memberships.

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Besides, it is more convenient to hire outsourced front-end developers or to hire mobile UX/UI designers to do the work for you rather than hiring full-time employees and paying their salaries and benefits over time. This might be especially beneficial if your startup has limited resources at its disposal. Outsourcing also eliminates the need for additional office space and related infrastructure costs, further improving operational efficiency.

What in-house developers might bring to the table, in terms of structure and stability, can be remedied in IT outsourcing product development through flexible team scalability and diverse expertise from a larger talent pool. The next sections discuss the advantages and disadvantages of outsourced software development.

Benefits of Outsourcing Product Development

Why outsource product development as a whole, or just outsourced UX/UI development? Outsourcing software product development is explained as an effective method of ensuring timely delivery, over budget estimation, quality delivery in terms of user-friendliness, and reducing technical risks.

In 2021, Statista valued the global IT outsourcing market at over $400 billion, with a steady growth rate. This section focuses on some of the key business and technical benefits of outsourcing software product development, which we have discovered in our experience working with clients.

• Cost Efficiency: Outsourcing product development is a cost-effective approach, allowing companies to access skilled talent and advanced technologies without the overhead of hiring and maintaining a full in-house team.
• Time-to-Market: By leveraging external expertise, businesses can accelerate development cycles and bring products to market faster.
• Flexible Scalability: Outsourcing enables organizations to quickly scale resources up or down based on project needs. This flexibility also helps reduce operational costs by utilizing external resources only when necessary.
• Access to New Markets: Working with global partners provides insights into new markets and user preferences. Additionally, outsourcing allows companies to focus on their core business areas while external partners handle development tasks.

Business benefits of OPD

• Cost Efficiency: Outsourcing the product development process can offer significant cost savings for startups, as it provides a ready-made solution at costs as low as $20 per hour. Particularly, ProCoders has helped clients reduce development costs by up to 50%.
• Faster Time-to-market: Outsourcing product development can help you get to market faster because it allows you to focus on your own business while another company handles the design and production processes.
• Access to New Markets: By working with an experienced provider, you can analyze the market to expand into new geographies or launch new products quickly without hiring more staff or setting up offices overseas.
• Faster Onboarding: When you outsource, you won’t have to spend time training new employees or looking for someone with a specific skill set. The agency will already have experts ready to work on your project.
• Flexible Scalability: Outsourcing allows companies to scale their projects quickly as needed without worrying about how much work they’re taking on. This flexibility makes it easier for businesses to pivot when necessary without sacrificing the quality of service or productivity.

Technical benefits of OPD

• Core Competency Focus: The definition of how you outsource product development allows you to free up resources that can be used elsewhere in your business.
• Multi-disciplinary Expertise: Outsourced product development agencies have teams that have expertise across various disciplines such as software engineering, user experience design, architecture building, quality assurance, etc. These teams can efficiently deliver a wide range of software products for clients, ensuring high quality and faster time-to-market.
• Dedicated Development: When you work with a large outsourcing provider, you will have access to a dedicated development team that can help you whenever necessary.
• Hiring Niche Specialists: You may be able to find developers and engineers who can create custom software solutions for your business needs at a fraction of the cost compared with hiring an entire team for full-time contracts

Comprehensive software product development services cover all technical aspects of the process, from initial design to final deployment, providing end-to-end solutions for launching and managing new software products.

Outsourcing Models: Choosing the Right Engagement Approach

When it comes to outsourcing product development, selecting the right engagement model is a pivotal decision that can shape the outcome of your project. The most common outsourcing models—dedicated team, time and materials, and fixed price—each offer unique advantages depending on your project requirements and business objectives.

The dedicated team model is ideal for long-term projects or when you need ongoing development support. In this approach, an outsourcing company provides a team of skilled professionals who work exclusively on your product development. This model offers flexibility, seamless integration with your internal processes, and the ability to scale your team up or down as your needs evolve. It’s particularly effective when your project requirements may change over time or when you need specialized expertise for multiple development phases.

The time and materials model is best suited for projects where the scope is not fully defined or may evolve during the development process. With this model, you pay for the actual hours worked and materials used, giving you the flexibility to adjust requirements as the project progresses. This approach is highly adaptable and allows for iterative development, making it a popular choice for startups and businesses exploring innovative solutions.

The fixed price model works well for projects with clearly defined requirements, timelines, and deliverables. Here, the outsourcing partner agrees to complete the entire product development for a set price. This model provides cost predictability and is ideal for smaller projects or MVPs where the scope is unlikely to change.

Understanding the differences between these outsourcing models and aligning your choice with your project requirements is essential for effective outsourcing. By selecting the right engagement approach, you can optimize your product development process, manage costs, and ensure a successful partnership with your outsourcing team.

Product Development Services to Outsource for Your Business Goals Achievement

If you want to know about the outsourced product development services and how these services can help your organization meet its business goals, you’re in the right place because ProCoders has helped multiple clients in the past, and this guide is based on our experience.

Choosing the right product development partner is crucial to ensure effective collaboration, clear communication, and successful project outcomes. Outsourcing can also provide access to innovative product development solutions tailored to your business goals.

Discovery Phase/MVP Stage

The discovery phase is all about identifying customer needs, defining MVPs (minimum viable products), and determining whether your assumptions about the outsourced products development market are correct.

Product Development Management and Tech Strategy

This includes managing team members, budgets, and timelines while ensuring quality control throughout all stages of development, as well as offering complete product management as part of the service. This type of service involves managing the entire product lifecycle from the ideation stage to the launch date.

UI/UX Design

UI/UX designers understand how to create attractive graphics, animations, buttons, and other elements that will make your app stand out in the marketplace.

Coding

The backbone of every successful software application is its actual coding and the work that goes into engineering the product using programming languages. Hiring someone with extensive experience in this area will ensure that your product runs smoothly from start to finish.

Quality Assurance/Testing

This type of service ensures that every feature in your software works properly and does not contain any bugs or errors. The best way to achieve this is by hiring a third-party QA team to test your app before launch.

The Importance of Development Services in Product Success

Development services are the backbone of any successful product, playing a crucial role in transforming ideas into high-quality solutions that meet market demands. A well-structured development process ensures that every stage—from ideation to launch—is executed efficiently and effectively.

Outsourcing product development services allows businesses to tap into specialized expertise that may not be available in-house. By partnering with an outsourcing company that has a proven track record and deep technical expertise, you gain access to skilled professionals who understand the nuances of the product development lifecycle. This not only accelerates the development process but also helps reduce costs and operational overhead.

Choosing the right outsourcing partner is essential. Look for a company with experience in your industry, a portfolio of successful projects, and a commitment to quality. A reliable partner will align with your core business activities, allowing your internal teams to focus on strategic initiatives while the outsourced team handles the technical execution.

This division of labor ensures that your business can respond quickly to market demands and deliver a high quality product that stands out in a competitive landscape.

By leveraging outsourcing product development services, you can streamline your development process, access innovative solutions, and achieve your business goals more efficiently. The right outsourcing partner becomes an extension of your team, driving your product’s success from concept to launch and beyond.

What Makes a Great Software Product? Key Characteristics to Aim For

A great software product is more than just functional—it’s intuitive, secure, scalable, and adaptable to ever-changing market demands. When embarking on software product development, especially through outsourcing, it’s important to focus on the key characteristics that define product excellence.

First and foremost, a successful software product offers a seamless user experience. This means a well-designed user interface that is easy to navigate and visually appealing. Security is another critical factor; robust security features protect user data and build trust with your audience.

Scalability ensures that your product can grow alongside your business, handling increased users and new features without compromising performance. Adaptability is also essential, allowing your product to evolve in response to shifting business objectives and technological advancements.

To achieve these qualities, it’s vital to choose an outsourcing partner with deep expertise in software product development and a thorough understanding of the development process. The right partner will not only deliver a high quality product but will also align with your business objectives, ensuring that the final solution meets both your immediate needs and long-term goals.

By prioritizing these key characteristics and collaborating with a skilled outsourcing partner, you can create a software product that delights users, supports your business growth, and stands the test of time in a dynamic market.

Risks and Challenges of Outsourcing Product Development

Should you outsource product development? Yes, indeed. The concept looks very simple, but it is a complex process that requires active participation from all the stakeholders to ensure its success. However, you can’t let the possible risks deter you.

Product core idea misunderstanding

When outsourcing product development, it is crucial that both your internal team and the external developers share a common language and understanding of the product vision. However, language barriers can pose significant challenges, potentially leading to miscommunication and misunderstandings that impact the project’s success.

Additionally, there is a risk that external teams may be handling multiple projects at the same time, which can affect their focus and compromise the quality of your product.

Security

There is always the risk that sensitive data will be compromised in the outsourcing of software development. The best way to avoid this type of problem is by hiring a company that does not compromise security. One of the best examples is that at ProCoders, we prioritize signing NDA contracts for all our developers at the beginning of every project. This keeps our developers in check and protects your data and interests.

Intellectual property protection

The company you hire will have access to your IP and proprietary information. If you choose to outsource your product development work, make sure that your contract includes clauses about protecting intellectual property rights and other confidential information shared between parties involved in the project. When working with ProCoders, this is one of the first aspects we settle with our clients to ensure IP protection.

Product Core Idea Misunderstanding

Another risk is that the company you’re working with may misunderstand what you want them to create for you. In this case, it is helpful that all parties speak a common language. Since ProCoders works with global clients, we require all our developers to be fluent in the English language for adequate communication. More so, we are always transparent about our dealings with our clients with regard to requirements as well as technologies in use.

Step-by-Step Guide to Outsource Product Development

To outsource product development without headaches, as with any business or product, you start by determining if it will fly and what you want to build. It’s important to ensure that your outsourcing strategy aligns with your company’s business processes to maximize efficiency and achieve your goals. When outsourcing, you will typically engage an external vendor who will handle the work according to your requirements. Outsourcing is suitable for a variety of development projects, from small apps to large-scale systems. The following information is based on ProCoders’ experience in relating with clients.

Step 1: Defining Project Requirements

Detailed Specifications

Creating detailed project specifications is the next step. This involves documenting all the technical and functional requirements of the project. Detailed specifications serve as a blueprint for the outsourcing partner, providing them with a clear understanding of the project’s scope and deliverables. Include information on the technology stack, design preferences, user interface elements, and performance criteria. The more detailed your specifications, the fewer the chances of misunderstandings and scope creep.

Budget and Timeline

Establishing a realistic budget and timeline is essential for managing expectations and ensuring the project stays on track. Your budget should account for all possible costs, including development, testing, project management, and any potential revisions or contingencies. Similarly, the timeline should be realistic, considering the complexity of the project and the capacity of the outsourcing partner. A well-planned budget and timeline help in avoiding delays and cost overruns, contributing to the overall success of the project.

Step 2: Selecting the Right Outsourcing Partner

Research and Shortlist

Start by researching potential outsourcing partners. Look for companies or freelancers with a proven track record in your industry. Use platforms like Clutch, Upwork, or industry-specific directories to find reputable candidates. Create a shortlist of potential partners based on their expertise, experience, and client reviews. This initial research phase helps in identifying candidates who are best suited to meet your project’s needs.ase helps in identifying candidates who are best suited to meet your project’s needs.

Evaluation Criteria

Once you have a shortlist, evaluate each partner based on predefined criteria. Consider factors such as their experience, expertise, portfolio, and client references. Review their previous work to assess the quality and relevance to your project. Check their technical skills, communication abilities, and cultural compatibility. Evaluating partners against a set of criteria ensures that you select a partner who not only has the technical skills but also aligns well with your company’s values and working style.

Request for Proposal (RFP)

After narrowing down your list, send out Request for Proposals (RFPs) to the shortlisted candidates. An RFP should include all the necessary details about your project, such as objectives, specifications, budget, and timeline. Request detailed proposals from the candidates, outlining how they plan to execute the project, their approach, and their pricing. This process allows you to compare different proposals and select the partner who offers the best value and approach for your project.

Step 3: Legal and Contractual Considerations

Contracts

Draft comprehensive contracts that clearly outline the project deliverables, timelines, payment terms, and intellectual property rights. Contracts should detail the responsibilities of both parties and include clauses for handling potential issues like delays, scope changes, and disputes. A well-drafted contract serves as a legal safeguard and provides a clear framework for the project, reducing the risk of misunderstandings and conflicts.

NDA (Non-Disclosure Agreement)

To protect sensitive information, ensure that both parties sign a Non-Disclosure Agreement (NDA). An NDA safeguards your proprietary information and trade secrets, preventing the outsourcing partner from disclosing or using the information for any purpose other than the project. This is particularly important if you’re dealing with confidential business data, innovative ideas, or intellectual property.

Compliance

Ensure that the outsourcing partner complies with all relevant regulations and industry standards. This includes data protection laws, security standards, and any specific regulatory requirements related to your industry. Compliance is crucial to avoid legal issues and ensure that the outsourcing partner adheres to best practices in handling data and executing the project.

Step 4: Establishing Communication Channels

Regular Meetings

Scheduling regular meetings is crucial for maintaining transparency and keeping the project on track. These meetings provide a platform for discussing progress, addressing concerns, and making necessary adjustments. Regular updates help in identifying potential issues early and ensure that both parties remain aligned with the project goals. Weekly or bi-weekly meetings can provide the right balance of oversight and flexibility.

Communication Tools

Utilizing modern communication tools like Slack, Zoom, or Microsoft Teams can facilitate seamless interaction between the in-house team and the outsourcing partner. These tools support real-time messaging, video conferencing, and file sharing, making it easier to collaborate and stay connected. Choose tools that both teams are comfortable with and ensure they are integrated into your workflow to enhance productivity.

Point of Contact

Designating a primary point of contact for both parties helps streamline communication and ensures accountability. This person should be responsible for coordinating updates, managing queries, and facilitating discussions between the teams. Having a dedicated point of contact minimizes confusion and ensures that communication is clear and efficient.

Step 5: Project Management and Collaboration

Project Management Tools

Using project management tools like Jira, Trello, or Asana can significantly enhance task management and collaboration. These tools provide a centralized platform to track progress, assign tasks, set deadlines, and monitor project milestones. They offer visibility into the project’s status and help ensure that everyone is on the same page, thereby improving overall project coordination.

Agile Methodology

Implementing Agile practices can lead to more efficient and flexible project management. Agile methodology emphasizes iterative development, continuous feedback, and adaptability. By breaking the project into smaller, manageable sprints, the team can focus on delivering incremental improvements. This approach allows for quick adjustments based on feedback and ensures that the project evolves in alignment with changing requirements and user needs.

Documentation

Maintaining thorough documentation for all project activities is essential for continuity and clarity. Detailed documentation helps track progress, understand decision-making processes, and provide a reference for future stages of the project. It includes recording meeting notes, design specifications, code comments, and user manuals. Proper documentation ensures that knowledge is preserved and accessible to all stakeholders, which is crucial for ongoing and future project phases.

Step 6: Quality Assurance and Testing

QA Processes

Setting up robust quality assurance processes helps in maintaining high standards throughout the development lifecycle. These processes should be defined early and integrated into the project workflow. They involve systematic testing of the product to identify defects, ensure compliance with requirements, and verify performance. A dedicated QA team or individual can oversee these processes and ensure consistent quality checks.

Testing Phases

Conducting thorough testing at various stages of development is essential to identify and resolve issues early. Testing phases can include unit testing, integration testing, system testing, and user acceptance testing. Each phase targets different aspects of the product, from individual components to the entire system, ensuring that all parts function correctly and cohesively. Regular testing helps in catching issues early, reducing the risk of significant problems at later stages.

Feedback Loop

Establishing a feedback loop is crucial for continuous improvement. This involves collecting feedback from stakeholders, users, and team members regularly and using this feedback to address issues and implement improvements. A structured feedback loop ensures that any problems are promptly identified and resolved, leading to a more refined and user-friendly final product. It also fosters a culture of continuous learning and adaptation, which is vital for long-term success.

Step 7: Handover and Deployment

Handover Process

Ensuring a smooth handover involves thorough documentation and knowledge transfer from the outsourcing team to your in-house team. This includes providing detailed technical documentation, user manuals, and any other relevant information that will help your team understand and manage the product. It’s essential to conduct training sessions and Q&A sessions to address any questions and ensure that your team is fully equipped to handle the product independently.

Deployment Support

Providing support during the deployment phase is crucial to address any issues that may arise. The outsourcing partner should be available to assist with troubleshooting, configuration, and any technical support needed to ensure a successful launch. This phase involves close collaboration to monitor the deployment process, quickly resolve any bugs, and ensure the product performs as expected in the live environment.

Step 8: Ongoing Support and Maintenance

Once the product is deployed, ongoing support and maintenance are necessary to ensure it continues to function optimally and adapts to any changing needs.

Maintenance Agreement

Establishing a maintenance agreement with the outsourcing partner ensures that there is a clear plan for ongoing support. This agreement should outline the scope of maintenance activities, response times, and any associated costs. It ensures that your product remains up-to-date, secure, and fully functional over time, providing peace of mind and reliability.

Updates and Upgrades

Planning for future updates and feature enhancements is essential to keep the product relevant and competitive. This involves scheduling regular updates to fix bugs, improve performance, and add new features based on user feedback and technological advancements. A proactive approach to updates helps in maintaining user satisfaction and ensuring that the product evolves to meet new requirements and challenges.

Step 9: Evaluating the Partnership

Performance Review

Conducting a review of the outsourcing partner’s performance involves assessing various aspects of the project, such as adherence to timelines, quality of deliverables, communication effectiveness, and overall satisfaction. This review should be based on predefined metrics and feedback from your team to provide an objective evaluation of the partner’s contributions and reliability.

Tips to Save Your Project Budget

You can save money while outsourcing software product development in several ways. Here are some tips that you can follow:

Identify your needs clearly

Before you start looking for a service provider, answer the following questions: What kind of work do you need to do? How much time do you have available? What type of team would be best suited for the project?

Set realistic goals

Consider your outsourcing partner’s capabilities and set reasonable expectations for their work. This will ensure that all parties are on the same page and that any surprises can be addressed before significant time or money has been invested.

Ensure communication and transparency

Ensure that both sides are clear about what they expect from each other. This will help avoid any confusion or misunderstandings that may lead to delays or additional costs down the road.

Identify all the costs upfront

You need to consider the number and cost of resources required for this project. It may even be worth considering one of our fixed-price options, where we will provide a fixed-price quote without any hidden charges.

Prioritize Features

Before starting the project, it is always advisable to prioritize the features and functions that are most important for your business or application. Focusing on key features will help you save time and money. save time and money.

How to Choose the Right Outsourced Product Development Company

Product outsourcing can benefit businesses through staff augmentation and speedy development, and the decision to outsource is crucial to a company’s success. Choosing to outsource software product development is a strategic move that can help address internal challenges such as HR recruitment and retention, while also improving quality through access to experienced specialists.

Here are some things you should look out for while evaluating different outsourced product development companies. Selecting a reliable outsourced company is essential to ensure successful project execution and expert guidance.

Determine your needs

Finding the right new software product development outsourcing partner begins with knowing what you need from them. The first step is to outline your requirements so you know what kind of service you need from your outsourced product development company.

Evaluate the company’s portfolio

Examine the number of products and technologies (e.g., React Native, PHP, Flutter) a company has used. Hire one experienced in similar apps that can manage the entire development process. For instance, ProCoders offers comprehensive services starting from the discovery phase. Choose an agency that meets your needs and be aware of limitations like infrastructure, skilled developers, and funding.

Check out customer testimonials

If possible, contact customers who have worked with this company and ask them about their experiences working together. Also, ask them about how their project turned out, whether their deadlines were met, or how problems along the way were resolved. ProCoders has a case study section on its website detailing our work with clients and how we satisfied their requirements effectively. We also let our potential clients speak with previous clients to understand our work delivery.

Interview the developers

Once you have prospective companies, interview them to discuss their past work, current projects, and any challenges faced. This helps identify potential issues early. At ProCoders, we emphasize transparency by allowing clients to interact with our developers, ensuring a comfortable working relationship.

Sign the necessary agreements

Make sure that everything is in writing so that there won’t be any misunderstandings between you and the outsourcing company. For example, one of the documents we always ensure we sign with prospective clients is a non-disclosure agreement (NDA) detailing the terms of how to handle proprietary information.

ProCoders Success Stories of Companies that Outsourced Product Development

ProCoders has extensive experience in IoT development, SaaS, logistics, and more, delivering efficient outsourced software solutions for startups. Our team has deep expertise in managing the entire software development process, from initial requirements gathering to deployment, ensuring quality and security at every stage.

We can supplement or even replace your internal team to accelerate project delivery and fill any gaps in expertise or capacity. For example, in a web development project for Frontegg, a B2B SaaS company, we quickly expanded the team within two weeks and successfully implemented the workflow after clarifying the requirements.

With Frontegg being a young startup company, the workflow was fast-paced to meet the rapidly increasing needs of their customers with the dynamic setup that ProCoders provided. We helped them overcome the hiring challenges of their country (Israel) by providing outsourced developers without an exhaustive onboarding process or additional taxes.

We assembled programmers for the project within two weeks and procured additional talent as needed during the course of the project. According to the full stack team leader of Frontegg, “ProCoders …are very dynamic according to our needs and very quick in what they do.”

Parameters	Percentage
Increase in time-to-market	25%
Increase in turnaround time	30%
Cost reduction	38%

Conclusion

Outsourced product development involves hiring a third-party service provider to handle product design, engineering, and development. The outsourcing company supplies the necessary personnel, equipment, and infrastructure to complete the project, allowing client companies to reduce costs, improve profits, and access new markets.

While in-house teams offer structure and stability, outsourced development provides flexibility and access to a broader talent pool. To avoid misunderstandings, ensure all agreements are documented, and regularly review the partnership for satisfaction, bottlenecks, and cost adjustments.

To protect sensitive data, choose an outsourcing partner that prioritizes security and uses quality agreements, such as NDAs, to ensure confidentiality.