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How to Outsource Product Development Successfully – The Complete Guide
15 min.

You have a clever idea for a new product, a blueprint for how it will look, and a belief that now is the right time to expand your business. Software products are a fast-moving field, and if you’re late to launch your product, you can lose business opportunities even with the enhanced ideas. According to a KPMG study, 85% of software projects extend beyond their original development schedules.

A critical resolution you’ll make as a startup CEO is whether to assign product development to a third-party vendor because of how risky the choice may be. Even if you already profit from this, you most likely already know that the markets and the business environment are dynamic. Also, if you are just getting started with outsourced product development, there is definitely a steep learning curve to surmount when evolving from a more traditional in-house team.

Making a software product yourself has the advantage of complete control over the process, however, there might be some challenges with maintaining the security of the product and business idea with regards to intellectual property, as well as the high chance of projects exceeding their budgets and preset deadlines. Hence, how can you organize outsourcing workflow to benefit from it?

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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. However, outstaffing is the process of hiring product developers and engineers through a software development agency. Outsourced product development is a way to scale down the cost of engineering a product and to speed up its delivery by using the expertise of a third-party service provider.

Companies often use it to reduce costs, improve profits, and gain access to new markets. It would also save a lot of time because you don’t have to go through the hiring process and you don’t have to go on a hunt for good employees by yourself. If you go to a reputable company such as ProCoders, you can be sure that the staff you get will be competent. Moreover, you can get by even if you don’t have any technical expertise and don’t understand how software development works.

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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. It also reduces the risk of creating an inferior product by getting feedback from experts early in the process.

How Outsource Product Development is Helpful for a Product Owner

Product owners wear several hats. You must keep up with your customers’ needs, ensure the team is working towards the same goal, and constantly improve the product.

For one, outsourcing product development allows you to save time because instead of spending months on developing a single feature or fixing bugs in the future, you can assign multiple tasks to different teams and get them done within weeks. This will free up your time so that you can focus on other important tasks related to your core business.

More so, outsourcing product development is cost-effective as compared to doing everything in-house because the former takes less time and effort. Moreover, outsourcing also helps you save money which can be used in other areas of your business where it is required more urgently.

save money on outsourced product development

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.

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 frontend developers 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. What in-house developers might bring to the table, in terms of structure and stability, can be remediated 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 outsourced product 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.

Business benefits of OPD

  • Cost Efficiency: Outsourcing 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.
opd is flexible

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.
  • 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

Product Development Services to Outsource for Your Business Goals Achievement

If you want to know 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 upon our experience.

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 product development market are correct.

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Product Development Management and Tech Strategy

This includes managing team members, budgets, and timelines while ensuring quality control throughout all stages of development. 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.

Outsourcing Risks

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.

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.

procoders make outsourced product development services confidential

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. The following information is based on ProCoders’ experience in relating with clients.

Establish Software Specifications

Before you start working with an external company, you need to have a clear idea of what you are looking for. This will make it much easier for the developers to understand what you want and how you want it. Make sure your requirements are clear and concise so that there is no room left for misinterpretation or miscommunication.

Choose a Model of Cooperation

Determine whether to work with your vendor using time and materials or a fixed price model. Time and materials means that there’s no cap on what can be spent on developing your product. The fixed price model limits cash flow and it is not efficient in dealing with problems that creep up in the course of executing the project, such as the exit of a critical team member. Hence, the dedicated team model is more convenient for most startups since it encourages staff augmentation as the need arises.

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Find the Right Vendor

It’s important to find a vendor with relevant experience and who has already worked with clients that are like you. The vendor should also have a good reputation for customer service, technical expertise, and timely delivery of projects. You can find a perfect match for your needs by looking through their portfolios, studying their previous work and checking out reviews from past clients.

Sign Agreements and Contracts

Make sure that the agreement between you and the development company is formalized through a written contract that includes all the terms agreed upon by both parties. Also, make sure that your contract has a non-disclosure clause that prevents the developer from sharing any confidential information about your project with competitors.

Trial Period

Many software development companies have a trial period where you can test their services and engineers before committing to a long-term cooperation. Software development projects could take several months in the coding and testing phase and even several more in the maintenance stage. Do not pass on an opportunity to try any outsourcing company before you enter into an extensive partnership agreement.

Launch the Product’s First Version

This first version can be a simple prototype or even just a white-label form of your product. If you want to make money from this product, then launching the MVP is crucial because it will give you valuable feedback on what needs improving and allow potential customers to see what they are paying for.

mvp vs product

Continuous Support

Once your software has been launched, there will always be room for improvement so it’s important that ongoing support is part of your outsourcing agreement. This could mean having some team members on standby if anything goes wrong with your website or application such as bugs, project extension, or failure of quality assurance. Sometimes, companies move from experienced developers to less skilled and cheaper developers for this stage of the project. Determining whether this is a valuable decision must be discussed with your vendor and stamped in a contractual document.

Product Outsourcing Cost and How to Save Your Project Budget

PHP Software Development Rates by Country

Country/RegionGlassdoor Average Annual Rate 2022 (all levels)
Estonia (Central Europe)$35,544
Germany (Western Europe)$58,020
United States$84,362
Brazil (South America)$35,280
India (Asia)$3,640
PHP is selected here as an example of the typical rates of software development. Most software projects involve the use of PHP and therefore, this is an important factor to consider.

Tips to Save Your Project Budget

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

Identify your needs clearly

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

Set realistic goals

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

Ensure communication and transparency

Make sure 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 of resources required for this project, as well as their cost. 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 project, it is always advisable to prioritize features and functions that are most important for your business or application. If you begin by focusing on key features, you will be able to save time and money.

How to Choose the Right Outsourced Product Development Company

Outsourcing product development can bring benefits to businesses through staff augmentation and speedy development, and the decision to outsource is crucial to a company’s success. Here are some things you should look out for while evaluating different outsourced product development companies:

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.

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Evaluate the company’s portfolio

Look at how many products they have developed and what technologies they used to build them (for example, React Native, PHP, Flutter, etc). It’s best to hire a company that has experience in developing apps like yours. They should be able to handle all aspects of app development from start to finish. ProCoders, for instance, specializes in providing services from the discovery phase. When choosing an agency, you should look for the features that best meet your needs. Finally, you should be aware of any limitations that may exist such as infrastructural challenges, lack of skilled developers, funding needs, and so on.

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 found some prospective companies that meet your standards, it’s time to interview them! This step is crucial because it gives you an opportunity to ask questions about their past work experience, and their current projects, and even ask them about any challenges they’ve faced during development periods in previous projects. By asking these questions up front, you can eliminate any red flags before they become problems down the line. Following our principle of transparency.

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At ProCoders, we allow clients to interact with our developers, so you can work with someone with whom you are comfortable.

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 Experience in Building an Efficient Outsourcing Process

ProCoders has several years of experience working with clients in IoT development, SaaS, logistics fields and more to deliver software solutions through efficient outsourced software development for startups. This is evidenced in each of our projects. In a particular example, our team executed a web development project for Frontegg, a B2B SaaS-based project. The primary challenge was getting the project off the ground as a team expansion was needed. Once the requirements were clear, we assembled a team for the project within two weeks and implemented the workflow.

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 to 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.”

ParametersPercentage
Increase in time-to-market25%
Increase in turnaround time30%
Cost reduction38%
F. A. Q.
What is outsourced product development?

Outsourcing is a special model to deal with the task of developing a software solution for your business idea by bringing in an external agency that has the required expertise. The benefit of outsourced product development is that it allows companies to focus on their core competency while outsourcing the rest of the work, so they can move faster and more efficiently than they would if they had to do everything themselves.

When outsourcing is good for tech startups?

Outsourcing is good for tech startups when it is a startup does not have a strong tech expertise within an in-house team and needs the skills as soon as possible. Also, it also makes sense when a startup has extremely short deadlines to develop a product and needs to beat the time in a short period of time, say within one to two months, instead of six to twelve months as is more common in the USA, the UK, Germany, etc.

How to coordinate outsource and in-house team to reach high efficiency?

This can be done through a combination of communication and tracking systems. To keep track of what’s going on, it’s important that both teams have access to the same information. Make sure that each person involved understands their role in the process, as well as how they fit into the larger picture of delivering your product. It’s important that they understand what other people on their team are doing and how it fits into their own work.

Conclusion

  • Outsourced product development meaning is the process of outsourcing product design, engineering, and development to a third-party service provider. The outsourcing company provides the people, equipment, and infrastructure to execute the project from start to finish. On the client side, companies often use it to reduce costs, improve profits, and gain access to new markets.
  • What in-house developers might bring to the table, in terms of structure and stability, can be remediated in outsourced product development through flexible team scalability and diverse expertise from a larger talent pool.
  • Make sure that everything is in writing so that there won’t be any misunderstandings between you and your chosen outsourced product development company. Also, for long-term cooperation, ensure you check that everything is in order from time to time. This includes checking the satisfaction level, defining the bottlenecks, and changing the rates and costs if necessary.
  • There is always the risk that sensitive data will be compromised in an outsourcing project. The best way to avoid this type of problem is by hiring a company that does not compromise security, but instead guarantees protection through expert work and quality agreements, such as an NDA.
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