Software product development outsourcing: what are the key benefits, and how to ensure success when outsourcing?

May 17, 2021

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Andrii Rybakov

In times of continuous innovations, when you work on different features to launch your product straight away, outsourcing software product development serves as a practice for many companies to follow. By searching for and finding an appropriate partner that satisfies their needs, these organizations can build better products, reduce the time to market, and focus on more complex business tasks. 

According to Daxx, ‘by the end of 2021, the overall value of outsourced IT services will surpass $413.72 billion.’ Clutch also states that ‘around 37% of small businesses use outsourcing to handle at least one of their business processes.’ Thus, regardless of the company’s scale or its focus, there can be a moment when outsourcing software product development is required. 

So what is outsourcing software product development? How can your business benefit from it? And what are the best practices to ensure success when outsourcing? Read in our blog post. 

What is outsourcing software product development?

Software product development outsourcing is the practice by which an organization selects a third-party company to manage all the tasks regarding a software product development project. In the simplest sense, organizations outsource to delegate control over essential business processes to a qualified, external vendor rather than using their in-house resources. Therefore, such vendors have relevant expertise, talents, and capabilities to deal with the required business needs, which enables your company to concentrate on more complex tasks. 

Executives turn to software product development outsourcing to make their organizations lean and flexible, which allows responding to the latest market trends or changes in software technologies. Also, the particular model serves as the cost-effective one because outsourcing often helps cut down operating expenses and other costs. 

Regardless of the size of an organization that needs product outsourcing, the outsourcing vendor provides relevant expertise and resources for delivering software solutions during all stages of the software product development lifecycle, from inception to delivery. Most software outsourcing companies use a remote operating model to offer services, such as web and mobile application development or SaaS product development. That allows hiring the best professionals and creating a unique, top-notch team dedicated to a particular project. 

How can your business benefit from outsourcing software product development?

Software product development outsourcing requires finding an appropriate partner with the necessary expertise and scaling a development team. A hired software outsourcing company can always help choose the right technologies to implement or provide effective consulting services. After all, the particular cooperation eliminates the need for a client to rent office space and set up the development infrastructure. That helps organizations solve fundamental issues like reducing fixed costs and allows working swiftly with qualified developers. 

Here, we detail some main advantages of software product development outsourcing. 

Focusing on core business. With software product development outsourcing, companies can dedicate their time to core business processes to ensure continuous improvement and growth. This approach is especially efficient for organizations where IT is not the line of business. Besides, the outsourcing company manages various labor-intensive aspects related to a software development team. That provides client’s in-house employees with enough time to concentrate on other essential tasks, such as management, marketing, or customer service. 

Reduced time to market. As the hired software outsourcing teams consist of skilled, well-trained, and experienced professionals, there is near to no time to spend on training. Nowadays, software outsourcing uses an agile methodology with an incremental approach to kickstart software product development into high gear and decrease the time for software delivery. In addition, cooperating with a partner with the proper expertise and set of technologies enables quicker and more efficient software product development.

Flexibility. Cooperation with the software outsourcing company usually is project-based. As the project scope may grow or reduce, there is a need to scale the initially hired team up or down. In this case, software outsourcing provides more flexibility for the team scalability than in-house development. Also, the company eliminates the challenges of searching for new IT developers with the necessary skills only for a single project. With outsourcing, your partner provides sufficient personnel to cover all project needs. 

Access to top-notch IT talents. Delivery of IT services is a core business of IT outsourcing companies. It means they invest a lot in recruiting the best IT talents, exploring new technologies that appear on the market, and growing the skills of IT developers to ensure the success of the projects they deliver.  Besides, these companies often motivate their technical employees to pass certifications for strengthening their expertise about specific technologies or technical tools. For example, in AgileVision, developers pass AWS certifications. 

Reduced costs and operating expenses. Software outsourcing does not require the organization to cover recruitment expenses, workspace equipment, and different employee benefits, including taxes, training, insurance, etc. Typically, outsourcing companies prefer calculating the cost by defining the hourly rates of employees based on expertise and experience. 

How to ensure success when outsourcing software product development?

Here you can find five best practices to ensure success when outsourcing software product development.

1. Determine the reasons and goals for outsourcing

Firstly, you should take time to scrutinize the reasons why your organization needs outsourcing, which allows creating a relevant list of objectives. The overall success of the outsourced product development depends on preparation, so do not underestimate this initial step. Also, before hiring an outsourcing company, ask yourself the following questions. Are there any factors that can make in-house development more efficient? Is it a proper time for you to outsource? Then, revise your answers a few times to create a clear plan for your further outsourcing experience.

2. Choose the right software outsourcing company

Primarily, you should think about evaluation criteria for your future outsourcing partner. Which expertise must it have? Should it have experience in your industry or with some specific technology? Does it have similar projects in the portfolio? What are your partner’s values and approach in work? Determine your needs and search for appropriate candidates accordingly. Browse their websites and social media profiles, read case studies and blog articles, and search for customer reviews. Then, get in touch with the chosen candidates to learn more about the rates, expertise, certifications, communication, and security measures. 

The outsourcing company that satisfies all your requirements and evaluation criteria should serve as a reliable partner to cooperate with. 

3. Communicate with the development team

Vendors often consider being autonomous among the key advantages of outsourcing software product development. But regular communication and feedback are one of the main pillars of the project's success. You can use different channels, including video conferences, phone calls, or email. Regular communication enables you to share important information, learn about project progress and align on key deliverables with the partner. 

4. Provide key milestones & have realistic expectations

With creating a project plan, setting measurable and realistic goals and milestones is essential for its success. A development team has to make sure the desired results are achievable. Thus, your scope of work has to be realistic to complete, and you need to agree on deadlines with your outsourcing partner. Besides, milestones serve as a helpful tool to track the team’s progress, especially for checking project updates and evaluating completed tasks based on previously agreed standards. Finally, always give feedback on the deliverables. 

5. Stay flexible and create an exit plan 

In many cases, your organization has to deal with additional expenses or various unforeseen circumstances regarding software product development outsourcing. Therefore, you must be prepared for such obstacles. That requires being flexible and responding to changes quickly, which also involves developing backup plans for important decisions. Do not start outsourcing without having exit strategies in place. 

The bottom line

Outsourcing software product development has multiple benefits to the company: it can stay focused on its core business, benefit from the expertise of its outsourcing partner, get highly skilled IT talents from any part of the world to work on its projects, and reduce time to market, costs and operating expenses.

Just like in other types of relationships, both parties, the customer and outsourcing partner, need to make relevant commitments for successful outsourcing. Thus, the basis for outsourcing to succeed is to choose the right partner, which allows your company to grow and expand in new ways. 

According to Compare Camp, ‘78% of client companies feel positive about their outsourcing relationships.’ By implementing the mentioned practices, your business also ensures that the necessary work will be done based on your needs. This approach makes more sense for staying close to the software development life cycle, which also helps the team with feedback or various inputs regarding its job, requires fewer iterations, and promotes faster task completion. 

Are you already outsourcing software product development? What benefits do you find the most valuable for your business? Or what factors prevent your organization from outsourcing? Share with us in the comments below. 

How AgileVision can help

Over the past several years, AgileVision has helped many businesses with their software product development as an outsourced partner and received positive customer reviews on Clutch. Are you considering outsourcing as a new approach to implement or need advice on your current software product development?

Request a free consultation from one of our software development experts.