Outsourcing

Outsourced Product Development: A Guide

16 min read

Saying that you want to outsource product development can be a scary thing. After all, it’s your product and your business—shouldn’t you be the one in charge of everything? To some extent, yes. But there are also many benefits to outsourcing your product development project that you may not have considered before.

Outsourced product development is a great way to get started with an online presence without having to invest in hiring an in-house team. It can involve hiring a partner to handle everything from initial design and planning to coding, testing, and launch or it may simply mean finding a dedicated team or developer to build a specific component while you manage the broader project internally. It’s also a good way to add new services or features you don’t have the time or expertise to handle—like payment integration, UI/UX design, and more.

According to recent statistics from a Deloitte survey, it has been discovered that a staggering 76% of executives today are opting to outsource their IT services. This trend is sweeping across industries and company sizes, from agile startups eyeing the market with their MVP to well-established enterprises that are engineering complex systems.

For example, the popular messaging app Slack was built in collaboration with an outsourced development team. Slack's creators relied on the expertise of an agency called Metalab to create the initial design, user interface, and logo, which eventually contributed to Slack's successful launch and wide adoption.

For startups especially, outsourcing the development of an MVP can provide the advantage of swifter market entry. By entrusting specialized tasks to external teams that possess the necessary expertise, they can focus on core operations and effectively manage resources.

If you’re considering outsourced product development, here are some tips for finding the right company for your project.

Three Key Challenges to Solve with Outsourced Product Development

We go beyond conventional outsourcing by not just reducing costs, but also providing added value. Moreover, we focus on delivering outcomes and innovation while optimizing costs and technology. We support complex processes, applications, or entire business functions that need specific expertise and utilize automation and data insights to drive value and grant clients on-demand access to hard-to-find talent, expertise, and cutting-edge technology.

As a result, these offerings are wide-ranging and adaptable, with the vendor-client relationship being highly collaborative and often seen as an extension of the organization.

Finding and keeping the right talent with the right skills at the right price is more elusive than ever

In today's rapidly evolving digital landscape, the challenge of acquiring and retaining talent is more significant than ever. Many companies consider talent acquisition to be their organizations' top internal concern, even though over half of them have seen a rise in staffing levels to fuel their growing demands. However, 62% of executives feel inadequately equipped to tackle the root causes of poor employee retention and its ensuing consequences.

As a result of the constant employee turnover and the emergence of remote working options, organizations find themselves in a fierce battle to discover and secure talent in the global marketplace. This situation presents service providers with valuable opportunities to offer innovative solutions that effectively address organizations' ongoing talent dilemmas.

Third-party delivery models keep evolving to unlock value

The observed increase in revenue and budget across various sectors suggests a significant growth in third-party usage over the past couple of years. While support functions and IT departments still lean heavily on outsourcing via distinct third-party models, core business operations like product development are typically handled in-house.

IT Service providers have expanded beyond traditional outsourcing, now offering expertise and hard-to-hire talent on an on-demand basis. This helps businesses stay agile and updated in the ever-changing business landscape. The shift towards more advanced outsourcing services underlines a growing interest in working in harmony with clients to deliver core competencies. The ultimate goal is to elevate value creation within the business, further underlining this collaborative outsourcing trend.

Outsourced product development is gaining popularity as a desirable choice for companies aiming for cost reduction and long-term innovation

Choosing the right sourcing strategy is a complex decision, as companies are faced with numerous outsourcing options. Effectively selecting a sourcing model requires considering factors beyond cost and skill set, such as time zone, cultural compatibility, and infrastructure improvements. As remote work becomes increasingly common, organizations are exploring new regions for external workforce expansion like Eastern Europe as an alternative to India.

When Outsourced Product Development Is the Way to Go

Over 76% of the world’s leading tech innovations in the last decade have roots in collaborative, cross-border development partnerships. You would agree with its post-pandemic state, changing business scenarios, and customers demanding all for yesterday - tie your hands, making outsourcing product development a far more reasonable strategy in terms of cost reduction, talent choice, and agility.

What’s more, a few years ago outsourcing was just a way to find a development team if you didn't have enough resources. Now, outsourcing is an integral and routine part of business operational strategies. When Skype started developing its first version, they decided to outsource part of the development work to Estonian engineers. This collaboration contributed to Skype's fast growth and its eventual acquisition by Microsoft.

The picture above shows the exact percentage rates of the IT functions businesses entrust to external vendors. However, what motivates them to choose the outsourcing path is another question. We found out that the buzz around outsourcing product development goes far beyond the traditional understanding that outsourcing is just for non-techies or new projects with limited resources. This trendy practice offers more than just cost savings, process optimizations, and fewer risks - which are also important, but they are just the tip of the iceberg.

Today's demand for outsourced product development services intensifies with such modern tendencies:

The ability to address workforce gaps. McKinsey Global Survey says that almost 9 out of 10 executives and managers believe their organizations are currently dealing with skill gaps or anticipate these gaps emerging within the next five years.

In addition, the latest article in the Wall Street Journal says that companies are outsourcing some jobs because there aren't enough workers and wages are going up.

Thus, we can see the predictions coming true. Office-based work became work from home. The lack of specialists and new policies force businesses to move some positions abroad.

The growth of remote work. The future of IT outsourcing in the United States is promising: experts predict the IT outsourcing market in the US will grow by about 10.67% from 2023 to 2028. While the pandemic was the driving factor for the growth of remote work, this trend will remain even after the pandemic is over. Therefore, businesses that don't embrace remote work might find it harder to attract and retain talented employees.

High competition sets the tone for further actions. New tech companies bet on product differentiation and choose to compete through the use of emerging technologies, such as artificial intelligence (AI), virtual and augmented reality (VR/AR), the Internet of Things (IoT), robotics, and advanced data analysis. Outstanding examples are Amazon, Tesla, and Netflix, which used technology in innovative ways to differentiate themselves.

Outsourcing development companies generally have vast experience and proficiency in incorporating disruptive technologies into innovative products. Additionally, from a cost, time, and quality perspective, it makes much more sense to adopt a well-tested approach that has been peer-tested on numerous projects than entering this uncharted territory from scratch.

6 Reasons to Vote for Software Product Development Outsourcing

Continuing the topic, it would be half true to say that the reasons for outsourcing today are the same as they were a few years ago. There are new challenges that growing organizations are struggling with today.

These new roadblocks push businesses to turn to outsourced product development companies to overcome existing and new challenges. Thankfully, outsourcing still helps.

Cost reduction and Predictability

The best part of outsourced software development is still cost savings, budget control, and the absence of hidden costs - as everything depends solely on your budget and is specified in a contract. In traditional outsourcing, 57% of executives cited cost reduction as a major motivation for outsourcing. This works simply: you hire a dedicated team or developers for a predefined scope of work so you can predict your expenses.

Abundant Talent Pool

Hiring globally for outsourced development lets you access diverse talents worldwide, no matter the role you lack - U/UX designer, React or Golang developer, database engineer, etc. Moreover, the shortage of skilled workers is also prompting companies to go beyond local hiring. As we've seen in the report, shortages in skills are mainly seen in cybersecurity, AI/Machine Learning (ML), and data science. Getting access to diverse talent and special resources helps fill skill gaps more efficiently while also saving time and resources on recruitment and training.

Faster Time to Market

Another startup goal behind outsourcing software development for startups is the ability to increase speed to market. Overlooking this factor can play a nasty trick if, let’s say, you want to promote your idea faster than a competitor. By outsourcing product development, you get well-established processes and development cycles so that you can move quickly from ideation to launch.

Moreover, a reputable outsourcing partner's experience and lessons learned are invaluable. With their expertise in place to increase time to market, they can provide advice on best practices and make prompt problem-solving decisions.

Access to tools, processes, experience, and peer-reviewed insights

Experience is something you can’t get at one moment. However, turning to outsourced product development companies with experienced teams solves this problem. Moreover, when teams with specific knowledge, experience, and ideas collaborate, it leads to more innovative and creative solutions.

Another problem of already bootstrapped startups is the lack of needed tools and well-set processes to guide software development tasks. That also explains why outsourcing is still on hype. Small and large business owners often turn to IT consulting services for in-depth expertise and guidance on their ideas, business plans, company futures, and startup futures.

Agility

In light of changing business scenarios, customer expectations, and high competition - agility is something you can’t bypass. For small companies, in particular, it makes even more sense. As new products tend to change and constantly adapt to meet customer needs, outsourced product development helps them pivot at any stage and scale the team up and down without the need for long-term commitments or hiring and firing processes.

Zero micromanagement

Focus on what you do best and outsource the rest. There is no way better to say how outsourcing can help business owners focus on their core business functions. So, the wise move is to choose a partner with the required competence to cover the missing role.

In-House Team vs. Outsourcing Product Development: Which One Should You Choose?

For Startups

Startups are known for being nimble and innovative. They can turn things around quickly, pivot when needed, and adapt to new opportunities without breaking a sweat. However, the 76% figure underscores that outsourcing IT services has become a prevalent practice, with more companies recognizing and embracing its varied benefits — from cost saving and increased efficiency to access to expert talent and advanced technology.

For Established Companies

If your company has been around for a while, there’s no doubt that you have some kind of online presence already. But does it do what it needs to do? If you need to improve your web product or fix some problems related to its functioning — outsource it. Those might be complicated tasks like building a complex app from scratch, or, for example, you can outsource CMS integration. You don't need to have a tech expert in-house; you need a skilled and reliable outsourcing partner with broad expertise.

In-house team 

Outsourcing 

Budget 

Higher due to full-time salaries, benefits, and infrastructure costs

Lower with no full-time expenses and flexibility

Control 

Offers direct control over the team and projects

Less control over the team’s daily actions, the outsourcing team is responsible for the delivery 

Experience and expertise  

Might have limited expertise and knowledge of technologies 

Narrow specialization, skill sets, and experience working with projects of similar nature 

Time to start 

Longer due to hiring & onboarding

Quick start: teams are ready to go

Competitive risks  

The high probability of losing the needed developer at critical development stages 

Lower risks due to the ability to fill the workforce gap at any time and speed up work 

Accountability 

High control over quality and direct accountability

Depends on the service provider's performance and contracts

What Can You Outsource in Product Development?

End-to-end software development

This service type includes custom software development, mobile, and web development that covers the full product development cycle, including product discovery, project planning, design, development, testing, deployment, and maintenance.

MVP development

Outsourcing MVP development involves creating a simplified product version that allows for quick market validation, cost reduction, and early-stage feedback integration. While the initial idea and vision come from the client, the technical implementation and related activities - from product discovery, development, and testing, to the MVP's launch and team setup - are managed and executed by the IT service vendor. This relieves the client of the technical intricacies and allows them to benefit from the outsourcing partner's expertise to bring the MVP to life.

UI/UX design

If your design lacks appeal and logic in UI (User Interface) or UX (User Experience), users won't be impressed by the functions. User-friendly design is crucial for creating attractive apps and websites that meet user needs and business goals. If you outsource product design to an experienced team, they typically develop wireframes, mockups, and visual designs for the product. Outsourcing product design covers the discovery phase, wireframes and prototypes, web, product, or mobile app design, etc.

QA and testing

It isn't a problem for outsourced product development companies to thoroughly test your solution to ensure it has minimal flaws and is in line with the latest design trends and quality standards. So, if you're unsure about QA and testing or what to test, don't worry—the experienced team will handle it. Outsourcing QA and testing means you'll have a dedicated team doing various tests like functionality, performance, security, load, and usability.

Coding

There are specific situations when clients may require specific expertise with tech stack. Their motivation is clear - they need access to a broader pool of coding talent and expertise, which may not be readily available in an in-house team. In such a case, they can also outsource this task and hire experienced programmers to write the code based on the product requirements.

Infrastructure and DevOps

Companies often outsource tasks related to creating and managing servers, databases, and other technical parts. More businesses are using multiple cloud services, which makes their IT infrastructure more complex as they provide a variety of services. This sector is growing due to these changes.

Infrastructure and DevOps services may also include things like setting up cloud environments, managing security measures, automating software development processes, and overseeing the continuous delivery of software updates. In simpler words, it's about making sure all the technical stuff, like servers and databases, work well and are kept secure while also helping teams work together efficiently.

Cloud migration

As we mentioned before, as more companies adopt cloud environments, the demand for transitioning systems to cloud-based platform providers like AWS, Microsoft Azure, and Google continues to increase. This transition requires specific cloud migration knowledge, which may be lacking in an in-house team.

By outsourcing cloud migration, you can receive dedicated help in seamlessly moving your existing systems to the cloud. This process may involve shifting software, databases, and other digital assets to cloud servers, making it easier to access and manage your data while reducing the costs associated with maintaining physical hardware.

Maintenance and support

The success of your business doesn't just depend on the final product release. What matters more is user-friendly, bug-free, and highly functional software that directly addresses your business or customer problems. Getting this right from the start is tough. Outsourcing maintenance and support services helps to ensure your software keeps working well and meets the changing needs of users. It involves fixing bugs, improving features, and offering technical help.

Modernization of legacy software

You may want to refactor the code by removing legacy parts of your software to create a new and efficient product version. When you outsource this process, it involves taking those old systems and making them work better with current technology. It's about enhancing how they run and making them last longer. This can include things like updating the software's code, adding new features, improving security, and ensuring the software remains compatible with newer technology trends.

How to Get Started with Outsourced Product Development

Outsourcing is indeed less complicated than hiring an in-house team, but only if done right. The hardest part of outsourcing is finding a partner that fully understands your requirements and shares your values. If you have doubts about outsourcing or concerns about how it works and whether it's worth the effort, pay attention to the following steps.

Step 1. Understand what and how you want it

Start by identifying your problems, requests, and what you need. Most importantly, have an idea of how you want it to be done. Without knowing your goals, it's unclear where you'll end up and what results you'll get from the partner's team.

So, be sure to create a list of things you need to build, set your budget, and provide rough deadlines for tasks like UI/UX design, app development, testing, and so on. Listing your needs will also help prevent misinterpretation and misunderstandings and help in finding the right outsourcing vendor with the relevant knowledge and skills.

Step 2. Choose a reliable partner

Next, consider who you need. You might just need one developer for a small project or a dedicated team for a big and complicated one. This decision is quite important.

When looking for a company for outsourced product development, many business owners struggle to know where to search. Here are some common places to find reliable contractors:

  • Social networks: Platforms like LinkedIn allow you to find companies and assess their work, client feedback, team ratings, and more.
  • Profile ranking sites: Websites such as Clutch provide a platform to explore various product development agencies, review their work, compare ratings, and read reviews.
ElifTech Honored as a Clutch Champion for 2023

Useful tip: Focus on companies that have experience in your industry and have worked on similar products. See what they can add to improve your software, and review their references and case studies.

Step 3. Decide on a cooperation model

There are several ways you can establish your outsourcing relationships with your partner. Whether it's through the fixed price (FP), time and materials (T&M), or dedicated team model, you should choose the one that best aligns with your budget, timeline, and project volatility. To provide a summary, we will outline the core specifics of these models.

The Fixed Price (FP) model is characterized by:

  • A predetermined budget
  • Fixed scope of work
  • Fixed timelines
  • Better suited for projects with well-defined scopes

The Time & Materials model is characterized by:

  • Billing based on resources and time utilized
  • Flexibility to adjust the project scope
  • Costs vary with project changes
  • Allows changes during the development process
  • Suitable for projects with evolving or uncertain requirements
  • Offers adaptability and flexibility
  • Allows you to see the result of work at each stage

The Dedicated Team model is characterized by:

  • Consistently dedicated resources
  • Ideal for long-term projects
  • Provides ongoing support and maintenance
  • Offers flexibility in team size and structure
  • Well-suited for continuous and multi-phase projects
  • Provides a stable and committed development team

Step 4. Set up the communication flow

Communication can significantly influence the outsourcing experience you will have. Establishing clear workflow patterns and open communication channels will allow for regular progress checks and keep both you and your development partner in sync.

To facilitate workflow, we focus on using easily accessible communication channels such as Slack, Zoom, Google Meet, and Jira for reporting and task tracking.

Step 5. Sign an agreement

Once you are satisfied with a particular vendor, it is the right time to reach an agreement and clearly outline the terms.

Our Experience with Outsourced Product Development

The knowledge and insights of outsourced product development are based on the experience we had. Our words would probably mean nothing to you if we couldn't showcase some of our recent cases. Below, you can look at a summary of each of our recent projects.

Theresa Regli: UI/UX design and web development

Theresa Regli's project was centered around the redesign and development of a sleek, modern, and user-friendly personal landing page for Theresa Regli that embodies her expertise and personal brand. The overarching objective was to leverage Theresa Regli's brand to redirect clients from her landing page to the corporate website, thereby increasing potential client interest in VoxVeritas' services.

Theresa Regli case

Recreogo: UI/UX redesign and web development

Recreogo is booking software for rental businesses, making operations and booking easy. Recreogo's existing software had been developed using outdated approaches, resulting in a lot of difficult-to-maintain code. Moreover, the user interface and design were inconsistent, harming the user experience. The project aimed to streamline operations by providing online scheduling, payment processing, inventory management, and real-time availability updates.

To help Recreogo transition out of these issues, ElifTech provided comprehensive support during the development process. We thoroughly analyzed the existing codebase, identified areas needing improvement, and successfully implemented changes, reducing downtime and improving efficiency. Recreogo's key developed feature is the real-time availability display, integrated with a booking calendar linked to the business's inventory.

The project resulted in significant improvements in code quality and maintainability. The booking process became more streamlined, and the user interface and user experience were enhanced. The project also delivered effective email marketing campaigns and efficient payment processing and management. Furthermore, the move from the Braintree Payment System to Stripe made payment processing more secure and reliable. Additional features such as invoice editing and price changes, VINs, and rental history table management were also included, contributing to improved reporting and statistics.

Recreogo case study
Recreogo case study

BidBuild: Mobile app development

Wahoo Pools faced challenges with their outdated CRM software, leading to scattered data and inefficiencies in managing leads, sales, and orders. The aim was to facilitate better management of leads, track sales, handle orders, create proposals, and manage billing and invoicing. They also wanted to monitor financial metrics in real time for improved budgeting and forecasting.

ElifTech developed and designed an intuitive tool that addressed the specific business processes of Wahoo Pools. The software was initially designed for Wahoo Pools but later transformed into a Software-as-a-Service (SaaS) product that other companies could use. As a result, it helped enhance sales and operational procedures along with financial management and accounting.

Features delivered included efficient lead and activity management, proposal creation, job tracking, budget management, and improved billing and invoicing processes. The platform also had a superadmin portal for managing new organizations. Overall, the project resulted in enhanced efficiency, improved user experience, and added revenue generation through the SaaS solution.

BidBuild case study

Conclusion

It's safe to say that outsourced product development is not on the decline in today's business landscape. It continues to go from strength to strength. Today's businesses increasingly compete in key areas–talent, cost, and technology – and the importance of these factors retains relevance. And, the more they remain crucial, the more attractive the idea of outsourcing becomes to businesses. Outsourced product development enables businesses to access a global pool of highly specialized talent, often at competitive prices, helping companies outplay their competition, and facilitating growth, innovation, and efficiency in their operations.


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