“Do what you do best and outsource the rest,” said Peter Drucker, one of the most influential management theorists of the 20th century. According to the IT Outsourcing Statistics 2020-2021, 60% of the tech companies turned this advice into a business strategy and started outsourcing their product development projects.
Although there’s no specific date when outsourcing started, there has to be a significant reason for this longevity. Better talents, lower prices, and access to global opportunities are a few to outsource your development project in this regard.
Outsourcing Product development has become not just a trend or the future of work but a present reality.
According to STX Next’s 2021 Global CTO Survey, 89% of the CTOs plan to outsource product development in the future. Even GlobeNewswire states that the outsourcing market will be worth $425.19 billion by 2026.As more and more companies tend to outsource certain parts of functions, it makes outsourcing product development is a common practice for tech companies. Top global product companies like Skype, Opera, and WhatsApp have successfully outsourced product development resulting in success.
An insurance tech startup from California outsources machine learning functionality to get access to ML experts they don’t have on a team.
Outsourcing product development is one of the wisest decisions that startups or large companies can make. It makes sense when you want to get a turn-key software solution fast and on budget.
When considering outsourcing your product development, external developers can help identify new technological solutions and speed up the development process at a lower cost.
In this era of product development outsourcing, you may have a bunch of questions in mind:
And so on.
It's safe to say outsourcing product development thrives because it gives much value to its stakeholders. Involving an external team as a part of your project welcomes expertise and loads of experience businesses use to create an upper hand in the industry.
With this in mind, if you’re looking to work with outsourcing product development that will help CTOs and entrepreneurs fill in any technology gap, the guide is for you.
A lot of competition in the market forces organizations to seek innovative ways to develop new products in a shorter time. But customer demand often exceeds the ability of suppliers to innovate. As in cases where the market demands new products faster than companies can produce, outsourcing has become a powerful tool to enable companies to act smarter.
Instead of thinking about whether outsourcing product development is right for your company, use a constructive approach. Here is a list of situations where it is best to hand off a product development project to an experienced outsourcing team.
Product development requires skills to get the job done well. It’s one thing to come up with a product development idea and another to bring it to life. It is an ongoing process, and the team should have skills such as prototyping, deep scan, documentation, testing, etc. If your in-house team lacks knowledge, skills, and experience in at least one of these areas, then it is worth outsourcing your product development to an outsourcing company.
The development of software products requires a good knowledge base and solid expertise. If you don’t deal with product development, it is logical and productive to outsource the part that requires an outsourced developer.
In many countries, there are high barriers to entry for new products. For example, several regulatory hurdles need to be overcome when developing financial products that lead to long delays in project phases. If you’re on a tight budget and schedule to launch your product, outsourcing is the best option.
The 2020 pandemic has brought about changes in the field of product development. Enterprises have been forced to move to remote working and rely on digital technologies as office-based work has become a home office. 57% of the companies believe outsourcing allows them to focus on their core business activities completely.
Many startups and tech companies are struggling to decide whether outsourcing an MVP or MMP, or any other type of minimum product is the right way to start. Starting from end-to-end product development to MVP to MMP to EVP to any other development stage you can outsource to build it right.
Do you have a concept for your product in mind? Are you willing to shape it and head straight to the development process?
The best way to start is by finding a roadmap for development. Organizations leverage it to save time, reduce cost, and develop an efficient product while meeting their client’s demands and expectations.
It makes a lot of sense to CTOs and entrepreneurs to outsource tasks. It is because you have to set up an office space, put together a professional team, and build infrastructure.
Developing a product requires a combination of keen minds, exceptional talent, and cutting-edge technology expertise. With cross-functional teams for designing, developing, testing, and marketing under one roof, outsourcing enables you to launch your innovative product faster and cost-effectively.
Product engineering outsourcing has improved as service providers have grown increasingly specialized, especially in certain elements of the product development lifecycle. Outsourcing end-end development would be more beneficial and profitable for your business. You can automate your business while focusing on the core operations.
By giving your requirements to an outsourced product team, you get more benefits for your business that include cost reduction, access to a larger talent pool, time savings, and increased productivity.
Hiring product engineers facilitates companies to easily scale up and down in accordance with their projects’ features and volumes. It enables you to react adequately to any unexpected challenges posed by the economic dynamics. Combined with the product engineers and high-end technology, the greater the time you have to market your product.
The pandemic has leveraged companies for digital product management. The transformation around customer-oriented digital technologies has shaped the way businesses work within global markets.
By extending your product workforce, you can stay competitive, allowing you to be more tech-efficient and performance-oriented.
Outsourcing Product development enables companies to build some of the complex activities of web and mobile applications while preserving the desired level of control over the web development project/projects.
Maintaining high-quality code is essential if you want to meet users’ expectations and give your applications a new avatar. That is why code refactoring is a long-term investment in outsourcing product development.
It will reward you with an efficient product that allows you to achieve your business goals and stay ahead of the competition.
A dedicated team can act as a team of experts suited for your project needs. By hiring remote product developers to adjust the tasks to the specifics of your app, the whole process will run smoothly and the result will be a quality product.
Remote Product development is not a one-step process. For a product to align with your business goals and serve your customers, you must know the benefits of outsourcing product development before it passes through several stages.
If your project is complicated that always needs to be developed sprint by sprint, analyzed, and then developed again you probably would economy a lot on having an in-house developer. However, hiring a remote developer or a dedicated team will lower your risk of becoming very subjective and outdated too soon.
Here are some of the beneficial reasons that support outsourcing product development
Hiring specialist developers to implement digital solutions strategies is not a simple task. They must have experience and expertise to support your product development and be culturally appropriate for your brand.
Hiring talented people who work together as a rock-star is difficult. However, outsourcing allows you to access the best talent in product development. The right partner will provide you with skilled professionals who are updated with new technologies and keeps up with recent trends and developments. Partnering with the best remote development team will guarantee your product is of the highest quality and up-to-date.
Leading product development specialists often have a high salary so hiring them as full-time employees can be expensive. According to Deloitte Global Outsourcing Survey, Industries stated cost reduction as a secondary benefit behind other objectives- agility or improving the quality of service.
It might seem counter-intuitive, but hiring and attrition of product development employees may cost the organization much more than outsourcing it. With remote developers, you get very talented resources working on your project only to the extent they are needed.
Additionally, to this offshore team, you have a cost advantage and broaden the scope of talent in the team. It creates the perfect balance between skill and rates while getting a top-class team to build your product.
Hiring remote developers or offshore teams can help you build your product at a low cost. If you’re a startup then you will also need the right guidance. An outsourced company can steer you on the right track. This way there will be no mistakes in your product development that you could make out of inexperience. Also, other product development help and specialist working with an outsourced organization.
Handing product development to a specialized company often means working concurrently, as the partner you outsource will complete the development task faster without micromanagement.
You get effective, built-in offshore team management as part of the service. At the same time, you can focus on your core business, doubling productivity. Another plus is the absence of management overheads.
It may take months to set up a team of experts for product development. Even the most simple defining process in product development can take up to a year if you do the work yourself.
However, hiring the right remote development team can usually ease your software development life cycle from planning to the deployment stage. Simple projects may take a few weeks, while more complex projects typically take four to seven weeks, depending on their size.
Outsourcing your product development project enables you to gain the experience and skills of the world’s leading product developers. When you work with a trusted partner, a team of engineers and other product developers will analyze every detail of the product.
Being experts in their field, these dedicated team of developers will review your process from planning to the deployment stage in your software product development life cycle. Additionally, these experts will have unique skill sets and experiences on things you never thought of.
Successful product development requires multiple interactions. The original idea may have a minimal set of features and, rapidly, put it in front of your users as MVP.
Working with specialized engineers will help you judge the user’s pattern on what is working, what needs tweaking, and what needs to be discarded. The idea is to minimize the cost of each learning iteration within the product development budget.
A good outsourced product agency brings this mindset to the table. These remote engineers can help you evaluate what’s in the MVP, what decisions should be made for experimentation, and during the building of the foundation.
The core part of your business includes business strategy, allocating funds, marketing, sales, and product development.
Why not hire a dedicated team of developers who can handle the most time-consuming aspects of product development so that you can focus on your core business.
Product developers are high in demand as the local talent pool is contracting. Hence, outsourcing product development is a great way for startups and established companies to scale their business while keeping development costs low.
Although there are a lot of benefits of outsourcing you must also avoid a few mistakes when choosing your development partner.
It's essential to be clear about your software engineering project when outsourcing and making the project successful. Not producing clearly articulated, well-structured requirements is one of the common mistakes companies make when outsourcing product development. It's essential that both parties have a solid understanding of what is the requirement and not simply have a vague idea of what is required.
Solution: Either ask your project manager or hire an outsourced one to comprehend a detailed scope of work including everything from the project's main goals to the specific tasks that require attention.
Having detailed technical requirements ensures both teams have a complete understanding and avoids an unreasonable timeline.
One of the common mistakes organizations make is not scrutinizing the estimated cost or contract of the project. Often the estimate may look attractive on the surface but only upon thorough scrutiny do you realize there are several essential items not included in the quote.
Solution- Ask your product development partner for a complete quotation. Also, see what services are available, and what is the global price for the same service. Asking questions about the developers, and the time to complete the project will help you analyze the actual costs.
When you outsource a project, defining a clear plan of action is essential. This will outline your requirements, and meet your respective deadline. The detailed outline will help to 5 define a clear path of action for both the parties involved.
Solution- Here are a few questions you may consider when making your project plan.
Making sure both you and the outsourced team have a copy of this plan will help ensure everyone involved is on track to complete their tasks in time. It not only mitigates miscommunication but also frustration along the way.
Establishing clear communication with the offshore team is a must to ensure product development success. Outsourcing product development doesn’t mean outsourcing your thought processes. It is essential to keep communicating with the developers in the outsourcing team to feed them in with your thoughts.
Solution- Engaging properly facilitates the developers with the complete development process. Along with communicating your thoughts, and listening to the feedback of vetted IT professionals for the betterment of your software. Also respecting the time of the outsourcing team will act as a healthy practice for the development process.
Building the perfect product as per your vision is not enough. Consider the remote team ensures you build a great product but, it can only be deployed once the complete product is developed. It isn’t wise to test small features. It increases the time-to-market for the product and incurs a huge cost.
Solution- Consider your remote partner delivering the completely developed product. Have clear communication with your remote team about the methodologies incorporated to develop your software. You should ask for the choices and options of your outsourcing partner while using different development methodologies.
Being aware of the kind of development methodologies such as Agile, Waterfall and DevOps will help in product development.
Avoiding these common mistakes to get the most out of the partnership when outsourcing your product development is important. Let’s now see which team should you choose for your product development- in-house or Dedicated Team.
Having decided to build a product, CTOs or entrepreneurs need to decide how to organize the development process. So the question arises which team of product development to hire-Inhouse or outsourced?
It’s sometimes challenging to decide when you have limited time and money. Here we have discussed a few advantages and disadvantages of an In-house and outsourced team to help you choose the better one.
It is a great way to start with your In-house team when developing your product. However, we will talk about it in brief now.
Cultural Fit: In-house developers tend to pay more attention to the specific needs of the company. It means they’re motivated to integrate with your company’s culture.
Face-to-face Communication: Having the same working hours and office enables you to communicate with your in-house team quickly. Direct communication mitigates misunderstanding and increases effectiveness.
Making Changes: Working with an in-house development team makes it easier for you to change any development feature, and discuss any technical difficulties.
Even the in-house development team to has imperfections. You as a product owner or a CTO must be aware of the disadvantages before planning to develop your product.
High Cost: The price is an issue when hiring in-house developers. The final price of hiring adds up other expenses such as a high pay scale, additional pay in the CTC, bonus, and other facilities. There are some additional costs like training employees, sick leaves, infrastructure costs, etc.
Staff Turnover: Product developers tend to change the working place often. It is because the demand for talented developers is high, and other companies may offer them better working conditions. As a result, entrepreneurs, and startups face challenges in finding better developers and lose time. Also, finding new developers is time-consuming that may slow down your product development.
Lack Of Talents: Not that every in-house team has better talents. As it’s tough to hire the right person in some regions. Apart from meeting the soft and hard skills, in-house developers must fit into the planned budget.
According to Statista 2021, the global IT outsourcing market is expected to grow by US $587.30 bn by 2027. Therefore a lot of companies are hiring outsourced developers to cut costs, save time, and find competent developers.
Outsourcing product development had undeniable advantages due to which companies like Google and Slack Expensify are choosing to outsource some of their development work.
Cost Flexibility: There are a lot of software outsourcing companies globally that offer affordable prices. The most popular regions for outsourcing are Central and Western Europe, the Balkans, America, and Asia. India is one of the best places to hire the best talents due to a bunch of talents, low taxes, and government support.
Huge Talent Pool: As we have mentioned above, the market of IT outsourcing provides a huge pool of technical specialists who have experience and expertise. Therefore hiring remote developers or a dedicated team takes a few days and not months. Outsourcing provides you with unlimited hiring opportunities who have different skills and experiences.
Scalability: Another reason to outsource product development is to scale your business. It means you can make the remote developers fit with your team when needed as per your project and scale down if there is no task for them to tackle.
Fast Delivery: Outsourcing product development reduces the time of hiring in-house developers. As outsourcing allows to hire of remote developers from all over the world, it enables entrepreneurs and CTOs to get the delivery faster. Being specialists in their field, you don’t need to train them. As a result time to market decreases along with expenses.
More Tech Stacks To Choose: A remote developer or a dedicated team of developers can offer a better-required skill set than an in-house developer. They are specialists. For example, if you lack a React developer in your team, you can always hire one from any part of the globe.
Despite significant advantages, outsourcing too has a small disadvantage that you need to beware of.
Communication: Although outsourcing product development mitigates costs, you may face communication challenges when working with a remote team. Due to regional and cultural differences, entrepreneurs may face time gaps and language barriers. For example, if you are from the USA and you have hired a team in India. There is 12 hours gap between both the region. However, you can communicate with your team during the overlap period. Because USA morning hours means India’s afternoon.
Although there is a difference between the times of the two regions, India has always been cheaper for hiring talented developers for your product development.
Now that you’re aware of what kind of developers you want to hire for your product development, it is also essential to know the cost of hiring developers from different regions. In our next chapter, we will discuss the cost of hiring developers all over the world.
As we’re clear about the advantages and disadvantages of hiring remote developers, it’s time to figure out how much developers globally charge for their service and a way for businesses to save costs in software development.
North America in the USA is one of the most expensive regions to outsource product developers. In comparison with other regions, developers from USA and Canada charge more than in other countries.
On average these developers charge $100-$150/hour for their service. With this rate, the entertainment giant Netflix’s product development costs $303,800 to $455,700. This is a huge price for outsourcing your developing project. Therefore, many tech giants look for regions with cheaper outsourcing costs.
Oceania stands next to North America in terms of the cost of hiring remote developers. With an average rate of $100-$120/hour, the cost of outsourcing product development may cost $250,000-$375,000. If you’re located in Australia or New Zealand then outsourcing from Oceania makes sense. You may have control over your remote team. However, with a limited budget and lesser time for your project then hiring from India is one of the best options.
Eastern, central, and northern Europe has been one of the biggest tech hubs in the world. Many entrepreneurs favor this region due to unlimited developers with new technology stacks. With an average rate of $40-$55/ hour, the average cost of outsourcing product development is lower. Taking these rates, outsourcing costs will be $200,000 to $300,000 for any project.
Western Europe is also rich with talented developers, whose price range varies from $50-$150/hour. Germany has one of the biggest developers in Western Europe and the developer charges $50-$99/hour. It is a decent price if you are in the same region to outsource your product development project.
However, in Portugal, there are far fewer developers. Due to a lack of developers, and specialized engineers Portugal product development companies charge $150/hour. With this price range, a product development project will cost you $159,100 to $477, 300.
It is one of the most debatable outsourcing regions. With so many attractive prices, organizations can hire talented developers from this region. Even the price range is also lower than in most parts of the world. If you have a feeling that your budget might just be getting tighter and everything is not going as per the finances priorly planned, outsourcing might be a fix.
The remote developers in India charge $20-$49/ hour. With this range, the Netflix product development will cost you $60,760- $148,862. Apart from regional prices, you also get a quality product.
Now that you know the price range of outsourcing product development in a different region, let’s discuss choosing the right product development company. We have created a checklist to help you search for the right partner for your development process.
Choosing the perfect product development partner to build your product solution can be very tough. With so many product development companies globally, how do you know who is the best for your company? Do they have a great development team or are they quick to reach your goals?
In this chapter, we will discuss the top eight tips you can apply while selecting your development partner.
Before choosing your technology partner, you must know what you want for your product. So the first step is to define what are your business goals? Here are a few questions we have listed to help you define your requirements.
These are all a few essential questions to answer before moving on. If you're not sure, ask for help from someone familiar with the process. Also, share these points with your with any software development companies so that they can understand your requirements.
The internet is a vast place to check about any company. If you need an outsourcing product development company, it is easy to find on the internet. Social proof is a very essential factor to search for any outsourcing company. If you choose the wrong product development company for your needs, it can result in many catastrophic consequences for your business.
Checking ratings and reviews on social media can help you hire the given product development company. Performing due diligence in outsourcing is essential. It enables you to do a complete legal inspection of the company you are trusting the company with.
Life becomes much easier when you can choose from a few listed outsourcing companies. So, what other steps can you take? One of the crucial things to do is to check the company’s portfolio and its case studies.
It will help you to compare the companies you may consider hiring for your project. A portfolio is a powerful source of information as it will showcase the company’s previous clients, and projects.
Also looking at their case studies helps you to see the kind of development services, and clients they have worked with. Reach out to the company’s representatives to closely examine their previous experience.
In the product development industry, the best companies always move forward and try to keep up the pace with modern technologies. The companies that are the best to have partnerships are likely the ones that are following the latest product development trends and technologies.
In 2022, many trends are new and many of those stretch out from before. Checking whether a company uses modern and advanced tools and technologies is vital for your choice of an outsourcing partner.
The language barrier and geographical location play a major role in choosing a product development partner. With the never-ending expansion of outsourcing, you can find a development company suited to your needs.
Teams, zoom calls, or Slack are a few effective communication software that makes it easier for you to connect with your dedicated team. When you choose an outsourcing partner, you must be aware of your client-provider communication.
India’s international language is English; therefore, choosing your partner from India will not only help you save costs but also make you a better partner.
Experience is one of the most essential things when outsourcing product development. Therefore, as a client, you must know about their previous experience. Before partnering with an outsourcing company big or small- anyone could be perfect for your business so don’t hesitate to do a little digging about its past.
Also, a big number of years on the market doesn’t mean better services. Therefore choose a partner who has worked with similar companies or development projects like yours.
Each product development process is unique and it can have different complications and situations that need handling. Therefore, the product development teams need to have a viable methodology for product development.
Most outsourcing product development companies rely on Agile methodologies that make the process adaptable to real-time changes. These teams use sprints that allow them to test the product each time.
You should check whether the company uses Scrum or Waterfall methodologies. Based on the methods they use, will enable you to test your project at any sprint or stage of its development.
It's essential to get an idea of how much your product development project will cost and the time frame to finish it. Ask for a quote or estimate from your outsourcing partner and see what fits within your budget and your desired timeframe to complete the project. Also, don't forget to consider other costs, such as maintenance, support, knowledge transfer, and updates after completion.
Now that you know how to choose the right product development partner, let's read the next chapter on how can outsourcing product development in India can benefit your business.
India is the leading nation in the global outsourcing industry. For over two decades, India has been a preferred outsourcing destination by many western countries.
40% of India's workforce is expected to enhance its skillset to cater to advanced business requirements in the next five years. Here are a few advantages of outsourcing to India.
In 2021, India produced 1 million engineering graduates and 300,000 postgraduates. With such a huge talent pool, India has a huge capacity to intake product development projects.
Over 50% of India's population is under the age of 25, thus it shows enthusiasm and passion. Therefore, for the product development industry, India has to offer a huge number of young and talented engineers.
Outsourcing to India for product development is cost-effective. With a vast pool of engineers in product development companies, India offers a competitive environment for CTOS and entrepreneurs.
For example, hiring product developers is cheaper than in Western countries in India. In the US hiring a product developer can cost $75-$150/ hour and can even go up to$ 250-$459/ hour. In India however, this cost is as low as $15-$40/hour. But the reduction in price doesn’t mean low quality; it's just an economic feature in a largely populated nation.
Another aspect of the product development life cycle is the interaction between the product owner and the client. In product development outsourcing, language barriers can pose a critical challenge to healthy owner-developer interactions.
With 125 million English speakers in India, you don't have to worry about hindrances to the development process due to the language barrier. When outsourcing product development to India, you can easily communicate with the remote developers in English, via different platforms like Skype, Slack, Google meet, Zoom, and more.
Although India is a developing country when it comes to product or software development- it is hard to compete with India. Plenty of talented young engineers combined with World Class technology and infrastructure makes India a preferred choice for outsourcing product development solutions.
With a large pool of talented developers, Indian engineers are experienced with new and trending technologies. Hiring a dedicated team in India knows which methodology to use- Agile or Waterfall. It helps CTOs and entrepreneurs save time and budget working with Indian developers.
If you’re concerned about the time zone difference when outsourcing to India then you must be aware that Indian developers mitigate the issue by providing round-the-clock service. Round-the-clock development enhances productivity and ensures on-time delivery.
Also working with experienced engineers you get your deployment on time and the quickest time-to-market for your product.
Outsourcing product development to India has a lot of benefits, but you need to tread carefully when selecting an outsourcing partner. Outsourcing to Classic Informatics: