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Why Startups Prefer Outsourced Product Development?

Krunal Shah

Nov 09, 2022

7 min readLast Updated Jan 20, 2023

Outsourced product development

Blog Summary: Outsourced product development has become a trend nowadays. Most of the new startups are opting for product development outsourcing as it is proving to be of great help to them. Know more about outsourced product development benefits, strategies and how it’s better than in-house product development.

Outsourced product development, refers to getting your product developed from some sources outside of your company. It can be both a boon and a bane for the company. Most of the time it has provided endless benefits to startups and small businesses.

With Outsourced product development market revenue crossing  $100 billion, and with the market cap of the IT industry being more than $1trillion, product development outsourcing is expected to reach new heights in the future. Being a time and revenue-saving option, most companies are opting for it nowadays.

Outsourced product development

What Is Product Development Outsourcing?

As the name goes by, product development outsourcing is a way organizations hire third-party software development companies to develop their software applications. Using this method, non-technical startup founders and product managers get a huge sigh of relief as they can now easily bring their product into the market, without worrying much about the development part.

This trend of outsourced product development has been going on since the time of tech giants like Google, WhatsApp, and Microsoft. In their early days, they also had to look for affordable and efficient product development solutions because of which they opted to get their outsourced product development to be done by developers from mainly Eastern Europe and Asia.

Google still opts for outsourced product development for many of its projects as it provides the giant with cost-friendly and experienced developers. It doesn’t matter which industry you are targeting, product development outsourcing would always be the best option for a startup. To know more, let's have an idea about the benefits of outsourced product development.

See More: How To Outsource Software Development Projects The Right Way

The Top Benefits of Outsourced Product Development

Outsourced product development has numerous benefits which include -

1. Experienced Team

One of the significant benefits of outsourced product development is getting in touch with world-class experts. These experts are of great use to the startup as they provide you with a top-notch and nicely finished product. Developing a product involves a dedicated team of developers, designers, testers, product engineers, and many more.

Outsourcing product development bypasses these hassles for the entrepreneur as they can now focus more on the other aspects of the product like marketing, funding, etc. This also provides them with access to the talent pool of different regions.

Most of the time, the project is handed over to a company rather than freelancers. The company to which the project is given must be researched as to how much-experienced the team they have and what kind of products they have developed, etc.

Outsourced product development

2. Budget-Friendly

Product developers in big companies demand bigger salaries, which most of the time are heavy on the pocket of a startup. Hiring developers can be a hassle for them as they may opt for affordable options from their country and the developers may not be much experienced which further leads to product delays.

A recent survey by Deloitte revealed that 70% of the companies opt for outsourced product development due to its affordability. The majority of startups turn to Asian countries for product development, as there’s a huge talent pool there and they are quite cost-effective than their western alternatives. In countries like the USA, UK, and Canada, developers charge around $80-$150 per hour whereas in Asian countries, especially like India, China, Japan etc., it comes down to  $35-$50 per hour, which costs even less than half of their western counterparts.

3. Time-Saving

Product development outsourcing is a huge time saver as the major hustle of product development is given to an experienced team, which you don’t have to head. Therefore, you can focus on other factors like marketing, funding, lead generation, sales, etc.

Even though you may opt for cheaper alternatives from your country, firstly, it may take nearly a year to accumulate the whole team and secondly, the team may not be as efficient as you thought it to be. The product development will take time also, and may not be according to the market requirements by then.

On the other hand, if you get this product developed by a third party, half of your hustle will be reduced and it would be a boon for you as you will save a huge amount of time. You may get it developed in as little as 3 weeks.

4. Researched Product

No matter how good a product you might have thought of if it's not as per the market needs, all your efforts go in vain. Outsourced product development helps you with this as the experienced individuals there have an idea of the market and can greatly help you with making your product as per the market needs.

5. Ideas Can be Outsourced!

Even if you don’t have any prototype ready, you can just pitch your idea to a third party and they may help you with developing your product.

See More: Outsourcing Software Development for Startups: Benefits and More

Tips to Opt for Outsourced Product Development

The outsourced product development process can be further broken down into several stages and here are some tips to follow -

1. Create a Structured Plan

Product development without a plan is as fatal as a missile that doesn’t know where its target is. Whenever you are pitching your idea to a third party, be careful about the requirements, features required, and relevant things.

If the client doesn’t pitch its requirements properly to the vendor and they create a mediocre-level app, which doesn’t do well in the market, it will ultimately lead to a waste of time as well as money. Always list down your project needs at the very beginning of the discussion. This will help you as well as the vendor.

Outsourced product development
IT Outsourcing Market & Trends - Source

2. Choosing the Right Vendor

Numerous outsourced product development software companies are there which can help you with getting your product developed. You need to find the one which caters to your requirements. While looking for companies, research the project delivered by them and the skill level of their employees.

3. Selecting a Collaboration Model

Development firms offer several models according to which your product will be developed. While selecting a model, look at the financial requirements, time requirements, and project volatility.

Outsourced product development

4. Communication Factor

Good communication is necessary for any project’s success. Both, the client, as well as the vendor, must agree on a certain set of rules. For example, having a progress update schedule and agreeing on a communication platform like Google Meet.

5. Contract Agreement

Once you have finalized the vendor, sign a contract agreement with them to make the project legal and spell out the legal terms. Make sure both parties agree on the set of rules mentioned in the Agreement.

Outsourced Product Development Vs In-House Product Development

Outsourced product development has its own set of advantages as well as disadvantages when compared to In-house product development.  Let’s have a look at the advantages of Outsourced development over In-House Product Development -

1. Faster Time-to-Delivery

While looking for outsourced product development companies, you only need to fix a meeting with several companies and finalize the one which caters to your needs.

While in In-House product development one needs to find all the team members themselves which may take as long as a year sometimes.

2. Easy to Convey the Idea

One can easily convey their ideas to a product development outsourcing Company as one only needs to schedule a meeting with them and tell them what one needs and how much resources one can spend compared to in-house product development where you need to take more responsibility and invest more effort.

3. Access to a Large Pool of Talent

For outsourced product development, you can have access to a large pool of developers from around the globe and you can choose as per your preferences. But in in-house product development, you only have access to limited talents to work with.

4. Continuous Innovation

In outsourced product development, you need not worry about innovative ideas which may help your product to be developed faster whereas in in-house product development, you need to consistently motivate them to have innovative ideas coming.

5. Less Expensive

Outsourced product development is easy on your pocket as the whole thing needs to be handled by a third party. While, in In-house product development, you need to have an office, look for employees, and get them with the required devices.

Disadvantages of Outsourced Product Development

1. Lack of Communication

Communication is the biggest issue in product development outsourcing. Since the team you are communicating with can be located overseas, you can have issues like time and language barriers.

2. No Immediate Access

Accessing is a major issue with product development outsourcing. You must have regular meetings with the team about product development. Whereas, no such issue is there in in-house product development.

3. Security Issues

Your information and ideas must be kept secret. There’s a great chance of security breaches in outsourcing product development, for which you need to have a non-disclosure agreement ready. On the other hand, in-house product development doesn't have any such issues.

See More: How To Choose Between Onshore vs Offshore Software Development

I hope this article gave you an insight into how product development outsourcing is said to be a boon for a startup. Do you also want to opt from competitive outsourced product development services?

Third Rock Techno gets you covered. We have a large talent pool of cost-friendly developers who deliver your projects on time.  Check out our portfolio and drop us a line to get started today.

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