Outsourced product development helps organizations focus on their core business while cutting overhead costs like office space, utilities, and maintenance. The unprecedented advances in technology are driving companies to look beyond their in-house capabilities to propel product development. Thus, outsourced product development is a strategic technique companies leverage to remain competitive and offer innovative solutions. Read on to explore what goes into outsourced product development, actionable insights, its benefits, and best practices.
What is outsourced product development?
Today, outsourced product development is a strategic approach that engages external vendors to address the entire product lifecycle. This strategy not only enables organizations to capitalize on external expertise but also decreases costs and expedites time-to-market. It is an important approach for remaining competitive in the current fast-paced business environment. This is true even for outsourced software product development. Popular brands like Google and WhatsApp leveraged software product development outsourcing to innovate quickly while focusing on their core functions.
Outsourcing software development models
Regardless of the project, outsourcing falls into location-based and relationship-based models. With location-based product development outsourcing the main decision when choosing an outsourcing product development company is how close it is. Furthermore, location-based outsourcing can be divided into:
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Onsite outsourcing. This approach requires the external team to work from the premises of the hiring party.
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Onshore outsourcing. It entails hiring an external team residing in the same country as the business. Although it prevents issues like time zones, cultural differences, and language barriers, it limits the talent pool. As such, it may not be cost-effective.
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Nearshore outsourcing. This technique expands an organization's options to neighboring countries or regions. Nearshoring provides access to more expertise with fewer logistical or time zone issues.
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Offshore outsourcing. This type of outsourcing allows organizations to partner with teams from anywhere in the world. According to Forbes, working with remote product development teams is a reality today. Often, this results in considerable cost reduction and an opportunity for software development around the clock.
For relationship-based outsourcing, the models fall into three categories:
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Staff augmentation. It involves hiring external experts to complement an organization's in-house team. This way, the organization addresses gaps in in-house skills, capacity, and expertise. The model is ideal for swiftly scaling the workforce for a specific period or project.
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Managed (dedicated) team. This model entails an organization hiring a dedicated team to work exclusively on a project. It provides flexibility and control over the timeline and direction of the project. Hiring a dedicated team is the perfect model for a long-term project whose scope is expected to change. It is ideal for outsourcing healthcare IT systems to an experienced team with an established track record.
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Project-based model. In this model, the outsourcing partner handles the entire product development process starting with ideation to deployment. The hiring organization provides the project requirements to the outsourcing software partner to handle the rest. Although this model decreases the hiring organization's involvement, it requires choosing a trustworthy product development partner to prevent delivery issues.
When to outsource software product development
Today, several scenarios warrant an organization or a business to outsource software development. These include:
Lack of technical expertise
An organization's in-house team may lack the necessary skills to develop and deliver software. Even though the internal team may manage several stages, it may require external guidance to finish the project. Thus, engaging with expert professionals provides invaluable insight and expertise the in-house team may lack.
Internal HR constraints
Maintaining existing products while developing new ones can stretch internal teams. Fortunately, outsourcing allows in-house teams to focus on core business processes while experts address complex product development. It provides access to specialized skills without the hassle of hiring and training new employees.
Time constraints
Outsourcing is ideal for organizations when they have a pressing need to deliver a product that meets market demands quickly. Hiring software product development services helps expedite the development process. Engaging external partners who specialize in product development allows organizations to leverage their resources, established workflows, and experience. This accelerates time-to-market for their product.
Cost saving
Often, outsourcing the software development process can result in cost savings. This is especially true when partnering with vendors located in areas with low labor and operational costs. What's more, the external team's streamlined process and economies of scale help in decreasing the overall cost.
Scalability
Businesses that experience fluctuations in demand or need rapid scaling can outsource product development to partners that offer scalable services. The partner can adjust resources accordingly to meet demand. Such flexibility is valuable for companies and startups with fluctuating product demands.
Focus on core competencies
Organizations can outsource non-core activities such as product development, allowing them to focus on core and strategic initiatives. Delegating product development enables organizations to concentrate their internal resources on areas they have a competitive edge. This way, a business owner can improve efficiency and effectiveness.
Mitigating risk
Outsourcing helps enterprises mitigate the risks that come with product development. Top outsourced product development services have a proven track record with well-defined processes, regulatory compliance expertise, and quality assurance measures.
Even though outsourcing product development may be advantageous, it does not apply to every project or organization. Besides, carefully evaluating and selecting partners is essential in ensuring a successful outsourcing relationship.
Identifying the right outsourced product development company
Before settling on an outsourcing partner, take time to vet candidates carefully. The best-outsourced development firms will welcome this evaluation and a chance to showcase their experience and skills. Over time, a thriving partner relationship will deliver compounding dividends. Here are several factors any organization should consider when looking for an outsourcing partner.
Avoid platform bottlenecks
One pitfall organizations should be wary of is choosing a vendor with expertise in one technology platform. This means the vendor will not support a business strategy if it veers in a different direction. Also, the vendor will be unable to address interoperability issues with platforms beyond their specialization.
Thus, consider a reliable outsourcing partner with a deep understanding of multiple platforms and know how to integrate them seamlessly. When evaluating vendors, consider their experience in client engagement projects addressing interoperability issues.
Look for flexibility
Besides the outsourcing vendor being versatile in matters of technology, the business relationship should be flexible. Some providers often offer low introductory rates and then spike them after a year once they lock the partnership. Thus, trust and transparency are essential for the partnership to thrive.
Organizations want a partner capable of scaling up and down to address scope, unexpected disruptions, or functionality. Thus, organizations should seek clarification on what the arrangement may look like a few years later. Whenever possible, look for direct feedback from the vendor's long-term clients to establish the credibility of long-term partnerships.
Industry knowledge and market
For the best results, businesses choose partners who understand technology and have strong industry knowledge. It is a great sign if they are familiar with the industry acronyms that will come up in conversations. In addition, it is even better if they not only understand the industry but also the business market and customers. This is crucial when it comes to designing, developing, and deploying technology to create value.
Ability to bring new insights
It is a win if a business finds a vendor who can bring fresh perspectives based on their experience. Often, vendors with specialized knowledge in an industry have unique technical expertise and perspectives from working with other clients. To establish vendors with such capabilities, organizations request potential partners to share use cases for new solutions or strategies.
Best practices for successful outsourced product development
Start small
Often, before diving deep into outsourcing, it is common practice to dip the toes first. Starting with smaller projects helps organizations gauge the vendor's compatibility, efficiency, and expertise of the outsourced team. Also, focus on outsourcing providers with experience developing and delivering software the business needs. Ensure the outsourced product development company has professionals who understand the technology and tools the project needs.
Define clear goals
Before outsourcing the software product development, it is prudent to have a detailed brief to avoid scope creep. This demands meticulously outlining each feature, function, and expectations. In addition, before outsourcing the software development process, clarify the precise requirements.
Whether an organization pursues expertise to develop an app from scratch or infuse existing software with new features, the goal should be clear. Delineating specific needs helps streamline vendor selection since it guides the organization toward partners with appropriate skill sets and experience.
Select the right cooperation model
Often, outsourced product development companies present several engagement models. Knowing which approach resonates with your organization, be it fixed-cost or a dedicated team, is paramount. Evaluate factors such as project cost, projected timelines, and volatility of the project when choosing a partner.
For instance, the time and material model provides flexibility without capping the software development expenditure. That said, the fixed-price model offers businesses cash flow predictability, although it may struggle to handle unforeseen challenges. Often, the dedicated team model is the favorite choice for most businesses. This model supports staff augmentation whenever necessary, offering a balance between the availability of resources and flexibility.
Formalize agreements in a contract
After establishing the outsourced software product development company that aligns with the business, formalize the agreements in a contract. The document should capture all the terms and conditions that each party agreed to. Before starting the collaboration, having a mutual understanding and acceptance of the contract guarantees a smooth working relationship.
Delegate but stay engaged
Even though the business owner delegates the agreed product development, they should stay engaged in the development process. The hands-on approach guarantees the final product will align seamlessly with the business objectives. Also, when choosing an outsourcing partner, the business must ensure the potential partner promotes transparent and efficient communication. A responsive partner is instrumental in guaranteeing that the project will remain on track and meet expectations.
Outsourced product development categories
Companies may decide to outsource the entire product development life cycle or just a few functions. Today, businesses can outsource most processes starting with business analysis to product maintenance. The idea is to understand where the shortfall is in bringing an idea to life. If a business lacks expertise, resources, or time, then the goal is to find a suitable vendor to fill the gap.
Here are common areas businesses outsource to qualified vendors.
Full (end-to-end) product development
Outsourcing the entire product development process is the most common since most providers specialize in different software development stages. This approach provides businesses access to a huge talent pool, saves time, reduces development costs, and increases productivity. It allows the business to focus on core strategy by leaving technical work to the professionals.
Product management
Outsourcing product management helps businesses stay competitive by augmenting the workforce with the right expertise. Doing so allows a business to focus on growth while the outsourced team handles the product development, marketing, and feedback.
Building web/mobile apps
Businesses often outsource the development of complex web and mobile applications. It allows them to build products like a data-heavy enterprise solution or a client healthcare platform. Outsourcing allows organizations to address challenging tasks while maintaining control.
Security
A good number of enterprises lack a cybersecurity vision and are unaware of the risks. Fortunately, they can outsource security services to safeguard their data and products against cyber threats. Services such as social engineering assessments and penetration testing provide additional layers of security. Outsourcing these security services is akin to a business hiring a security guard to safeguard its digital castle.
Testing and quality assurance (QA)
A business may outsource testing and QA to ensure the software product works across platforms. The QA teams employ several testing techniques like security, performance, and functional testing to establish and solve issues early. Thanks to the outsourced team's expertise, businesses can release high-quality products confidently.
Cloud infrastructure management
Businesses that rely on a cloud infrastructure must manage it to ensure their product remains scalable, cost-effective, and reliable. This outsourcing solution gives businesses access to experts who design, implement, and optimize cloud architecture based on their needs. It decreases operational costs while guaranteeing flexibility to scale as the business grows.
Advantages of outsourcing software product development
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Access to global talent. Outsourcing connects businesses with talents across the world
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Cost efficiency. In product development, outsourcing is the sweet spot between price and quality. It helps businesses save costs without skimping on quality.
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Better scalability. Businesses leverage outsourcing to scale their development teams swiftly.
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Optimized development processes. By outsourcing, businesses can fast-track product development, reducing time to market.
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Superior product quality. Outsourcing product development provides access to expertise that can elevate product quality.
Disadvantages of outsourcing product development
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Pricing issues. Sometimes pricing can be a challenge because of unexpected costs.
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Less control. Outsourcing results in some loss of control in terms of hands-on involvement and oversight compared to an in-house team.
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Poor commitment. External teams often juggle several projects that can affect their dedication to delivering quality products promptly.
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Data security concerns. Sharing sensitive details with an external team can result in a data breach and intellectual property theft.
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Communication challenges. Engaging external teams across geographies presents several challenges, like time zone variations and cultural differences that can cause misunderstandings. These can throw off the software development timeline dissatisfying both parties.
Summary
Outsourced product development can transform your business. This approach takes the technology load off its in-house team plate. This lets the business focus on core business strategies while letting the technical team handle software development. Outsourcing provides access to global talent, reduces cost, and offers flexibility as needed. Although outsourcing has its challenges, if a business chooses a reliable and professional partner like Devōt, it should not be an issue.
