Peter Druker, the father of modern management strategically said, “Do what you do best and outsource the rest” According to the recent statistics shared by Statista and KPMG, around 49.6% companies stated they wanted to increase their IT outsourcing share, while only 10.4% wanted to reduce outsourcing activities. Given these numbers, it can be assumed that the IT outsourcing market shows signs of growth.
Around a decade ago the primary reason for businesses to outsource business processes was simply a cost-saving strategy. However, with increasing competition and technological advancements, the approach towards outsourcing has a different meaning where businesses are seeking to capitalize on more sophisticated provider offerings and focus on what they are best at.
Although outsourcing product development services have existed for a long time, the major reason for its longevity and growth is associated with aspects like better talents, access to global opportunities, and lower prices.
Reasons why businesses should outsource product development services
In the digital era where technology is changing and getting better with each passing day, outsourcing product development services has become one of the most popular options for companies looking to remain competitive while reducing costs. With the kind of expertise and upskilling these tech advancements demand, outsourcing is certainly a great way for companies to access specialized expertise, accelerate their development process, and ultimately bring innovative products to market faster.
As shown in the figure above, the product Development Lifecycle typically has six phases. The complexity of these phases depends on multiple factors such as the use of newer technologies, lack of skillset, limited resources, timelines, and more. Depending on changing needs, demand, and external factors, it might get more complex. Normally the timelines differ based on projects, but typically, it takes more than four months for any custom software development process, making outsourcing product development services a feasible solution for businesses.
Now that the background is clear, let’s understand the reasons that make product development outsourcing a go-to solution for businesses.
- Wider Talent Pool
Software product development demands a strong understanding of the creative and technical aspects and a team of talent that has the expertise in managing various aspects such as front-end development, UI/UX, Quality analysis, Software testing, and more. By working with an adept product development outsourcing partner, businesses can get access to a talent pool that can do their job like a pro, increasing the chances of success of your new product.
According to a report shared by Clutch, around 24% of companies mention their interest in outsourcing to improve efficiency, while 18% say they choose to outsource to gain access to expert assistance.
- Reduce Development Costs
According to a survey by Clutch, 83% of small businesses plan on maintaining or increasing spend on outsourced business services, with a primary expectation of offloading tasks internally to reduce expenses and at the same time bring industry talent onto the team.
Similarly, outsourcing product development can help lower overhead costs and help businesses offer services at a more competitive price. Depending on the need, businesses either outsource end-to-end product development activities or development of MVP i.e. the minimum viable product or EVP.
- Faster Time to Market
Outsourcing product development activities to expert partners can help businesses cut to the chase and increase the speed-to-market quotient. By relying on the expertise of an external vendor, newer products can be developed without wasting time. This also helps achieve a faster go-to-market opportunity, giving you the upper hand over your competitors.
- Enhanced Product Quality
The quality of the software product is paramount. Businesses invest in outsourcing with a primary aim of having a flawless and high-quality product. A product with a refined design, better experience, and excellent features can make your business stand out in the market. Built under the guidance and expertise of an appropriately skilled team, it can enhance the quality of your software product. Outsourcing indeed is a no-brainer for companies seeking excellent quality products at lower costs and minus all the development trouble.
- Reduced Risk of Failure
When businesses sign up for outsourcing product development activities, they also manage to reduce the risk factor. When you join hands with an expert vendor, you not only benefit from their experience and expertise but also gain an upper hand in mitigating risks including design flaws, product recalls, defects, and so on.
Get more details on how Gen AI is changing the face of software product development here.
There are specific ways for businesses to outsource their software developments to vendors throughout the globe, where the development centers can belong to onshore, offshore, and near-shore i.e. location-based outsourcing and relationship-based model.
Location-based Outsourcing Model
- Nearshore Product Development:
This is a model where product development activities are outsourced to vendors in a nearby country to manage aspects like travel times, maintain cultural similarities, and get work done in convenient time zones. In this model, the pricing factor is also expected to be lower than in-house development or onshore outsourcing.
- Offshore Product Development:
In this model, product development activities are delegated to teams working in a distant country. For example, companies in the US hire vendors operating in India or other Southeast Asian countries. With this setup, companies can expect to save more but are bound to come across challenges related to language barriers and time zones.
- Onshore Product Development:
As the name suggests, this model is inclined towards hiring outsourcing partners that operate out of your home country. This guarantees comfort like effective communication and cultural similarities, but they are bound to come at higher costs.
Relationship-based Outsourcing Model
- Staff Augmentation
As the name suggests, staff augmentation is a model that helps organizations improve the agility and response time of changing needs of the by outsourcing these activities to an expert instead of going through the rigorous time consuming and costly recruitment process. - Dedicated Model
In this model, the client can sign up for an agreement with the outsourcing vendor to hire technical professionals on a long-term basis. This model enables businesses to onboard a team of external professionals from the outsourcing company and offload the burden from in-house teams. - Full-Process Outsourcing
In this model, the outsourcing partner takes on full responsibility for the entire process, managing everything from start to finish. This allows the client to focus on core business activities while the outsourcing partner handles all aspects of the project, ensuring a seamless and efficient workflow.
However, finding the right technologies and language, choosing the right process, looking for opportunities to automate, gathering feedback regularly, and on top of everything choosing the right partner to accelerate the product release is an important aspect in outsourcing activities.
Tips to Choose the Right Product Development Outsourcing Partner
Cost saving never goes out of fashion. Based on research by Deloitte, startups opt for delegating product development activities to a third party primarily based on the cost-effectiveness quotient, flexibility speed to market, access to tools and processes, and finally agility. The graph in the image below gives an insight into the same.
We totally agree with the statistics that revolve around outsourcing product development activities, but what can be done to bring efficiency and order to the product development process?
The right outsourcing partner for end-to-end or any of the phases of the product development lifecycle can help in meeting project deadlines, faster release cycles, cost savings on overhead, and much more.
However, choosing the right partner for outsourcing product development services can be a critical decision for any organization. Having worked on outsourcing projects for more than two decades with Fortune 500 companies based in the United States, Calsoft’s experts have curated some tips to help you choose the right partner for outsourcing product development services.
Top ten tips for choosing the right outsourcing partner for your product development activities
- Define your requirements: Even before deciding on the outsourcing partner, businesses need to do their homework right and keep ready a clear project scope related to objectives, timelines, and deliverables necessary to be aligned with the expectations of both parties. This will help in shortlisting the partner that will meet your needs. Additionally, it is advisable to prepare a document that contains detailed information about technical specifications to better evaluate the outsourcing partner.
- Assess and evaluate potential expertise: While looking out for vendors to carry out your product development activities, make sure to check the portfolio of the company. Evaluate if the company has worked with a similar industry to yours. Check what the clients have to say. Understand the technical portfolio of its team and based on these factors make the final selection.
- Make Budget Estimation Outsourcing product development activities are not meant to hurt your budget. Instead, they are a great opportunity to save costs while you get to work with the best talent and expertise in the market. However, setting clear budget expectations makes it easier for you to make the final selection. It helps businesses understand who the best possible choice can be to deliver the finest quality based on the budget constraints you have as a company. Making budget plans beforehand can prove helpful as it reduces the risk of cost overruns.
- Focus on the QA Process: Quality is one aspect that must not be compromised. To understand the kind of quality a product development outsourcing partner can deliver, it is suggested to evaluate its quality assurance process by asking the right questions. It is important to understand the software testing protocols they follow, to get an idea about their bug detection and resolution process. This is important as a partner with robust and holistic QA practices is more likely to deliver error-free and better-performing products.
- Review past performance:Choose a partner who delivers high-quality products on time and within budget. Get a better understanding of their previous track record by speaking to their previous customers and gathering feedback.
- Assess Communication and Project Management Approach: Communication is the key to getting things done right. Therefore, to have a streamlined experience, it is essential to understand if the potential product development outsourcing partner uses flexible project management methodologies like Scrum and Agile to keep the progress on track. Keeping these things in mind will streamline workflows and foster ease while dealing with changes and challenges in the project.
- Mention Clear KPIs and Reporting Metrics: KPIs, also known as Key Performance Indicators and other metrics, can offer data-driven insights on the project’s whereabouts. Establishing a clear idea about these can help both parties keep track of the project and know if the timelines are being followed. Some KPIs you can track are:
- – Sprint burnout
- – Kilo source lines of code
- – Story points retired
- Pricing: Compare the pricing of different partners & vendors and choose the one that offers the best value for money. The cheapest may not be always the best fit, so choose wisely.
- Location: Consider the location of the partner. Based on aspects like the budget, culture, language, and time zone, select a partner that fits best in your prescribed criteria.
- Risk Mitigation: To make sure the shortfalls in your project are kept to a minimum, wisely choose a partner by identifying their potential to mitigate issues that arise during the process. For instance, if there is a data breach that unfortunately takes place, what is the plan of action that the partner plans to follow? Would they be conducting regular cybersecurity checks and audits and have protection protocols in place to keep such problems at bay?
By following these tips, any organization can find the right partner for outsourcing product development services that meet your needs and help you achieve your business objectives.
Conclusion
One of the primary benefits of outsourcing product development is the ability to tap into a wider pool of talent. By partnering with an experienced development team, companies can access a diverse range of skills, including software engineering, UX design, data analysis, and more. This allows businesses to expand their capabilities without the need to hire additional in-house staff or invest in expensive training programs.
With the right outsourcing strategy in place, companies can access the resources they need to stay competitive and drive innovation in the ever-evolving technology industry. Calsoft’s being a technology- first company is a preferred choice for global ISVs and enterprises. Specializing in a range of comprehensive software product engineering services, we are adept at catering to every phase of the product development lifecycle right from design to deployment. Our expertise in product innovation and modifications can be leveraged at any stage of the product life cycle. We tailor our development strategies to align with the product’s current market phase, ensuring effective product life cycle management. Our managed services framework offers customers a competitive edge through proactive process enhancements and sustainable value additions. We have established ourselves as a trusted partner to leading ISVs in the domains of storage, networking, virtualization, cloud, IoT, and AI/ML.
If you are keen on developing state-of-the-art products to boost factors like growth, competitive edge, and offer high quality services at competitive prices, it is time to evaluate Calsoft’s product engineering services.
