Outsource Product Development: Boost Profits with the Right Partner

Outsource product development is a powerful way for businesses to save costs while accessing specialized skills. By partnering with an experienced outsourced product development company, you can leverage a dedicated product development team to bring high-quality results, speed up your timeline, and meet essential business goals. At Newwave Solutions, we help you understand the pros, cons, and best practices of outsourcing a product for impactful growth.

1. Outsource Product Development: What It Means and Why It’s Growing

Outsource Product Development is a strategy that involves third-party vendors managing product development tasks. This approach allows companies, especially non-technical founders, to focus on outsourcing a product while ensuring developers work on high-quality deliverables. It helps avoid the complexities of handling technical details.

This cost-effective strategy simplifies the journey from concept to launch, providing access to specialized skills and global talent. Many global giants, such as WhatsApp and Google, use this approach to reduce costs and accelerate growth.

So, why is it growing?

The outsourcing market has grown significantly. According to Statista, while the market valuation in 2023 was US$92.5 billion, it is projected to be US$98.7 billion by 2025. Outsourcing a product, not only in IT but across industries, is rising rapidly. Businesses are increasingly turning to vendors to optimize costs and resources. This approach boosts business efficiency and ensures high-quality results.

A major reason for this increase in outsourcing is because of an increasing demand for specialist skills. The 2023 Deloitte Survey, where 59% of businesses plan to increase their outsourcing primarily for software product development. This trend suggests that companies are increasingly using outsourced product development to tackle growing technological demands, tap into high-caliber talent, and keep competitive in a world with continued financial pressures.

Outsource software product development reduces costs for companies by up to 30-50% through overhead reductions in hiring and training. Companies can also select flexible engagement models, like Time and Material, which allow them to pay only for actual work performed. This enables quality without going over the budget while supporting scalability and adaptability to dynamic needs.

2. The Pros and Cons of Outsourcing Product Development

Outsourcing product development has many advantages, but it also comes with its share of challenges. Understanding both will better help an organization make informed decisions if the approach aligns with its objectives.

Pros of Outsourced Product Development

Outsourcing product development brings a variety of benefits to companies looking to expand their capabilities. Here are some additional pros of this strategy:

Global Talent Access

Outsourcing means access to a huge talent pool comprising highly skilled and specialized developers. This ensures that even if your company lacks specialists in specific areas, your product will be developed by the best professionals. Partnering with a reputable outsourced product development company provides access to expertise and experience for creating exceptional products, which would otherwise be impossible due to resource limitations.

Reduction of Costs

The most appealing advantage of outsourcing is cost-effectiveness. By working with experienced developers in regions with lower labor costs, companies can drastically cut overhead expenses without compromising on quality. Outsourcing enables companies to deliver high-quality results while optimizing budgets, making it a strategic choice for resource-conscious organizations.

Flexibility & Scalability

Over 50% of executives have reported onboarding more workers in recent years, but talent shortages and skills gaps continue to create challenges. According to Deloitte, leveraging outsourcing enables companies to scale their development teams rapidly and efficiently. This flexibility is a key benefit when choosing an outsourcing model for product development.

Faster Time-to-Market

Software product development outsourcing speeds up the development process, by which one can launch products faster. By collaborating with an experienced outsourced product development company, your team can leverage their expertise to quickly address challenges, streamline processes, and launch products faster, avoiding delays and inefficiencies.

Superior Product Quality

When companies outsource software product development, they gain access to seasoned professionals who specialize in delivering high-quality solutions. These remote developers bring industry-leading expertise that can elevate the final product. With a focus on quality, outsourced teams ensure that products meet the highest standards, resulting in improved customer satisfaction, repeat business, and overall success.

Outsourcing product development enables business ventures to engage third-party experts who can handle product design, creation, and launch, especially in software. By outsourcing a product, companies can consider partnering with professional services in software product development to take advantage of a team of specialists who rapidly launch their products, rather than trying to build an in-house technical team.

Cons of Outsourcing Product Development

While outsourcing product development offers significant advantages, there are some notable drawbacks that the business needs to consider. Here are some additional problems that might affect the success of your outsourcing:

• Challenges in Communication: Effective communication is the success mantra for outsourcing. However, time zone differences, language barriers, and cultural differences make things a little more complicated. Miscommunication might affect the timeline of projects, leading to delays and dissatisfaction of both parties. Setting expectations and having regular check-ins will help to bridge these gaps.
• Data Security Concerns: Data security is considered one of the major issues in software product development outsourcing. Sharing sensitive information with remote teams raises an increased threat to data security. Due to a lack of strong security protocols, critical proprietary information may be leaked. Therefore, the selection of a partner is very important to secure this confidential information with proven security protocols.
• Unpredictable Costs: Outsourcing, on the one hand, is efficient in terms of cost; sometimes it is very hard to foresee certain prices. Sometimes an initial quotation is reasonably within budget, but hidden charges may arise during the project. This may make it very complicated to budget and lead to unforeseen expenses. To minimize this risk, it’s essential to obtain a detailed breakdown of the costs from your outsourced product development company before starting.
• Commitment Issues: An outsourced team may handle multiple projects at once, impacting their commitment to your project. Divided focus can lead to delays and reduced quality. This may harm the project timeline and end product. Ensuring your partner’s dedication to your project is crucial to avoid such setbacks.
• Loss of Control: Outsourcing may mean less direct oversight compared to an in-house team. This limited control can make it harder to catch and address issues promptly, leading to potential delays. Establishing clear reporting and monitoring processes with your outsourced product development company can help maintain control and ensure smooth progress.

Outsourcing product development offers advantages, but companies should address these potential issues proactively. With the right outsourced product development company, businesses can maximize the benefits of outsourcing while minimizing these common challenges.

3. Key Insights on Outsourcing Product Development

Outsourcing product development can help organizations realize significant value by gaining access to expertise, thereby bettering cost efficiency and hastening time-to-market. Other than the cost, selecting the appropriate model is the main issue a business has to consider for successful collaboration in product development.

Cost Considerations

One of the major roles in determining the overall cost of development is the location of your outsourcing partner. Because of local economic conditions, labor market availability, and regional expertise, labor rates on the whole are very different across countries and regions. Here is a general outline of outsourcing rates, country by country:

• Asia (India, Vietnam, China): The cost per hour can range from $20-$60. Due to the low labor cost factor, especially in software product development, it stands out to be one of the cheapest regions to consider for outsourcing a product.
• North America & Western Europe: These regions charge from $100 to over $200 per hour. This is explained by higher labor costs and high demand for qualified specialists, and these regions are in general the most expensive for outsourced product development.
• Eastern Europe: Countries like Poland, Ukraine, and Romania charge $40-$80 per hour. A good balance between cost and high-quality has been found in this region, thus making the software product development outsourcing segment a favorite among popular destinations.
• Latin America: Countries like Brazil, Mexico, and Argentina charge anywhere from $30 to $80 per hour. Latin America is catching up with other leading outsourcing destinations in the world, considering its cost-effectiveness, proximity to the U.S., and English-speaking skills. Many businesses opt for outsourcing their software products to this region for high-quality and reliable service.

For more detailed analysis, check out our full guide on 4 Key IT Outsourcing Costs: Smart Budgeting & Savings Guide.

Product Development Outsourcing Models

Choosing the right model of outsource product development can help you keep the software product development outsourcing process appropriate, efficient, and effective. Here are three popular models of outsourcing where each model is designed for different project needs and requirements. A proper understanding of these models will help you make a correct decision based on your business goals and the scope of the project.

This table gives a clear picture of the various outsourcing models for product development. With these models, a business will be able to choose the best option that fits its project requirements, budget, and business goals.

Steps to Outsource Product Development

The process of outsourcing product development is strategic. Below are the main steps to walk you through the process of outsourcing so that your partnership turns out successful and effective in product development.

1. Define Your Business Goals and Product Requirements

The first step in outsourcing product development is to clarify your business objectives and specific product needs. It’s essential to determine:

• What problem your product is solving?
• What features and functionality it should have?
• The target audience for the product.
• Budget constraints and timelines.

Clear requirements will help identify the correct outsource product development partner and ensure that your expectations match their capabilities.

2. Select the Correct Outsourcing Model

Once you have your business goals and requirements defined, it’s time to choose the best outsourcing model. The most common models are:

• Fixed Price Model: Ideal for projects with well-defined requirements.
• Time & Material (T&M): Suitable for projects where the scope might change or evolve.
• Dedicated Team Model: Best for long-term projects needing ongoing support or constant updates.

Each model comes with its benefits and considerations, so it’s essential to align the model with your project’s needs.

3. Shortlist and Evaluate Potential Partners

Finding the correct outsourcing partner is quite critical to the success of product development.

• Check their portfolio: Look for experience in similar projects.
• Read client testimonials: Ensure they have a track record of delivering and succeeding.
• Analyze technical capability: Check technical proficiency in technologies to be used on the product.
• Analyze the communication skills: Good communication is key to any successful partnership.

This step should not be skipped, but the time taken to find a perfect match for your company is essential for successful software product development outsourcing.

4. Finalize Contracts and Begin the Development Process

With your outsourcing partner, you will now finalize the relationship. Here’s how to do that:

• Set clear terms: Define milestones, timelines, and deliverables.
• Approve payment terms: Determine how and when you will pay. The terms might be fixed prices, hourly rates, or some other arrangement.
• Sign a legal contract: This will protect both parties in scope, responsibilities, and terms.

After signing the contract, your partner will begin the development process. Make sure to have periodic check-ins and reviews.

5. Do Ongoing Monitoring and Make Adjustments as Necessary

This is actual monitoring during development that keeps the project on course. Here’s how you can stay involved:

• Set up progress reports: Schedule regular updates on the development progress.
• Review and test prototypes: Be an active tester of early prototypes and provide feedback.
• Change in scope budget or resources: If the project isn’t shaping up to be what one had in mind, adjusting the scope, budget, or resources would be helpful.

With this information, continuous involvement will help you ensure that the final product will be aligned with your vision.

By following these steps, you’ll be able to ensure a smooth outsourcing process, manage risks, and achieve product development outcomes that are in line with your business goals.

4. How to Choose a Product Development Company to Outsource Your Work to

The selection of the correct outsourced product development company is the key to making your project a successful one. Here is a simple guide to make that collaboration smooth and bring you great results.

Research the Company’s Expertise

Start by researching the company’s experience in outsourcing a product. Check their past projects and the industries they’ve worked with. A solid background in your industry or a similar one can be beneficial for your product’s success in software product development outsourcing.

Assess Quality Control and Project Management

Ensure the company has robust processes for quality control and project management. This ensures your project will meet high-quality standards and is completed on time. Ask about their approach to managing deadlines and quality assurance. It’s also important to understand how developers work and how they ensure consistency throughout the process.

Align with Your Business Goals and Values

Choose a company whose values and objectives align with yours. You will be able to cooperate better and understand each other in the course of development. A good product outsourcing partner should understand your goals to deliver results that reflect your vision. Why will outsourced app development be one of the strategic decisions in 2024? Then there are 7 Powerful Reasons to Consider App Development Outsourcing in 2024.

Request References or Case Studies

Always ask for references or case studies from similar projects. Seeing their past success stories or speaking with previous clients can give you a clearer understanding of their capabilities in outsource software product development.

Establish Clear Communication Protocols

Communication should be effective in avoiding delays and misunderstandings. Ascertain that clear lines of communication have been set aside by the company. Setting expectations for updates with feedback will keep you updated on each improvement regarding the project.

Final Thoughts

Take into consideration a few key elements in the process of outsource product development, such as cost-benefit. Still, one needs to be careful enough to choose an appropriate outsourcing model with great caution, suiting the project requirements. Whether opting for fixed-price, time and material, or a dedicated team model, ensure the company aligns with your business goals. Above all, prioritize high-quality development to meet your product standards and long-term objectives.

If you are in search of a trusted outsourced product development company to translate your vision into a real product, look no further than Newwave Solutions. With our expertise in outsource software product development, we ensure that developers work seamlessly on your project. Contact us today for customized customized software product development outsourcing solutions and take the first step into the journey of successful product development. Contact us for an immediate consultation!

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• Head Office (Hanoi): 1F, 4F, 10F, Mitec Building, Duong Dinh Nghe Street, Yen Hoa Ward, Cau Giay District, Hanoi City, Vietnam
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