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According to statisticapproximately 74% of companies outsource IT services and 87% have expressed a desire to maintain or increase their IT spending.
The trend of working with remote development teams, which companies often use to outsource their product development, is thriving and will continue to do so in the future.
Let’s discuss the importance of outsourcing your company’s product development, compare it to an in-house team, and discuss the considerations for understanding the outsourcing model.
How does outsourced product development help?
When companies choose to outsource their product development, they look for opportunities for different technical solutions and accelerate development at a lower cost.
In addition, companies gain access to modern tools and tech stacks, new resources and top talent, optimize their IT processes, reduce costs and make reliable forecasts regarding their short and long-term IT objectives.
Related: 3 strategies to optimize innovative product development
Outsourced product development versus an in-house team
Internal teams are built from the ground up. You fill the vacancies based on the talent and expertise needed for product development. Building an in-house team is similar to hiring permanent employees for your company. You will shortlist candidates, conduct interviews and onboard them through typical on-site procedures.
The benefits of hiring an in-house team are that they are in direct communication with the team, provide immediate support and, most importantly, are aligned with the company’s goals and vision.
On the other hand, internal teams:
- Are expensive prospects with a high turnover rate?
- They lack multifaceted expertise and problem-solving depth
- Are not easily scalable for team upskilling
Outsourced teams provide many benefits to companies by providing a huge pool of talent and no technological constraints, allowing companies to exercise greater control over budgeting and acquire better expertise.
The only drawbacks are the communication barrier and trust issues in the team. In addition, legal issues related to the hiring process, regulatory compliance, information sharing before and after project completion, cultural complexity, and time zone differences can create a problem.
Following are four things to consider when outsourcing product development.
1. Analyze your issues and requirements
Start analyzing your issues, requests, and requirements.
Without a clear understanding of your requirements, you gain nothing from the contractor’s team.
Create a to-do list of items and activities to do, state your budget and set estimated deadlines for all milestones, e.g. UI/UX design delivery, development, app testing, etc.
Related: What Not to Do When Outsourcing
2. Select the appropriate collaboration model
The most popular collaboration models are the fixed price and time and material models. Each has its characteristics and requirements; choose the one that best suits your project.
– Fixed price model
As the name suggests, the fixed pricing model works through the fixed budget, timelines, and work scope and is especially preferred for small projects with very limited functionality. In addition, the model does not take into account additional changes and iterations, it is expensive and there is a possibility of possible compromises with regard to product quality.
– Time and material model
The time and material model is a flexible counterpart that fits in nicely with the agile principles. Unlike the fixed model, the T&M model allows teams to start developing quickly. The flexible developer hourly rate allows teams to manage tasks and set deadlines and budgets. The agile approach benefits teams in determining the outcome or progress in each development phase.
3. Select an agency or freelancer
Deciding whether you need an agency or a freelancer isn’t as easy as people often think – if it’s a small project, hire a freelancer; if it is a large, complex project, hire an agency. In my experience, in most cases there is always more to the story. You must make it clear that you need specialists for which specific processes. Entrepreneurs often struggle with the prospect of how and from Where to find the right contractor for their outsourced product development.
Here are some of the best resources to find a reliable contractor:
Social channels. Use social channels like LinkedIn to look for full-fledged development companies or freelancers for your next project. Check out their social posts, read reviews from past clients, view team ratings, and more to check their business credibility and trustworthiness.
Business review websites. Check out platforms like Clutch, Trustpilot, GoodFirms, etc. to inspect agencies and freelancers and see their ratings, customer reviews, and other metrics to better understand their credibility and what their clients are saying about them.
4. Create a design and software specification document
Write a design and software specification document that describes your product (at least an MVP), how it will perform, and how you want end users to interact with it.
Despite being a labor-intensive job, it’s one of the essential things you’ll be doing in product design and development.
The design and software document will contain the following elements: a comprehensive project overview, problem statement, project goals, target audience, functional requirements, intended features, aesthetic details, non-functional parts, suggestions and limitations and questions.
Mistakes to Avoid When Outsourcing Development
1. Selecting an Outcast Contractor
Entrepreneurs often wrong hiring the first contractor or agency they encounter in their search. Therefore, they hire a contractor whose location, experience, expertise and skills are not suitable for their particular project. Take your time organizing your search and starting the hiring process. The more detailed your analysis, the more likely you are to hire the right company and a responsible partner.
2. Unfamiliar with your product development costs
One of the most common mistakes companies make is not examining the costs of outsourcing product development. The estimate may look reasonable on paper, but some underlying essentials may not be included in the quote. Ask the development agency to make and send a full quote. Ask the development team the right questions in addition to timelines that should help you analyze actual project costs.
3. Lack of a strategic action plan
Having a solid strategic action plan is crucial when outsourcing your project. The inability to clearly outline your requirements and state deadlines of your deliverables is not something you want to experience.
Ask yourself the following questions:
- What are the core goals of your project?
- When do you expect to complete your product development?
- What are the working hours of the developers?
- How many third-party developers do you want to work with?
- Is your hired team experienced enough to accommodate your custom project?
Related: 3 Mistakes (Almost) Every Tech Startup Makes — And How To Avoid Them
Regardless of your requirements and project specifications, there are always pros and cons of working with an in-house team and outsourcing your product development. However, take the time to weigh the considerations by analyzing your problem and requirements, selecting an appropriate collaboration model, choosing an agency or freelancer, and preparing a design and software requirements document. Finally, avoid mistakes when outsourcing product development, including selecting a maverick, an inadequate cost estimate, and the lack of a strategic action plan.