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Software Outsourcing for Startup: Founders’ Guide [2021]

October 1, 2020 – Sona Dabaghyan
software outsourcing

Software Outsourcing for Startup: Founders’ Guide [2021]

It’s a big challenge to reach business growth in a time when thousands of startups are founded on a daily basis. To survive in such a competitive market, you need to have clearly set goals and creative marketing and business strategies. There are many reasons why a lot of startups fail: wrong budget management, uncertain business objectives, lack of expertise, etc. One of the most common mistakes that many startup founders make is trying to do everything on their own thinking that it’s more effective and reliable. However, a closer look at things shows that the road to success can be gained by making use of better business solutions.

As a startup owner, one of the most important decisions you need to make is about the development of your software – who should do it? You have two choices: you can either hire a team of specialists to do the job, which is the so-called in-sourcing strategy or you can choose the outsourcing model and have a professional outsourcing company do the software development. When choosing between these two, first of all, consider your budget and business demands.

An in-house team of developers would require a bigger budget as you will have to pay them salaries, provide them with the required devices, etc. Besides, it’ll require some time till they start working as a team, adjust to your company’s culture and work processes, and eventually, you can never know if they’ll make it. So, with the limited budget of a startup, the best decision is trusting your software development to a professional software outsourcing company. This is a highly recommended business strategy for startups and small businesses and can be especially rewarding for SaaS companies. It should be mentioned here that SaaS development is a long and challenging process which is why an outsourcing company with a team of experienced specialists will deliver the best results.

In any case, your every investment should bring a high ROI otherwise it’s a simple waste of your budget. Software outsourcing can be highly beneficial for your startup bringing much better results than you could expect at affordable costs. It will also let you focus on the more important aspects of your business without having to worry about the development process. The right software outsourcing company has all the required knowledge and skills to handle a number of different tasks and avoid any possible errors.

If you are still in two minds whether investing in software outsourcing is worth the money and efforts, we have made a list of reasons why you should go for it.

Why Outsource Your Software Development?

Standing out in your business field and meeting the expectations of your customers as a startup company can be really tough. For this, you need a team of experienced professionals who can collaborate well together and develop high-quality software for a market that keeps evolving at a fast pace. Outsourcing the software development of your company can be the best decision in order to keep up with the latest market trends and deliver high-standard services to your potential customers on a low budget.

Thus, if you are looking for quality, speed and innovative solutions for your startup, here are a few reasons why software outsourcing is the right choice for reaching your goals:

  • Lower Costs: As already mentioned, software outsourcing is a highly cost-effective business solution and it’s especially beneficial for startups which usually don’t have a big budget or external funding options. Outsourcing will help reduce the operational expenses and save the money which you would have to invest in permanent hires.
  • Decrease in the Risks:  You should break up the different tasks of your company between team members so as to achieve better results. You can’t keep up with your daily objectives successfully while working on software development at the same time. Your team members will be distracted from the main focus points and might stop meeting the deadlines. This means that outsourcing your software development, you will have a separate team that concentrates solely on one task while your in-house team does the rest of the job. This will increase team productivity and boost your business. An outsourcing company doesn’t have other tasks which will distract them from doing the software development which you have assigned. This ensures the high quality and the on-time delivery of the work. Besides, the risks come down to be very low due to the service level agreement between you and your outsourcing provider. The contract will set the terms regarding the deadlines, the expected results and other relevant issues on the whole process. This way there is very little room left for any possible risks in trusting an outsourcing company.
  • Better Teamwork: The team members that will work on your software development have worked together before too which means they already have a shaped culture inside their company and improved levels of communication. They will work harmoniously together on your project without having to warm up or adjust to each other which would be the case with an in-house team.

software development team

  • Transparency:  Software outsourcing companies will keep constant communication with you and update you on how the work is progressing regularly. They will provide you with high-quality work as they also want to gain the trust of customers and strengthen their presence in the competitive market and this can be achieved by meeting the needs and expectations of their customers.
  • Concentration on the Core Tasks and Time-Saving:  Outsourcing will save you a lot of time and enable you to focus on your company’s core tasks without any distractions. No work interruptions for you or your team.
  • Flexibility:  The people working at software outsourcing companies come to be more up-to-date on the latest trends and innovations in the IT industry as they have worked on a wide variety of projects. This has widened their perspective and approaches to software development and made them more flexible and experienced in the field.

How to Choose the Right Software Outsourcing Company?

There are a few criteria to consider before choosing the best software outsourcing company for your startup. Below we have listed the most important points you need to keep in mind before making your final decision:

1. Your Project Needs

Before starting the process of outsourcing your software development, make sure you have planned everything regarding your project: the draft of your technical requirements, your needs and expectations about it, the possible results, the deadlines within which you want to see the project done, etc. The software development company also needs to have deep insights into your plans.

2. Research

When choosing a software outsourcing agency, you can do your own research. Go through the testimonials of different companies, study their services, contact them to get more details on any questions that arise in your mind. If you find out that they have loyal customers that come back to them it is already an indication that the company is trustworthy and delivers high-standard services.

3. Pricing

Don’t run after the cheapest services. We said that software outsourcing is the most cost-effective solution but it can’t be the cheapest one. If you choose a company offering extremely low rates, you might end up paying more when the project is done (this means dealing with poorly written codes, source code ownership issues, lack of transparent working process, etc.). Also don’t choose the fixed priced plans because as a startup you don’t yet have an exact project plan, properly documented product, user stories and experience.

4. Communication

A good software outsourcing company would make sure that the communication between you and their team is carried out regularly. Usage of instant communication tools and weekly/monthly (depending on your needs) calls are a good way of keeping track on how your work is progressing.

5. Development Team

It’d be good to know who you are going to work with and their background in the field of software development. You can ask your outsourcing company to send you the profiles of the developers so as to know more about their knowledge and experience. E.g., if you are an owner of a SaaS company and want to have an app developed in React JS, you are naturally interested in the scope of skills of the developer/team of developers who you outsource your project to. As noted before, SaaS development requires special attention to detail for having user-friendly and customizable SaaS apps. Though, we can say that the same goes for any other type of project.

Follow these tips and set clear goals regarding your startup’s software development – this way you will be able to choose the right software outsourcing company for your business’ needs and future growth.

Models of Software Outsourcing

If you are a newbie in the world of IT and are still in the process of grasping the core ideas of software outsourcing then keep reading to find some additional information on the topic. There are several types of software outsourcing based on which the contract types are defined.

Freelance developers or contractors

Contract Types: Contractors or Freelancers

One of the types of software outsourcing is assigning your project to a freelancer. This is especially common among those startup founders who have short-term and one-time development projects. If you choose to work with a freelancer, make sure you find a qualified and responsible one, who has much experience and positive reviews from previous customers. There are certain contract types which are offered when collaborating with a freelancer – find them described below in more details so as to be able to choose the one that fits your demands best:

  • Time and Material Method:  This is the oldest model of software outsourcing contracts. You can choose this model when you have set a clear final goal and have all the requirements of your development tasks. This can also include planning, determining the milestones, and taking care of the paperwork (creation of the System Requirements Specification Document). A qualified and responsible contractor would be willing to guide you through these processes. The price will be calculated in the man-hour format, i.e. by every full hour that the developer spends working on your project without interruptions. The payment should be done by milestones: before every milestone, you pay 50% of the amount, and after the milestone completion, you pay the rest. This is a one-time contract so if you have another project which you want to outsource to the same contractor, you’ll need a new contract. The standard warranty period is 30 days during which all the possible bugs are fixed.
  • Fixed-Price Model:  In this case, the payment doesn’t depend on the hours or resources the contractor has spent on the completion of your project. You should again provide your expected results and final goals in the requirements documentation.

Dedicated Team

This is pretty much like hiring a team of professional developers who work for you remotely. And the team will not only have developers but also designers, UX/UI specialists, business analysts, project managers, QA engineers, etc. You will be part of the whole process and will be able to monitor the outsourcing company’s work and have daily/weekly communication – messaging, emailing, calling, etc. There are three types of pricing models for this type of software outsourcing:

  • Cost per Resource:  This is a fixed price paid to the outsourcing company and is calculated for each assigned developer on a monthly basis. In this case, the developers will be ready to take any new tasks you have for them.
  • Management Fee: Here you will know about the developer’s real salary and will pay a “management fee” in advance to cover some expenses. You will also be able to participate in choosing the people you want to work for your project from the provided list of candidates. This is a more transparent method of pricing as you will be able to see the skills of the workers and decide the amount of the payment accordingly.
  • Hourly Rate: This means counting the price based on every working hour of each developer. You won’t have to pay for the time, when, e.g., a developer is sick or on vacation.

You have a wide range of options to choose from which means you will surely be able to find the best match for your software development project. Of course, the dedicated team method of software outsourcing is the one that we would highly recommend as it has come out to be much more reliable and effective in terms of the delivered results.

Software outsourcing is one of the most strategic decisions that you, as a founder of a startup company can make. As Lee Kuan Yew, the prime minister of Singapore noted once: “If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.” Despite being said in a wider scope, it’s still very apropos in this context – boost your startup and become competitive in the market by trusting the software development of your company to the professionals.


SaaS Growth
Sona Dabaghyan
Post by Sona Dabaghyan
October 1, 2020
Experienced Content Writer & Proofreader with a demonstrated history of working in the writing & editing industry (over two and a half years). Graduated from YSU with a Master's degree in English language and a Bachelor's degree in English and literature. Provides unique and high-quality content on both IT and non-technical topics. Has been working for Incredo for a few months now writing content for the company and its clients.