Why Startups Should Use Outsourced Product Development
Updated January 24, 2025
Startup owners have a difficult puzzle to solve: creating a great solution without spending all their resources (and extra) or compromising on quality while keeping the costs low. As a business owner, youโre probably looking for ways to thrive in chaotic markets without just staying afloat. One way you can do this is by employing software product development services with years of experience helping startups.
Popular tech companies like Slack, Skype, Microsoft, Meta, Google, and others have been using outsourced product development for years. Startups have also been thriving with product development outsourcing, with reports showing that approximately 70% of companies choose outsourcing for cost reduction and 45% of tech firms employing outside resources to address talent shortages.
So, how do you approach outsourced product development? In this article, weโll explore this subject in depth and see how outsourcing custom software development can help you save costs, get access to expertise, and improve time-to-market.
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Why Do Businesses Choose Outsourcing?
Startups outsource software development to save resources and gain access to expert input unavailable in-house. Outsourced product development not only brings expertise to the table but also helps startup owners avoid headaches associated with hiring and training an in-house team. So why do so many companies turn to outsourced product development?
- They can lower operational expenses.
- They get access to an international talent pool.
- It frees up time and space for strategic decisions.
- It gives the company the ability to stay competitive and use advanced tools.
- Helps ensure legal and industry standard compliance.
This short list describes just a part of why we recommend you outsource developing new software for your startup.
The latest research shows that the outsourcing market will experience significant growth, with a CAGR of 8.9% from 2023 to 2030.
Why Do Startups Need Outsourced Software Development?
When a startup owner decides to launch their new product, they have two choices: develop the product in-house and deal with all the chaos that comes with it or delegate this process to an external source. While both approaches have their own benefits, we want to explore how in-house development and outsourcing differ from each other.
| Factor | Outsourcing | In-House |
| Cost & Time | Eliminates expenses for recruiting, training, and infrastructure. Faster time-to-market. | Higher costs due to salaries, infrastructure, and longer development time. |
| Expertise | Access to specialized skills and experienced teams with a proven track record. | Limited to in-house team skills; requires ongoing hiring and training. |
| Control | Less direct control, but a reliable outsourcing partner mitigates risks. | Full control over the process and intellectual property. |
As the table above shows, in-house software development requires much more resources and engagement, rather than outsourcing. Additionally, in-house teams are limited in terms of skills and expertise, while outsourcing opens up a whole new world of advanced tech and experience. Some startups choose to go with in-house creation due to more control over the process; however, outsourcing can also offer flexible collaboration methods, like outstaffing, team augmentation, and more.
According to Deloitte research, cost reduction and flexibility remain the primary drivers of outsourcing, with over 70% and 40% of companies, while speed to market, access to tools & processes, and agility each contribute to the decision to outsource.
Want to know more about the various benefits of outsourced software product development? Hereโs an in-depth exploration of some of the most significant benefits:
Cost savings
Hiring and training new team members can cost a fortune, especially if you mismatch a few times and have to rehire. Outsourcing can significantly reduce your costs.
Incidentally, research shows that 70% of companies outsource primarily to reduce costs. In fact, reports highlight that some companies can save up to $88,000 annually by outsourcing. So, very often, instead of hiring new professionals, startups work with product development companies to save money on labor, resources, office space, infrastructure, etc.
Read more about pros and cons of in-house and outsourcing software development.
Access to expertise
Even large companies struggle with a lack of expertise, so itโs not surprising that startups decide to outsource to gain access to a wider talent pool. Remote product development partners usually bring a product development team with software licenses, expertise in new technological solutions, professionals with extremely specific scopes, and software solutions that are unavailable locally. Additionally, youโll be introduced to new tech and best practices for your software creation.
Outsourcing product development can provide startups with access to expertise in areas such as:
- Software development: A software development company can provide expertise in coding, design, and testing to ensure your software is functional and user-friendly.
- Hardware development: A hardware development company can provide expertise in areas such as electrical engineering, mechanical design, and product prototyping.
- Healthcare development: A medical app development company can provide expertise in areas such as regulatory compliance, safety testing, and clinical trial management.
Faster time-to-market
Startups often feel pressure to perform well and fast. Faster time to market is essential to introduce your product to the audience and attract investors and business angels. This benefit is essential for fast-paced industries that adopt new technologies in the blink of an eye.
If you have a limited budget and a tight deadline for launching a new product. By outsourcing product development, you can work with an experienced team that can develop your product within a shorter time frame. They can also take care of product testing, ensuring that your product is bug-free and meets the necessary quality standards.
Anna VoznaClient Success Manager, Glorium Technologies
Flexibility and scalability
One of the biggest advantages of outsourcing product creation is the ability to scale up or down as needed. Startups often experience fluctuations in demand for their software, which can result in needing additional team members. By outsourcing product creation, startups can quickly and easily scale their teams up or down to meet the changing demands of their business. For example, Adobe has been easily scaling its software creation efforts by working with outsourcing partners.
Interested in outsourcing your product development? Read our article about the pros and cons of choosing an outsourcing team from Ukraine vs India.
Focus on core business
Research shows that around 49% of companies outsource software development to free up resources in-house. Outsourced product development allows companies to spend more time making strategic decisions, improving their marketing efforts, reducing sales cycles, and more.
Source: Grand View Research
For example, Dropbox used outsourced product development to create their Android and iOS apps and reach millions of users worldwide. They worked with an external partner that provided them with a high-quality solution, while their core team focused more on improving their primary role of file storage and sharing for their customers. Similarly, Netflix has prioritized improving its streaming platform and user interface by outsourcing software and app development while they focus on content acquisition, production, and curation.
What is the Cost of Outsourced Product Development?
So, how much does it truly cost to outsource product creation? Firstly, itโs essential to understand that the cost can be different and influenced by many factors. These include the productโs complexity and scope, the outsourcing partnerโs geographical location, expertise, technology stack, and market rates at the time of development.
- Geographical location: Location can play a significant role in determining the final cost. For example, working with remote development teams in Eastern Europe can be more cost-effective than hiring a team from Western countries due to lower living costs
- Tech stack: Using advanced tech will result in higher fees while developing a simple mobile app can have a lower initial cost
- Design: App complexity aside, design elements also dictate the price of outsourcing. Simple designs donโt cost much for a company, but more advanced elements will affect the price significantly
- Integration: If you need to integrate your new software with existing systems, itโll grow the final cost of your collaboration
- Support: Post-launch services like maintenance, updates, support, and customer care are often overlooked, but keep in mind that this step also affects the price
As a rough example, average outsourced product creation for startups can cost around $10,000 to $50,000, depending on the abovementioned factors.
How to Choose the Right Outsourced Product Development Company
Choosing the right outsourced product development company can be a challenging task. You must research, interview, compare, and make a careful decision. Below, youโll find some tips and tricks for choosing the right partner:
- Your partner should have years of experience working with startups like yours.
- Make sure they have a good reputation, testimonials, and case studies.
- Explore their outsourcing model and the experience of their outsourced team.
- Make sure they have clean and transparent communication.
- Ask them about their methodologies and how they protect your intellectual property.
- Schedule a consultation with them to get to know the team better.
By following these tips, you can find an outsourcing partner with expertise and experience that aligns with your startupโs needs and business goals. Read more about how to choose the right vendor for outsourcing programming.
How Can Glorium Technologies Help?
As an outsourced product development company, Glorium Technologies offers startups comfortable and flexible collaboration models for high-quality software creation. We use Agile methodologies, transparent communication channels, and continuous improvement to provide you with the best possible services. If youโre looking for a cost-effective solution to help your startup thrive, schedule a free consultation with our experts and discuss your project idea.
