Outsourcing Software Development for Startups

In our article, you will get to know the present-day reasons for outsourcing software development for startups and vivid examples of unicorns that applied to the external vendor.

Content

1. Why Startups Should Outsource Software Development?
2. How does software development outsourcing for startup work?
3. Examples of Successful Development Outsourcing for Startups
4. Summary 
5. FAQ: Should a Startup Outsource Software Development?

Why Startups Should Outsource Software Development?

We’ve gathered eight up-to-date reasons why to turn to outsourcing software development for startups:

1. Access to experienced engineering teams

   The startup is an emerging project and in order to make it a valuable product for users, the idea must be tested, improved, and implemented by the qualified team. In fact, the ideas that the founder may assume from the start are unverified hypotheses, thus, the task of the external vendor is to find the best solution and cost-effective implementation.

   IT outsourcing for startups is that very opportunity to involve experienced and tech-savvy talents in creating valuable product. Due to the varied scope of projects the IT vendor has run, its developers are like engineering ninjas who are aware of innovative expertise and can offer the best-suited options.

2. Access to the best technology

   As we mentioned before, startups who apply for outsourcing services get the ability to cooperate and rely on the best minds in information technology. That is because IT vendors constantly improve the technical skills of their teams, regularly assess the professional level of engineers, and pumping them to the higher ones.

   With IT outsourcing, brand-new and world-class expertise is guaranteed. Consequently, you as a client take advantage of the cutting-edge software technology and enable the startup to meet and exceed the expectations of its target users.

3. Cost-cutting tool

   With hiring an in-house engineering team, you as a founder will have to spend a lot of time, money, and hassle on it. Finding professionals to meet your business needs is a time-consuming and challenging task since the process includes looking for candidates, reviewing their resumes, interviewing, etc. Not to mention, further maintenance associated with keeping an internal employee, insurance, and tax payments.

   The other benefit of the startup outsource software development is that you can choose the engagement cooperation model. There are fixed cost, hourly rate methods of outsourcing, dedicated teams, or IT outstaffing. Depending on what your needs and budget are, you can choose the best-suited option. To know more about the models, and how to select your method of partnership, check out our previous article “How to choose the best-matching software development vendor for your project?”.

4. Organizational flexibility

   The outsourcing software development vendor offers more flexibility than you would have with your particular in-house developers. As the requirements often vary within the project process, the needed resources also will differ. Whether your startup needs one developer or a separate team, or the product is getting scalable, an IT vendor offers those required talents.

   
   

   Tech companies obtain professionals in various services as Cloud, Custom Software Development, Custom-made CRM, DevOps, Machine Learning and Artificial Intelligence, UI/UX design, etc. Thus, you can adjust the team according to the required tasks, not being limited by domain expertise.

5. Transparent process of work

   There is the mistaken assumption that if you switch your project to an outsourcing, you won’t be involved in monitoring the process. In reality, the vendor keeps you updated with the development phases throughout the entire process. Particularly, Agile method gives you the opportunity for fluent communication with your engineering team, daily/weekly meetings, and reports about the work. In such a manner, you are always aware of the project’s status, developers’ roles, results, and future improvements.

   Note, the primary task of each vendor is to deliver the product that will meet the business and its users’ needs. To make it well-done, constant collaboration and receiving client feedback on improvements are essential.

6. Rapid and efficient development process

   IT outsourcing allows not only to get a quick start of the startup development, but also to proceed and complete it in a rapidly efficient way. That is because the vendor has well-defined work processes, rational plans of delivery, and wide technological experience. Consequently, your project releases to targeted users in a time-effective manner. The crucial step here is to correctly approach the process of selecting the tech vendor.

   

7. Concentrating on core business activities

   Getting rid of non-core tech functions is one of the major benefits of applying to an IT partner. In the initial phase, the startup owners have a lot of business tasks to solve and pay attention to. And when leaving the development process to the in-house team, it affects the performance of core processes.

   With outsourcing tech needs, stakeholders concentrate on core business lines with more power since project development, testing, release, developers’ accounting, payroll, etc. are the responsibility of the IT vendor. You in this case get each stage’s reports, transparent process of work, and regular communication.

8. Security guarantee

   From the start, it is necessary to take care of the project’s sensitive data from cybersecurity threats such as malware or hackers. If your in-house team doesn’t specialize in IT security, the way of applying to an external IT companies is the best. They are familiar with protecting assets from digital threats using the most innovative and advanced security tools.

   In addition, making quality security requires the implementation of infrastructure, which is often very expensive. With outsourcing services, you save on resources and get the proven startup’s digital security.

   
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How does software development outsourcing for startup work?

The process includes the following steps:

• Signing the NDA for securing startup’s idea.
• Analyzing the niche, target audience, and gathering the business requirements.
• Researching the optimal solution to best address startup needs and preparing a working plan.
• Design stage: the creation of a User Journey Map and prioritization of MPV features. 
• Building prototype to simulate the main aspects of the final product (basic structure, interface layout, and sketches of the screens). 
• Development stage and demo sessions of the product to show how the implemented functionality works in the development environment.
• Testing an MVP with users. 
• Improving all parts of the user interface and functionality, taking into account the data, statistics, and user feedback from the previous step. 
• Optimization of the further startup development process. 

Examples of Successful Development Outsourcing for Startups

Let’s take a look at six globally renowned corporations that began their way as startups leveraging IT outsourcing services.

Slack

Slack, a world-known platform for corporate communication, is now estimated at $3 billion. However, in the initial stages, it was a simple beta messenger, a prototype with rough design concepts. The company decided to hire an outsourcing team to push its product beyond beta. As we see, by partnering with a third-party vendor, the startup made a crucial step towards making a successful business, in particular gained valuable insights about the project work and how it could be improved from a customer perspective.

Skype

One of the most popular digital communication tools, Skype, started without the own in-house engineering team. They transferred the software development to the outsourcing vendor from Estonia. The successful partnership proved that geographical location doesn’t matter, the key point is the skills and talents of the developers. The company was bought by Microsoft for $8.5 billion.

MySQL

MySQL is software for managing database systems. From the very beginning, the company relied entire development to outsourcing talents. At its peak, the startup hired 400 specialists from 25 countries. Due to partnering with external resources, they not only reduced costs but managed to grow rapidly. Today, MySQL is worldwide popular and used by millions of organizations.

Alibaba 

Alibaba started as a Chinese startup, and now we know it as an international big-scale company, specialized in e-commerce services. In the beginning, the founders of the company, Jack Ma and Peng Mei turned to United States’ talents for outsourcing its software development that gave the opportunity for the startup to focus on business and strategy. As a result, owners have built the innovative company we know today. This corporation boasts a capitalization of $453 billion.

BranchOut

BranchOut, the Facebook recruiting application, was completely built via outsourcing development services. The startup was founded by Rick Marini in July 2010, and attracted $49 million in investments. BranchOut has also been named as one of the Top 10 Facebook Apps by the Electronic Business Group.

Basecamp 

One of the most popular project management tools, Basecamp, outsourced some core functions so that its internal teams could focus on organizing in-house processes. Consequently, the company was better able to concentrate on running its own organization. Their capitalization currently is rated at $100 billion.

Summary 

From the list of reasons why to turn to outsourcing software development for startups and examples of unicorns that used this model, we see how unknown small projects have become big-scaled international companies thanks to bespoke software companies. This approach helps startups not only to reduce costs but also to have access to high-quality experts, improve the overall performance and let focusing on core business processes. 

In particular, Ukraine has established itself in the global IT market as a provider of high-quality development services. To know more about the topic, check out our article “Is it a good solution to outsource web development in Ukraine?“.

FreySoft, the outsourcing and IT outstaffing company, has 11 years of experience in delivering services in such domains as custom software and mobile app development, CloudOps, Maintenance/DevOps, Artificial Intelligence/Machine Learning, UI/UX design. We also pay a lot of attention to the user interface services market news, design trends and the latest developments. Relying your startup on our team, you get: 

• productive communication (reports, daily/weekly meetings, improvements on your feedback);
• access to our diverse and top-notch engineering teams;
• vivid delivery plan (with the opportunity to track the processes in Asana, Jira, Trello, etc); 
• high quality of the services on every stage (from hiring and onboarding processes with consultations to support and maintenance phases);
• opportunity to start with a 2-week trial period.

Our implemented cases speak for us in reaching the clear results and requirements of our clients. Contact us today and we turn your startup idea into a valuable real product.  

FAQ: Should a Startup Outsource Software Development?

Why do startups outsource? 

Small businesses and startups outsource tech needs due to a number of reasons. First, it let their owners reduce costs, and contribute the revenue to the core business processes. Secondly, outsourcing gives opportunities to owners and in-house employees to free up their time from engineering issues and focus more on the growth of the business. At the same time, with the IT vendor, startups get access to a well-experienced and diverse pool of developers, who can provide the best-suited solutions and innovative technology. Consequently, security, risk management, and high-quality delivery are guaranteed for the projects. 

How to select your IT outsourcing partner for small business?

Follow the next steps in selecting your outsourcing partner:

1. Internal brief of the vendor.

   The project starts with forming the requirements needed to implement the idea into reality. It provides a solid foundation for further understanding of what IT partner you need.

2. Vendor shortlisting.

   Choose the IT companies based on your preferences: industry/domain, nearshore/offshore, software development costs, methodology, size of the company, region, team management, English level. Check the implemented cases of the partner and its online presence.

3. Communication.

   Contact the chosen outsourcing company to get the initial discussion about your specific project. Communicate in what way and what resources are needed to meet your needs effectively.

4. Engagement model.

   Underline the selected outsourcing provider and agreed on the best engagement model for the project implementation – consultancy, outsource, outstaff, client managed / partner managed.

5. Budget.

   Agreed on what payment model you work (full-time equivalent (FTE), fixed price, dedicated teams, blended hourly). Choose the best-suited for your startup.

6. Start of the solution.

   Get documents signing (NDA, SRS, SOW as well as complying with GDPR standards), clear delivery of the project processes, and setting a scheduled communication plan.