The Benefits and Risks of Outsourcing Product Development

Photo of author

Editorial Team

Short time-to-market, cost-effectiveness, and a few other similar factors are the major reasons IT businesses consider exploring outsourced product development services. However, just as it is advantageous, outsourced software product development also has its associated risks, including but not limited to privacy concerns, cost uncertainties, etc.

So, the big question is, should you consider product development outsourcing or hiring in-house developers? To answer, it’s important to understand how beneficial the former is over the latter or vice versa.

In this article, we have carefully examined the top benefits and risks of outsourcing product development, helping you make a better-informed decision as an IT startup owner or co-founder.

Without further ado, let’s dive right into it!

Top 4 Benefits of Outsourced Software Product Development

1.      Short Time-to-Market

How soon your software product can get to the market significantly determines how successful such a product will be. And outsourcing can help you achieve a very fast time-to-market. When well-managed, outsourced product development companies can help deliver your project faster without compromising quality, thanks to their limitless resources and experience.

More importantly, while you’ve outsourced the development, you can focus your energy more on monetization and other strategies to remain ahead of the curve, especially with the industry becoming more competitive than ever.

2.      Access to Talented Product Developers

While this largely depends on your IT outsourcing product development partner, outsourcing your software product development process typically allows you access to more experienced developers with better expertise. It’s worth noting that if your project requires specific skills, such as RoR (Ruby on Rails) development, your outsourcing partner can be a valuable resource, providing RoR development expertise.

Since they are not working in-house, you can pool an outsourcing team worldwide comprising project managers, UI/UX designers, software developers (back-end and front-end), QA engineers, etc. You only need to inform your outsourcing company of the required roles for the project, and you can be sure of having a team of talents to work with.

3.      More Flexibility

Developing a software product involves many phases, from pre-development to post-development. Every one of these phases may or may not require your involvement. But you will enjoy better flexibility in choosing how involved you want to be when outsourcing.

This may also depend on what you believe will work best for your company. You can limit your involvement to routinely tracking the project progress and associated development costs. This way, you can prioritize your focus on other aspects of ensuring optimal market acceptance when the software product eventually launches.

4.   Cost-Effectiveness

New product development outsourcing can help you save a lot of money. Generally, employing an in-house team costs more than outsourcing. Beyond costs, the efforts required for onboarding, supervision, etc., are incomparable.

Outsourced software product development allows you to leverage the differences in available resources and labor costs worldwide. It also helps you avoid the risks of budget restraints and unnecessary expenses on rent, utilities, etc. With zero overhead costs, you can maximize your profit margin!

Risks of Software Product Development Outsourcing

1.      Unexpected Costs

This is otherwise known as the risk of “hidden charges.” Product development companies offer different pricing models, which may be a Fixed Model, Time and Material Model, Dedicated Team Model, etc.

However, regardless of the model you receive, there is always a risk of unexpected costs. This may include but is not limited to unplanned plan adjustments, unexpected software upgrades, and so on. You wouldn’t want your project abandoned halfway and will be left with no option but to pay these extra charges.

But you can avoid this risk by having a comprehensively binding contract before the start of the project. Ensure it includes the scope of the project, everything your project involves and the associated costs, delivery timeline, and so on.

2.   Limited Control

While the flexibility of involvement may be a benefit, some consider it a risk. Outsourced software product development reduces how involved you are in the entire process. The risk here is that your outsourcing vendor may miss out on some of your requirements so they can do things their way. Again, this largely depends on the product development outsourcing company you work with.

The best way to avoid this is to clearly define your requirements and conditions before starting the project. This way, you can be sure you and your vendor are on the same page.

3.   Privacy Concerns

You cannot work with an outsourced software product development company without sharing your business’ confidential details with them. While it is important to do so, it also raises privacy and security concerns.

Of course, you must sign Non-Disclosure Agreements with these companies, but is it always enough? Hence, ensure you extensively review any company you want to work with, examining their track records and how they handle their clients’ data.

Final Thoughts

Outsourced software product development can significantly help you get your software product to the market without needing to break the bank. But, of course, it also has its associated risks. Understanding these benefits and risks is very important to make the right decision.

Should you have further questions? Don’t hesitate to reach out via the comment section below!