One of the issues startups face is finding the right balance between providing innovative solutions to the market — which often require serious tech expertise, associated with rare specialists and high costs — and saving money. Statistics show that 29% of startups fail due to running out of funding or personal resources.

How can you deal with this tricky situation? The answer might be to involve outsourced software development services for startups , as hiring an experienced and skilled individual within a team might not be a realistic option when considering all the costs involved. One way or another, there are multiple reasons to enhance the startup development team. Let's explore the whole thing! In this article, we'll discuss the benefits and pitfalls that outsourcing startup development brings, explore different outsourcing models, and provide an illustration of successful outsourcing.

Understanding software development in startups

Compared to mid-sized companies and enterprises, startups have a unique environment that can be described using three key concepts:

Agility and flexibility. Working in iterations (gradual stages) is a suitable methodology for startups, allowing the company to quickly adapt to changing market demands and customer requirements.

Limited resources. At the beginning of their journey, companies usually face two limitations: financial and human resources, as we mentioned earlier. On one hand, a small team inspires creativity and gives a sense of family-like business; on the other, it certainly makes the path to the goal longer.

Innovations. While the old-timers might work on their pioneer product and enhance existing features, there's no need for a startup to enter the market without proposing unique selling points to capture customer interest.

In addition to these concepts, startups are characterized by their team dynamics, involving small, cross-functional teams where effective communication is valued due to the short product development cycles. The pitfall of this trait is the high pressure on participants and the inability to focus on complex tasks, with a potential lack of expertise in resolving them. As you can see, like other types of companies, startups have their own specific challenges. Let's explore how outsourcing can help overcome them.

Why consider outsourcing for startups?

Outsourcing software development can help startups create a product that will impress the investors and capture audience attention. Here's why outsourcing can be a smart choice.

Access to diverse expertise

By outsourcing, startups gain access to a wide pool of global talent. This allows them to improve their product with specialized skills and knowledge that they might not have in-house, such as expertise in emerging technologies, design, or DevOps. This diversity can enhance the innovation-driven nature of startups, enabling them to develop cutting-edge solutions without the high costs associated with hiring full-time experts.

Cost efficiency

One of the primary reasons startups consider outsourcing is cost savings in building new software. Outsourcing can significantly reduce expenses related to hiring, training, and maintaining employees. It also eliminates the need for infrastructure investments, such as office space and equipment, since outsourced teams often work remotely. This is particularly beneficial for startups operating on tight budgets, allowing them to allocate resources toward other critical areas in product development, like marketing and business.

Scalability and flexibility

Outsourcing provides startups with the flexibility to scale their operations up or down based on project needs. This is important for startups whose product development cycles can vary in size and scope. Whether it's launching a new feature or entering a new market, outsourced teams can be quickly restructured to meet changing demands.

Faster time to market

Time-to-market can determine a startup's competitive edge. Outsourcing allows for parallel processing of tasks, speeding up the overall development process. With a dedicated team focused on software development, startups can accelerate product releases and better meet market demands.

Risk mitigation

By partnering with outsourcing firms, startups can reduce their risk exposure. Outsourcing firms typically have experience in managing projects of various scales and complexities, offering proven development processes and quality assurance practices. This experience can help mitigate common startup pitfalls, like project delays and technical debt.

Focus on core business activities

Outsourcing allows startup founders and internal teams to concentrate on their core competencies and strategic activities. By delegating the technical aspects of their projects to external specialists, startups can focus on refining business models, engaging customers, and expanding their market presence.

Phases of software development outsourcing

Even though any part of the product development process can be outsourced — whether it's just designing interfaces or providing a dedicated team to develop the project from idea validation to deploying apps to online stores — below are the stages of the full-cycle Minimum Viable Product (MVP) development process, so you know what to expect in case of opting for the full spectrum of software outsourcing. The MVP is the first version of the product released to test the main functionality of the startup product. The process is described as it is usually performed when Ronas IT clients outsource software development to our team.

Before collaboration

Before you contact your future outsourcing partner, try to define what goals you'd like to reach by the end of the collaboration.You might use a model suitable for small businesses called SMART. It implies that your goals should be:

Specific. Be clear about what you want to achieve with the outsourcing partner. Instead of saying, "improve app features" specify which features or functions you want to improve.

Measurable. Set goals that let you track progress. For instance, aim to increase user engagement by 20%. Measurable goals help you evaluate success and determine if the partnership is meeting expectations.

Achievable. While it's good to think big, setting unattainable goals can lead to frustration and wasted effort. Consider your budget when setting these goals.

Relevant. Your goals should align with your overall business objectives. For example, if your startup aims to penetrate a new market, ensure the outsourcing efforts directly contribute to that aim.

Time-bound. Set a clear deadline. This creates a sense of urgency and keeps the project on track. For example, aim to launch a new app feature within three months. Timelines help manage expectations and facilitate planning and execution.

Analytics

In this first stage of outsourcing development, an outsourcing agency should analyze project requirements, define the timeline and urgency of completion, determine a tech stack, and provide the client with a document outlining the number of features to develop and the time needed for engineering.

Planning

A project manager plans which goals the design and development teams need to reach by the end of each iteration. Additionally, the team composition is defined at this stage, depending on the project's timeline.

UI/UX design

The design of the minimum viable product is closely connected to development, especially if a startup aims for full-cycle software development outsourcing. This ensures that interface mockups are easy to develop and release faster. Even if the startup only outsources design, in full-cycle development agencies, designers consult with engineers to check future functionality. After the design's approval, a development team starts writing code.

Release

At this stage, web apps are set up in IT environments, and mobile apps are submitted to Google Play and the App Store. You might notice the quality assurance step is skipped. At Ronas IT, engineers write automated tests throughout development, moving straight to release after that. For such sped-up startup development, you can check if your outsourcing partner adopts unit tests and writing practices.

Support and maintenance

Once the MVP is ready and tested, you may want to improve it based on user feedback and add features to your mobile or web app. You can continue working with an agency to maintain your product after release.

Outsourcing models

There are many ways to outsource software development. These can be divided into two groups: relationship-based models, defined by types of contracts and obligations, and location-based models.

Relationship-based models

In terms of relationships with a software development company, it is important to understand what type and scope of work needs to be done.

Dedicated development. In this model, an entire development team is dedicated to working solely on the client's project. The team operates almost like an extension of the internal team. A dedicated development model offers a high level of control over the engineers and processes, as well as long-term commitment. Such end-to-end solutions allow startups to focus on their brand strategy and unique propositions while outsourcing startup software development to the external team.

Extended team. The extended outsourced team works closely with the internal team, often participating in daily communication and collaborative efforts as if they were part of the company. Seamlessly integrating an extended team with an in-house team can be difficult, but it brings the benefit of immediate access to additional skills and expertise.

Staff augmentation. This model helps to add external experts to the in-house team to provide additional skills or manpower as needed. Staff augmentation allows for quick access to specialized skills without hiring a full-time employee.

Location-based models

Location preference depends on the available budget as some countries offer cost-effective hourly rates compared to others.

Onshore. A vendor and a client are located in the same country. This implies conveniences like shared language, culture, and time zone, along with familiarity with the same laws and regulations. However, the major drawback is that it's difficult to achieve cost savings while getting high-quality service domestically.

Nearshore. Development is outsourced to a neighboring country or one in the same region. Its advantages include similar time zones, moderate cost savings, and fewer cultural differences compared to offshore outsourcing.

Offshore. In this case, companies outsource software development to distant countries with different time zones, often in regions known for lower development costs. Choosing this outsourcing option brings significant cost savings, access to a large talent pool, and flexibility in scaling the team.

It's up to every startup founder to decide which model suits their needs best, but for cost savings and guaranteed results, most opt for offshore outsourcing with a dedicated and end-to-end development team.

Pitfalls and solutions in outsourcing

There are some common pitfalls that startups might encounter when they choose an unreliable outsourcing partner for their custom software development project. We'll name the most common problems below and describe what to look for in the outsourcing company to avoid them.

Exceeding the budget

Since we've been talking about tight budgets in startups, let's start from this problem's description. Even though the cost might slightly vary between most agencies, there is no way it should be a surprise for the client. At Ronas IT, we implement the practice of verifying the project cost in three steps. The first step is simply finding out the budget restraints that a client has. Based on them, the capabilities of product development are clarified. In short — a software development company can't promise to build an Amazon-like platform knowing that a client only has the budget for a small e-commerce website. The next step is providing an approximate but still thorough calculation of the cost and time forecast for every app's feature in a document. Then, another round of cost approval can be held after the design stage and before software development. So, if an outsourcing partner doesn't want to discuss costs and help calculate them, better be suspicious.

Slow market reach

Anyone having an original idea has an urge to be the first to present it to the audience. The same goes for bookwriters and scientists. The word has its time to be said, and it is important not to be late with your wit. If it takes too long for a startup to be developed, then something is wrong with the software development company. For sure, the speed depends on the number of features and their complexity, but startups normally start by developing an MVP, which is a product with just enough features to test the idea. Speaking of the Ronas IT time schedule, on average, MVP development takes our team three months to complete. If an urgent rollout is needed, it will take us about one month.

Post-release support and scalability

Speaking of MVP development, after rolling out the enough-for-the-market features, the very next step is enhancing the product and adding new features. The last thing that startup founders want to deal with is uncertainty after the first release. Therefore, when checking the list of services included in software development outsourcing, see if they include support and maintenance.

Hidden development costs

Another issue associated with pricing is unexpected hidden costs that arise during the development process. The client should pay attention to defining a clear scope of work at the beginning of the project, understanding the aim of MVP development and its features, and assessing the vendor's transparency, which is shown through clear communication and adherence to the plan outlined with the client at the first touch.

Unstable quality of service

Another common fear is that after signing the contract, the service provider will lower the standards promised at the beginning. In this case, it's important to discuss and know the contractual exit clauses to stop the partnership if the software development company fails to meet quality standards. In the product development process, special attention should be given to the way the project manager communicates. At Ronas IT, we hold demo sessions with clients every two weeks to keep them updated. If someone requests more frequent updates, we're up for it, too.

Legal issues

Some industries have laws and regulations that applications in these fields should follow, usually to control customer data security. Before proceeding to software development outsourcing, you might want to find out if the company is familiar with the documentation and able to develop following it. Also, it might be good to check if they've dealt with projects in the same industry — independent reviews are available on Clutch, GoodFirms, and UpWork platforms. Certifications are not only industry- but also country-specific. For example, in Australia, it would be APPs, Canada follows PIPEDA regulations, and in California, it would be CCPA.

Project management issues

When outsourcing development, there is a risk of losing control over the project and lacking understanding of the process. To prevent this risk, it is important that your outsourcing software development company lets you access the project management tools and files where you can see the progress in real time. Moreover, it shouldn't be something that a client has to ask for but should be a procedure that the software development agency offers its clients regularly. If access is not discussed before the start of the project, there is a reason to be worried.

Timezone difference

A common issue and worry is asynchronous communication between the client and the vendor, especially for those outsourcing development overseas from Australia. If a startup founder doesn't feel comfortable not being able to receive answers within business hours, then it's better to outsource to nearshore agencies. However, if the outsourcing partner shows productivity and progress despite the time difference, such a working style can even initiate round-the-clock productivity, where the client's team works during the day and the development team works at night. Additionally, many outsourcing partners offer flexible work hours or overlap significant portions of their day with the client's timezone to support efficient communication and collaboration. So, in outsourcing software development, flexibility in scheduling from both parties is key to a successful partnership. Even if it brings some inconveniences, the cost-efficient solution without quality loss is worth it.

Violation of agreements

Another pitfall is associated with not meeting expectations when an outsourcing company violates time-quality agreements discussed at the beginning. Since you cannot check the expected result of collaboration at the onset, the only way is to study clients' reviews. Among other criteria, the Clutch platform offers reviewers the chance to estimate schedule commitment, and usually, clients do not hesitate to leave their comments on this topic.

Сhoosing the right outsourcing partner

Taking into account all of the mentioned above, we can outline some criteria that define a good outsourcing vendor.

Verified reviews. It is essential to check for genuine reviews on platforms such as Clutch, Goodfirms, DesignRush, and Upwork. These reviews provide insights from previous clients and can help estimate the vendor's reliability, quality of work, and professionalism.

Relevant experience. While not mandatory, it is an advantage if the software development company has experience relevant to your industry or project type. This experience can lead to a smoother collaboration, as the vendor may already be familiar with specific challenges and solutions specific to your field.

Transparency in processes. Check if the vendor is committed to transparency in their processes. They should be open about how they operate, including regular demos, and offer you access to download code, view designs, and monitor progress through task management systems. This transparency allows you to verify what you are paying for at any given moment.

Warning signs after choosing an outsourcing vendor

Even after selecting a software development company, it is important to remain cautious about any red flags that may indicate potential issues.

Delayed results. If you do not see results for a prolonged period, this could be a cause for concern. In custom software development, a healthy timeline includes demos every 2-3 weeks. Anything extending beyond this without clear justification should be closely examined.

Progress slowing down. If you notice a significant slowdown in progress, where features that previously took days now take weeks, this could signal resource allocation issues, lack of expertise, or internal challenges within the vendor's team.

Lack of demonstrated progress. Be wary if the vendor repeatedly assures you that everything is on track but fails to show tangible progress. Frequent updates and visible outcomes are factors that maintain trust and persuade you that the project stays on course.

Example of outsourcing a web app development project

To give you an example of an outsourcing partner and client collaboration, here's one of the Ronas IT cases, where we made sure that every step of the project was validated and approved by the startup founder. The story is about building an efficient booking platform without investing a fortune in its development.

Client-vendor match

A UK Retreats startup founder discovered us on Dribbble and reached out with a unique challenge. He wanted to create a booking platform to showcase his collection of unique locations across the UK. However, other companies turned him away due to the inability to match the idea with the startup's budget. That's when the founder approached Ronas IT.

Ideation

It became clear that starting off with a full-scale app wouldn't be feasible, and an MVP was needed. We proposed a simple solution: a mobile-friendly web application that serves as an exclusive club with subscription access. This platform offers a map with searchable and filterable properties and an admin interface built on Laravel Nova, allowing an admin to manage listings.

Development process

Over the span of one month, we completed the application design, followed by two months dedicated to development. We followed standard practices with regular bi-weekly demos and received feedback to refine the product. The design of the product was an interesting stage, where we began with negative references provided by the client and eventually developed a clear and clean final result. In development, we used technologies like React for the frontend, Laravel for the backend, and Google Cloud Platform for hosting.

Results

Our solution met the startup founder's budget and deadline. The result is a unique service highlighting his personal collection of exclusive locations, with custom user experiences and insider access to hidden gems. In just three months after UK Retreats launched, the platform brought in 850 new end users.

Conclusion

Opting for an outsourcing software development project can be a transformative strategy for startups that want to balance innovation with resource constraints. By providing access to a diverse talent pool, cost efficiencies, and flexible scaling options, outsourcing allows startup founders to focus on their core strengths. The story of a UK Retreats startup illustrates how an effective outsourcing partnership can help founders turn challenges into opportunities by delivering tailored solutions on time and within budget. If you'd like to outsource your software development to us, just let us know by filling out the form below.