The ultimate guide to outsourcing software development for startups

Every startup depends upon experts who can address its technological needs, especially entrepreneurs who decide to create custom solutions for their businesses. There are two ways to collaborate with IT specialists: hire an in-house team or outsource software development to an external team. If you are unsure about which approach is right for you, read our article for guidance.

In the article, we compare these two approaches, share stories of entrepreneurs who have achieved success thanks to outsourcing software development for startups, and offer tips on choosing the right technology associate for a smooth collaboration.

What are the benefits of an in-house team?

At Ronas IT, we have a great team of our own and have been operating since 2007, so obviously, we cannot be against the in-house way of product development. Even though our main focus in this article is outsourcing, let’s briefly mention why some opt for building their own development teams around products and prefer to hire employees rather than partner with outsourcing software development companies. Here are some of the reasons to have your own development team:

Control

Having your own team means you know each member and have immediate access to the processes.You can observe progress directly and, if you find them ineffective, change the processes and adjust the workflow to meet the project’s needs. However, some software development companies are better at reporting the progress than internal teams. In our case, we report on any update and milestone so that clients feel as included and informed as possible.

Dedicated resources

If your company is focused on developing a single product, then your whole development team works solely for the success of that project. In other words, they are focused on meeting the company’s objectives and don’t work on side projects. This benefit, though, may have a side effect, which is the lack of motivation and initiative. Having multiple projects helps employees switch between them and prevents burnout. Only big companies can afford creative side projects within an organization. That’s not an obvious but an existing reason why startups outsource software development.

Fast problem-solving

Because the team works closely together, they can often find solutions to tough questions almost immediately. However, there might be problems that require specialized expertise. In such cases, an entrepreneur has the choice between hiring a new employee or simply entrusting the issue to a software development company that already has a pool of experts.

Consistency

This point is more about mature companies that are already confidently standing on their feet. An in-house team understands the company’s culture, mission, and goals, so they can maintain a consistent brand voice and image. As for startups they usually need some time to elaborate on their unique identity. To get help with this task, you can refer to the brand identity services that many software development agencies offer in addition to product development.

Skills development

You can grow your own specialists with skills fine-tuned right for your business needs, thus ensuring continuous improvement and growth. It’s a long but fruitful task, when in the end you have people sharing the same values as you. However, if skilled professionals are needed from the beginning, software development outsourcing can provide a significant boost.

The truth is, by choosing the right outsourcing software development company, you normally won’t feel a drastic difference between the performance of an in-house team and an outsourcing team. The latter, being real professionals, must have everything under control, be easy to reach within working hours, fully engaged in your project, and should not take too much time to solve emerging problems. Now, let’s get into the details of software development services.

Is there anything good about outsourcing software development?

First of all, we want to emphasize that both approaches to application engineering can work and suit a company under certain conditions. For instance, if your startup has a tech co-founder who can conduct interviews with tech specialists and streamline the project work, having an internal team of developers might be the most suitable solution. On the other hand, software development outsourcing might be a more advantageous choice in other scenarios.

In our analysis, we have compared both approaches and explained how outsourcing software development for startups can make the life of a startupper easier. Each entrepreneur should weigh the pros and cons of both methods based on their unique business requirements and available resources, to make the best decision for their specific circumstances.

Flexible overhead management

Usually, it’s difficult for a startup to find funding for expanding its project, let alone for developing its own application. It’s uncertain when the next round of financing will take place and when the business will start generating enough revenue.

In this situation, achieving maximum flexibility is crucial. Hiring an internal team means paying the team a monthly salary with no chance to halt the team’s work if the startup suddenly lacks funds and decides to pause work on new app features. Furthermore, a startup owner will have to pay taxes for having the team on the payroll, adding to the costs.

On the contrary, handing over app development to an external team allows entrepreneurs to pause the process the moment they cannot afford it. Flexibility is a great upside that outsourcing software development for startups brings since it allows a startup owner to allocate their financial resources where they are needed most urgently.

No recruitment pain

The gap between the demand and supply of qualified IT specialists is significant, making it challenging for startups to find and hire competent professionals. US labor stats have revealed that in recent years, 1.4 million software developer positions have gone unfilled. Moreover, other studies show that, on average, a company spends 66 days searching for the right individual to fill a technical position.

As a result, startups must account for the time spent searching for an in-house team while planning their MVP release or app feature development timelines. On the contrary, if a startupper decides to explore outsourcing software development for startups, they would not have to manage the recruitment of developers, as that burden would fall upon the tech partner.

Generally, third-party firms already have all the necessary specialists in their workforce, including IT engineers and UI/UX designers with various areas of expertise as well as project managers who serve as contact points and deliver fresh information about the project to their customers. Due to all this, the tech company can curate a fitting team for different projects, manage it independently, and even suggest suitable technological stacks to implement, thanks to their extensive experience working with diverse projects. Thus, software outsourcing alleviates many time-consuming responsibilities venturing down the path of custom development.

Faster time-to-market

Any startup wants to launch its product quickly to promote its idea ahead of others. That’s why it’s crucial to find the approach that allows development of the first version of the product as fast as possible.

In-house teams often do not have many developers. Usually, there are about 3–5 people on the team. In this situation, any unforeseen event can impact the speed at which the digital product is released. What if a team member chooses to join a larger team amid the MVP development? What if they fall ill or face other personal circumstances? All of these factors influence the project delivery speed and cause considerable stress for the startup owner, forcing them to spend time and money on finding a replacement developer and adapting to the situation.

A significant advantage of outsourcing software development to an IT company is that they often have multiple developers on staff with the capacity to replace someone who needs to leave the project abruptly. Additionally, the company can increase the number of developers in the team to speed up the release of an app or incorporate essential features faster if there is an urgent need for them. Due to this flexibility, outsourcing software development for startups might result in a shorter time-to-market.

Focus on business activities

Except for tech issues, founders and co-founders typically have an extensive range of tasks to handle. They need to find investors for their business, promote their startup online, explore suitable tax schemes, and gather client feedback. In short, there is a large number of responsibilities demanding their attention.

Managing an internal team of developers can sometimes distract the entrepreneurs from other crucial tasks, especially in case none of the founders are professional technologists. Outsourcing software development for startups can alleviate these concerns, as the engineering company takes charge of all technical and managerial aspects of application delivery, leaving the startup owner to simply review the final results.

The technical team can streamline the app’s feature implementation process, as they usually have team leaders who can monitor developer efficiency, break the project work into iterations, and deliver tangible outcomes after each iteration. Outsourcing software development for startups may not be as essential if you have a partner who is well-versed in IT processes and can establish efficient work of the in-house team, but in most scenarios, a collaboration with a third-party tech partner can save you significant time and stress.

Immediate access to expertise

When you choose to outsource software development, you pay for the exact expertise you need for a limited period instead of taking on the responsibility of hiring a specialist and looking for tasks to assign when there is no immediate need — for example, in design or development.

According to a Deloitte survey , gaining access to new capabilities is one of the most important reasons for choosing custom software development outsourcing services. Given that talent acquisition is a primary challenge for in-house teams, it is often a better choice to collaborate with a software development company that boasts a vetted and experienced pool of experts. Deloitte’s research indicates that 76% of IT functions are delegated to outsourcing teams by companies, which is a significant number compared to the 52% of business functions that are outsourced.

Among the qualities most valued by executives are transparency, trustworthiness, understanding of business specifics, proven results and outcomes, clear and frequent communication, effective capabilities, and clearly defined cybersecurity standards.

And are there any startups that outsourced software development and reached success?

When we need a cake for our birthday celebrations, we don’t always bake it ourselves; instead, we often turn to a professional baker. The baker knows how to bring our idea to life while our task is limited to explaining the desired cake design and filling.

Just like with the cake, we can hand over app development to a third-party team, who can save us from hustle and stress. Outsourcing software development for startups has already helped several entrepreneurs accomplish their tech objectives and start reaping substantial profits. Here are a few success stories of such entrepreneurs.

Slack

Stewart Butterfield decided to create a communication app for team collaboration. He built a prototype showcasing his vision for the future application and approached Metalab to get help with building up this concept. The team at Metalab helped him design the app, develop a website for promotion, and create a strong branding identity.

Today, Slack has over 18 million active users, and in 2021, the app generated $902 million in revenue. This success can be partially attributed to the fact that Stewart Butterfield made the decision to seek professional design and custom software development services from the moment the business idea hit him and managed to get the product as soon as possible.

Groove

Groove is a SaaS application designed to help businesses organize, prioritize, and solve customer requests, all within a familiar interface. The creator of this application, Alex Turnbull, considered finding a technical co-founder for a long time but ultimately opted for outsourcing software development for startups by working with Mojo Tech. This team developed the application in just four months and launched it on the market. As a result, within three years of the app’s existence, the company’s revenue had grown to $5,000,000.

In an article titled ”What I Did When I Couldn’t Find a Technical Co-Founder” Alex shared his thought process and the difficult decision of either outsourcing to a development company or finding a technical co-founder. Here’s the quote from the article that demonstrates that outsourcing software development for startups was a growth point of Groove.

WhatsApp

Before WhatsApp was acquired by Facebook, it outsourced the development of its application to various developer teams across Europe. Outsourcing software development for startups helped create a revolutionary app in a short time frame, driving it to reach the top ranks in the App Store and Google Play. Many of the European developers who worked on the product later became full-time developers for WhatsApp and even relocated to the US when Facebook purchased WhatsApp for 19 billion dollars. It is worth noting that Facebook took this step to eliminate a formidable competitor.

Then tell us, how to choose the right tech partner?

Although outsourcing software development for startups is one of the attractive options, some issues with product delivery still can be encountered. If a startup fails to find a diligent team, it might face problems with communication, release delays, or poor quality of work. To avoid this, it’s crucial to find the right tech partner. That’s why before shaking hands with a potential external partner, take the following steps.

Look for a company with experience in your niche or industry

Begin your search by identifying tech partners with relevant experience in your industry. The outsourcing company with relevant experience in your niche is usually not only capable of building a high-performing product but can also refine it. Such a team can help you to make the list of features your product will definitely need and omit features that can be implemented later.

They are also familiar with the ins and outs of the product release and know what should be done prior to this process.

To find out about the company’s experience in certain niches, you can check its cases on the corporate website, Behance, and Dribbble, or ask your potential tech partners to provide you with them.

Review the company’s market reputation

Once you find the potential tech partner with relevant experience, check reviews other entrepreneurs have left. No business benefits from working with a contractor that misses deadlines or disappears before completing the promised work. Such situations could lead to delays in launching an application to the market, causing startups to lose money.

To ensure the reliability of a dev company, make sure to check their reviews on websites like Clutch and Goodfirms. Reviews on these platforms typically provide information about both the strong and weak aspects of the team. By doing thorough research, you can find the partner for successful outsourcing software development for your startup.

Assess company’s technical skills

Before signing a contract with a tech company, it is crucial to evaluate their technical expertise in outsourcing software development for startups. It is best to choose companies proficient in the most relevant languages, frameworks, and technologies, such as those supported by tech giants like Apple, Meta, and Amazon. Such technologies are likely to remain relevant for several years.

There are various ways to assess a company’s hard skills. Firstly, review the company’s portfolio to gain insight into its experience with different technologies. Additionally, consider reaching out to their past or current customers for personal opinions on the company’s expertise.

Furthermore, you can conduct interviews with the company’s tech leaders or explore their employees’ profiles on LinkedIn or GitHub to evaluate their skills. Some companies also participate in competitions and conferences, receiving awards and recognition, which serve as a good indicator of their technical abilities. These assessment methods will help you make an informed decision about choosing a tech partner for outsourcing software development for startups.

Evaluate communication and project management abilities

To track the progress of an application, founders need to maintain frequent communication with the dev team, conduct design reviews, and discuss requirements and vision. To ensure a smooth process, it is crucial to establish a common language for communication and comfortable time zone compatibility between you and the partner when outsourcing software development for startups.

During your initial contact with the company, assess how quickly managers and developers respond to your messages and requests. Ideally, they should respond within 24 hours.

Before starting the project, inquire about the development methodology the team uses. It is beneficial to choose a team that employs Agile methodology. With this approach, the entire process is split into iterations, after which you will receive tangible results from the team’s work. An Agile methodology offers the advantage of allowing the development team to rapidly adapt without redoing completed work if additional requirements or urgent features need to be added to the application.

Confirm the longevity of the company

To ensure the continuity of custom software development services and long-term support, it’s important to verify the financial stability of your tech partner. Ensure that the company has a solid track record of longevity in the market. After startups outsource software development and release their product, they require support during the post-project completion phase. Therefore, it’s crucial to work with a development team that is likely to maintain its operations in the forthcoming years.

Outsourcing software development to a short-lived company could be risky, as it may result in unexpected project cancellations or undesired disruptions. To protect your product from such setbacks, familiarize yourself with the company’s existing client base, its credentials, and projected financial performance.

Investigate how many clients remain for post-release support with the software development company. Examine the growth pattern in terms of the number of employees and projects over the years. You can also look at feedback from former and current employees. The reputation of the company serves as a good indicator of its reliability as a software outsourcing partner.

Wrapping up

All in all, your company can benefit from either hiring an in-house team or outsourcing software development for startups. You can opt for one of these approaches or juggle them as the needs of your startup change. However, if you choose the latter, make sure you cooperate with a diligent team, as it can help you to overcome hurdles with recruitment and make the product launch seamless and as quick as 3—4 months.

By the way, our team has been dealing with outsourcing software development for startups for 16 years already. We can help you both design and develop your product and do that within just 2—3 months! Fill in the form if you have an app idea that you want to bring to reality.