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As technologies grow and expand, so do users’ expectations. In order to reach new markets, attract wider audiences, and increase sales, businesses choose to build websites and applications. However, the product development process is a complicated task that cannot be jeopardized. Companies that don’t have enough resources to handle the entire project opt to outsource to a dedicated software development team.

Whether you’re looking for mobile or web development services, a trustworthy IT vendor can take on the entire project or some parts to help you launch faster. Aside from accessing experienced developers, organizations benefit from cost reduction, faster time-to-market, and improved efficiency.

In this article, we will discuss outsourced product development, its advantages and threats, as well as offer a guide to a smooth outsourcing process.

What is Outsourced Product Development (OPD)?

Outsourced product development is the process of delegating development of a project or a part of it to a third-party vendor. In other words, companies that lack technical expertise or resources can outsource product development tasks to a specialized company. In recent years, outsourcing software product development has become increasingly more popular due to widespread remote work.

Not only does outsourced product development save costs and time, it also allows businesses to focus on their core operations. Instead of going through a lengthy and cumbersome process of assembling an in-house team, many organizations prefer to utilize existing teams of professionals.

Often mistaken for offshoring, outsourcing product development is quite different. In outsource vs offshore, the latter refers to getting work done in a different country, usually to leverage cost advantages. Outsourcing, on the other hand, focuses more on identifying a development company that is best suitable to handle a certain task without being tied to geography.

Benefits of Outsourcing Product Development

Before exploring the nuances of the outsourced product development process, let’s explore the main benefits that businesses gain from choosing this model. We will focus on business and technical advantages.

Business Benefits

Outsourced Product Development

Cost Reduction

Hiring an in-house team always comes at additional costs, from recruiter rates to equipment and taxes. Outsourcing product development tasks do not require these expenses and allows companies to jump-start their project faster.

On top of that, working with a company based in Eastern Europe or South America facilitates lower rates while maintaining industry-level technical expertise. The cost of outsourcing software development is roughly 40% lower compared to in-house hiring.

Faster Development Process

A seasoned team of software development engineers can apply their extensive knowledge to execute your project faster, thus shortening the time to market. Delaying product launch can be quite detrimental to the overall success of the application. Acquiring ready solutions in a shorter time period will help you reach your audience without losing momentum.

Smooth Onboarding

Since the onboarding activities fall on the vendor’s shoulders, you can simply begin the project when the dedicated team is selected. Moreover, the outsourcing product development partner will choose talent that fits your requirements the best to avoid any additional training.


Companies that are rapidly expanding are in need of scalable software product development services. When hiring an in-house team, acquiring any additional specialists imposes a large cost. Outsourced product development helps you avoid this spending by simply assigning more workers to the project to meet the growing demand.

Risk Management

Outsourced product development enables businesses to minimize the risks associated with software development by offering a range of experts with in-depth expertise. Starting such a risky and expensive project on your own can be overwhelming while partnering up with seasoned product developers will ensure a successful solution.

Technical Benefits

Outsourced Product Development

Resource Allocation

Outsourced app development optimizes resource allocation by providing access to a specialized talent pool with diverse technical skills. This allows businesses to efficiently match the required technical expertise to specific project needs. Additionally, outsourcing enables flexible scaling of technical teams, ensuring the optimal allocation of resources throughout the development lifecycle.

Expertise across Industries

No matter which part of the software product development requires additional force, a reputable outsourcing partner can deliver a multitude of services, including software engineering, testing, user experience design, IT consulting services, and many more across different industries. This broad industry knowledge allows for innovative solutions and insights that may not be readily available within an in-house team. Leveraging this cross-industry expertise enhances the technical capabilities applied to product development, fostering a more robust and adaptable approach.


Outsourced product development offers technical customization tailored to specific project requirements, ensuring a personalized and efficient development process. The flexibility provided by outsourcing allows businesses to adapt the level of customization based on project complexities and goals.

Which Parts of the Software Development Process Can Be Outsourced?

Essentially, any task associated with the development can be delegated to a third-party provider. However, most commonly, organizations outsource product development with the following activities:

Outsourced Product Development

Discovery Phase

The discovery phase is the initial step of product development that involves market, product, and customer research. As a result, business gets to know the end-user, clarify project vision, goals & scope, and identify risks.

Product Development Management

This role is fulfilled by a project manager who is in charge of managing team members, setting the budget and timelines, and ensuring the project is running smoothly. The project manager’s responsibilities involve all activities associated with the project’s progress.

UI/UX Design

Outsourcing UI/UX design allows businesses to benefit from the skills of experienced designers with a focus on user-centric design principles. This approach ensures the creation of visually appealing and intuitive interfaces that enhance the overall user experience. Companies can access top-tier design talent without the need for extensive in-house design teams.


Outsourcing coding provides businesses with access to specialized developers proficient in the precise technologies needed for a project, ensuring optimal coding practices and robust software solutions. This not only accelerates development but also guarantees the incorporation of industry best practices, resulting in high-quality code. Furthermore, the cost-effectiveness of outsourcing coding allows businesses to allocate resources strategically, maximizing efficiency and achieving a competitive edge in the market.

Quality Assurance

Outsourcing testing is a strategic move for businesses seeking rigorous quality assurance, as it grants access to specialized testing professionals with diverse skill sets and testing methodologies. This ensures comprehensive testing coverage and early detection of potential issues, leading to a more reliable and robust product. Thus, products meet the highest quality standards, ultimately enhancing customer satisfaction and competitive advantage.

Types of Outsourcing Product Development Services

Mainly, there are three types of outsourcing product development: mobile, web, and custom. In this part, we will explore the different types, along with their specifications and challenges.

Outsourced Product Development

Mobile App Development

As mobile devices are becoming more and more affordable, the potential user base for mobile applications is growing. Mobile application development services include a range of tasks to build apps that run on mobile devices.

Mobile product development can be quite challenging due to the numerous programming languages and frameworks. Especially if you’re aiming at a complex application with advanced features like AI or AR, outsourcing software product development can substantially simplify the process.

Aside from the technical prowess, trusted IT providers can use their experience to help you identify vital features, set user personas, and develop a sound marketing and business strategy.

Web Development

Outsourcing web development allows businesses to craft visually stunning, functional, and user-friendly websites. By collaborating with third-party development teams, companies can harness the latest trends and technologies, ensuring their web presence remains cutting-edge. The collaborative model facilitates rapid development cycles, quick adjustments to market demands, and continuous improvement. Outsourced web development becomes a strategic asset for businesses aiming for digital excellence, innovation, and cost-efficient solutions.

The benefits of outsourcing web development include a higher quality website, faster speed, and the right choice of technology. From web design to frontend and backend development, a reputable outsourcing company can help you build a high-performance site that converts visitors into customers.

Custom Software Development

Custom software development refers to creating tailored tech solutions that cover specific business needs. These can include in-house management software such as CRM or ERP, content management systems, eCommerce applications, and many others. As opposed to a turnkey software solution, custom software products will cover your unique needs and perfectly align with your existing infrastructure.

Custom software development ensures the creation of tailored solutions aligned with specific industry and business needs, fostering increased operational efficiency and competitiveness.Outsourced product development can deliver a solution based on your requirements, infrastructure, and budget.

The Risks of Product Development Outsourcing

Outsourced product development does carry certain risks and has bottlenecks. In this section, we will dive into the most common challenges that you may face.

Outsourced Product Development


Delegating your project to an outsourced team involves granting access to your data. Especially when it comes to sensitive information such as health, personal, and financial data, security is of utmost importance.

However, hiring developers who value data protection and adhere to the industry’s best practices will shield you from data exposure. Make sure your IT partner includes data safety measures in the contract to avoid misunderstandings.

Intellectual Property

Much like with your sensitive data, your intellectual property also requires protection. Especially in outsourcing the product development process, oftentimes, this aspect is left unspoken which results in disputes and disappointment. Discuss your IP rights with the potential service provider to make sure your information is protected.

Communication Barrier

Unfortunately, misunderstandings can occur when dealing with outsourced product development. Especially if you’re working with a vendor whose native language is different from yours. A lack of communication skills can lead to wrong ideas and subsequently wrong products.

To avoid these issues, choose a partner who speaks English and showcases transparent and direct communication. It’s also important to continuously stay in touch via regular calls, meetings, or video chats.

When to Outsource Product Development

It can be difficult to determine whether or not your project will benefit from product development outsourcing. Let’s take a look at the common examples of outsourcing scenarios that warrant outsourced product development.

Outsourced Product Development

Lack of In-house Talent

If you identify that your internal team does not possess the skills required to execute the entire product development, it’s recommended to outsource the whole project or at least some parts. The process of software development is highly complex and requires various skill sets, including coding, project managing, designing, testing, and more. Objectively evaluate your current team and pinpoint the areas that require additional force.

Working with Tight Deadlines

Oftentimes, products are expected to launch within a concrete deadline to satisfy investors and grab the existing market opportunity before it disappears. If you’re working with strict deadlines, delaying the release can be devastating.

Consider hiring outsourced developers to compensate for the resource deficit and launch your application within the preset deadline.

Different Core Business

If software development is not your strongest suit and you are focused on other competencies, outsourced product development can be a great option. Quickly assembling a development team is not an easy task and will likely lead to poor quality and missed deadlines. Refer to specialists to avoid complications and concentrate on your core business processes instead.

Market Barriers

For example, the fintech world is prone to various barriers that make a software product launch significantly more challenging. These can be special regulations, data protection laws, and even customer trust. Dealing with these hurdles is an ambitious task that should be handled by an outsourcing product development firm that has experience in this particular area.

Need for Idea Improvement

If you aren’t sure about your product development idea and can use some expert consulting to make it better, outsourced product development is for you. A qualified development company can assist you in fine-tuning your vision, choosing the right features, and targeting a fitting user base.

Especially in organizations that don’t focus on software development, fleshing out a business idea on your own can be a hard endeavor. Consider cooperating with professionals to deliver the best possible solution to your customers.

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When Not To Outsource Product Development

Not every company will equally benefit from the application outsourcing industry. The primary example is an organization whose core business competency lies in software development. Although it could be beneficial to delegate some parts to speed up the coding or testing process, outsourcing the entire project might not be the best idea. 

Another scenario that doesn’t favor outsourcing is when it increases your spending. One of the main selling points of outsourcing to specialized engineers is to save costs. Make calculations to identify how much your project delegation will cost you, and if the number is bigger than doing the tasks in house, then consider opting out.

Finally, companies choose to build products in house whenever they can’t lose complete control over their operations. Whether you are afraid of entrusting an external development team with your data or worried about protecting your intellectual property, these concerns may deter you from outsourcing product development. However, thorough vetting and careful selection will help you retain control and ensure safety and confidentiality of your data.

Costs of Outsourced Product Development

The product outsourcing cost varies across countries and even regions. While in the US you may expect to pay up to $150 per hour, software engineers based in Eastern Europe charge $35 to $50. The most prominent software product developers are located in Ukraine, Poland, and Romania. They deliver modern industry-standard technological solutions while charging moderate fees.

Another promising area is Latin America, namely Argentina, Brazil, and Mexico. Their rates range from $30 to $50 and can offer advanced solutions. Technical specialists located in Vietnam and India provide similar rates, from $25 to $50 per hour.

When choosing skilled developers, make sure they can converse in English (if this fits for you) to ensure effortless communication and avoid misunderstandings. Cultural compatibility also plays a major role in the success of the collaboration. Choose an outsourcing partner who is in tune with your way of working and shares your values.

Step-by-step Guide to Outsourcing Product Development

How can you ensure smooth collaboration between you and your software development partner? Follow the steps below to ensure smooth collaboration from day one.

Outsourced Product Development

Find the Right Vendor

Unsurprisingly, the first step is to choose a mobile app development company or web development agency that you can entrust with your project. Make sure your future IT partner has sufficient expertise in your specific niche and offers excellent technical prowess. Research their online presence to read client reviews and gain an understanding of their mode of work.

You should also visit their homepage to familiarize yourself with their portfolio to determine whether they are the right fit. Finally, set up a meeting to discuss your business idea and check how well you understand each other.

Here’s a checklist that will help you evaluate the potential development company partner:

  • Technical skills: Is their knowledge and experience enough to build your solution?
  • Communication skills: Do they take long to reply to your emails and calls? If not, do they mention a timeframe when they will get back to you?
  • Intellectual property and data protection: Are they a reliable partner who prioritizes the safety and confidentiality of your information?
  • Budget: Can they deliver the solutions within your budget constraints?
  • Portfolio: Do they have a range of cases that prove their expertise in your industry?

Convey Your Idea

Devote your time to conveying your vision to the product development company to help them identify software specifications and human resources required for the project. Share as many details as you can and discuss the nuances to make sure you’re both on the same page before the project starts.

Choose the Outsourcing Model

There are three common models of cooperation that outsourced product development provides.

Fixed Price

The Fixed Price model refers to a predefined scope and budget that doesn’t change throughout the project. Although a cost-saving approach, this outsourcing model doesn’t leave any room for modifications which can be detrimental for a long-term project.

Time and Material

Another IT engagement model is Time and Material that does allow the budget to fluctuate enabling more changes on the go.

Dedicated Team

Lastly, the Dedicated Team model is an approach whereby one or several vendor employees temporarily join your team to complete a certain task. This method is perfect for longer software projects that require more technical expertise and know-how.

Establish Communication Channels

Communication is the absolute key to a fruitful software development process. Methodologies like Agile Scrum and tools like Jira are specifically designed to aid remote developers in constantly staying in touch. Other means of communication include regular calls, video chats, and in-person meetings if possible.

Another point of contention is time zones, which can significantly complicate the collaboration process. As opposed to an in-house team that always operates in the same time zone, your outsourcing company colleagues may be hours ahead or behind. However, it can also be an advantage of sorts: while your remote developers run tests, you rest.

Sign the Contract

The service agreement should include clauses concerning the deliverables, vital KPIs, security measures, intellectual property protection, and more. Before launching the outsourcing product development process, formulating an exhaustive contract is paramount for smooth cooperation. Additionally, prepare a non-disclosure agreement (NDA) to protect your confidential information.

Trial Run

This step is optional and depends on the software development vendor. If the outsourcing company is willing to offer a trial period, do not pass on this opportunity. A trial run will help you get a feeling of how the agency operates, how well they communicate, and how professional their services are.

A product development project can take months and sometimes years to complete, which is why having a shorter trial can be a great test for both you and the outsourcing product development firm.

Product Launch

The first version of the application is commonly called an MVP, or Minimum Viable Product. It contains only the essential functions that are enough to solve the main customer need. This simplified version can help you gauge how well the application is received on the market and gather feedback to make further improvements.

Continuous Support

Even after a successful launch, the outsourcing product development collaboration continues. Releasing new features, fixing bugs, enhancing user experience, and other tasks will inevitably emerge, and your trustful partner should be there to handle them.

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Final Thoughts

Outsourced product development is a lifesaver for companies that lack the skills and resources to single-handedly execute a software development project. This service allows non-technical organizations to create software solutions and achieve their business goals without going through the hiring process.

If you’re interested in outsourcing product development, get in touch with NIX. We’re a team of software engineers with experience across sectors and technologies. Our rich portfolio contains previous projects of various magnitude, complexity, and specificity. Reach out to us to discuss your idea and build a tech solution that helps you thrive.

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