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Software Outsource vs Product Development: How to select the right collaboration model


6 min read

When it comes to creating an application, businesses have two main options: software outsourcing and product development. Software outsourcing is a popular choice for companies looking to reduce costs and access specialized expertise without building an in-house team. This option works well when the project has clear specifications and requires temporary resources to handle specific tasks. For example, startups might outsource initial development to quickly launch their app and save on overhead costs.

On the other hand, product development offers a comprehensive solution for launching a new product. It covers the entire development lifecycle, from ideation to manufacturing and market launch. This approach is suitable when a company has a concept for a new product and wants a fast launch but lacks the resources or expertise to handle everything in-house. It allows businesses to focus on strategic business goals and marketing strategies while leaving product development to external experts.

Choosing between the two depends on project complexity, budget, timeline, and in-house capabilities. Software outsourcing companies have a great approach to well-defined projects with specified scopes and technologies. At the same time, product development is beneficial for end-to-end development when you have an idea but don’t have deep technical knowledge about how it should be built. The final decision should be based on the company’s specific needs and goals, making it crucial to evaluate the project’s scope and available resources before choosing. In this article, we will compare the two service types to assist you in selecting the optimal solution.

Comparing Outsourcing Models: Software Outsourcing vs Product Development

In the software industry, two different collaboration models are used: software outsourcing services and product development outsourcing. 

So, let’s examine the main differences to distinguish between software product development and outsourced projects.

Software outsourcing means hiring a team of experts from another company to provide you with software development projects, features, or specific tasks. 

For example, if your company needs a mobile app, has a clear scope of work and feature list, and prefers certain technologies, you can hire a team of experts with the required skills. 

Product development provides turn-key solutions from an expert team without the hassle of managing the development team or technical requirements. It helps to handle everything from ideas to working products.

For example, if you have an idea for an innovative solution, you want to launch it right away, and you don’t have enough in-house expertise, you can hire a product development company to help you. It will add expertise and knowledge on making products, so you can shape the idea to the point where the market needs it. In the product development model team can l also help form a parable scope for the MVP or PoC launch so you can have a revenue stream and then continue improving the product after its launch. 

Everyone can find its outsourcing model. Fintech software outsourcing could be ideal if your internal team lacks the necessary expertise or resources. 

When comparing software outsourcing and product development, the main distinction lies in the level of accountability and expertise that the team can offer you. In software outsourcing, the customer is accountable for the final product, and the team is responsible for the quality of particular tasks. So here, the client is the one who should manage requirements and make sure that team understands what needs to be done. On the other hand, in product development outsourcing, an external team manages the entire end-to-end process and is accountable for the product’s quality.

Here are the main differences between those models.

Outsourcing versus product development cooperation models

When considering software development outsourcing services versus product development for your product, it’s essential to assess the pros and cons based on your specific requirements and project specifications. Take the time to carefully analyze your needs, select an appropriate cooperation model, and choose a suitable software development company.

No matter what collaboration model you choose, finding the right partner is important. Look up how to select the right outsourcing company

Key Factors for Selecting the Right Outsourcing Model

Selecting the right outsourcing model involves carefully considering several significant factors. Among them are accountability, experience, budgetary constraints, time, and effort. Let’s take a more detailed look at all of them. 

Accountability of each party involved is a crucial metric for businesses. In software outsourcing, the vendor is fully responsible for task quality performance and outcomes. Meanwhile, accountability for the final product’s success is on the client demanding ownership of every decision, action, and result they deliver. The outsourced team requires decisions, confirmation, and detailed requirements from the client to deliver quality results. While in product development, accountability for the quality of the final product lies on the contractor, meanwhile, the client is accountable for setting business goals and objectives. means the vendor gets a comprehensive product development process without giving tasks and controlling the whole process. 

Experience is crucial in launching any new product. The main question you should ask yourself is, “Did I do it before?”. If you have a similar experience, you can hire an outsourcing team and guide them through the process as you see fit. But if you’re trying something new, expert input from people who have already done it would be a real lifesaver. Hidden threats exist in any field, so if you find a partner with relevant expertise, who has built similar products before, and has insights from the field and the industry, you can save yourself tons of time and money with valuable expert tips.  

Budgetary constraints and the cost implications of each option. Software outsourcing may be cost-effective short term for specific tasks or projects. In contrast, product development may involve higher upfront costs but could save time and money in the future on expert-shaped requirements and planning.  

Amount of time and effort your company can allocate to managing external teams. Software outsourcing typically requires more hands-on management, giving tasks and requirements and controlling the achieved results. In contrast, product development outsourcing demands less involvement in the development process and requirement management.

Factors to choose a cooperation model

By carefully assessing these factors, you can make an informed decision. It’s important to find a partner with the right expertise, effective communication, cultural compatibility, robust data security measures, and cost-effectiveness to ensure the success of your software development projects. It is a big part of avoiding common outsourcing failures

Why choose product development?

The services offered by a software development company are undeniably more comprehensive and add significant value for the client. Now, let’s delve into the specific advantages this brings.

  1. Business Orientation means that Product Development’s main focus is business goal achievement. All development process is aligned with a company’s overall business objectives. It goes beyond simply creating a product to meet market demands and involves considering the financial aspects and profitability potential of the product and strategic planning.
  2. Accountability for the final result is about taking ownership, being responsible for the process, and actively working towards achieving the desired outcome. While choosing a product development vendor puts the whole responsibility on the product manager to deliver a product that fits all business needs. It is a fundamental aspect of a productive and efficient working environment.
  3. Expertise in dealing with the same problems guarantees avoiding beginners’ mistakes and saves time and money in the long run. Experienced contractors help set measurable goals, devise strategies based on your market and audience, and help to validate ideas before development, providing continuous oversight of your product’s growth.
  4. Flexibility and adaptability in approach and skill set. In choosing a product development contractor, you don’t just hire specific developers but get a solution for your problem, which would be adjusted as your goals evolve.
  5. Flexibility. Product development companies understand the need for change. They adapt their approach to change, employ cost-effective techniques to validate ideas, and utilize minimum viable products (MVPs) to understand customer needs, help pivot your product in time, and ultimately reduce the risk of market failure. Active involvement in the development process, including strategy preparation, prototype testing, and final evaluation, allows for a product that better meets customer requirements.

Final Thoughts

I understand that outsourcing a software project can initially be daunting, particularly if you require more knowledge and experience to identify and choose the right developer for your needs.

Choosing the appropriate software and product destination requires thoughtful consideration of various factors. Each destination presents unique advantages and potential risks. Suppose your company is considering outsourcing product development services. In that case, it is crucial to thoroughly understand the implications of your project, assess the benefits and drawbacks, and then make an informed decision.

When considering outsourcing product development services, Dashdevs can offer product development services with profound expertise in Fintech. You can look through our cases to understand what types of products we have already built. 

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