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

When it comes to creating an application, businesses have two main options: software product outsourcing or product development services.

These models serve different purposes and are used on different types of projects.

Below, I provide detailed information about what product development outsourcing and software product development are and how they differ.

I also give clear recommendations on which model will suit you best.

What is outsourcing development?

Outsourcing development is a model in which you delegate certain software development work to a third-party software product development company.

Outsourcing development is often used to augment an in-house team. At the same time, it can act as a complete alternative to hiring an in-house development team.

Software product development outsourcing works well when the project has clear specifications and requires temporary resources to handle specific tasks. For example, startups might outsource initial development to launch their app quickly and save on overhead costs. Or companies may outsource the implementation of specific features, for example, creating an admin panel for a website or integrating card issuing providers into a fintech app.

Software outsourcing is a popular business collaboration model because it provides quick and cost-effective access to specialized development expertise.

What is software product development?

Software product development is a model in which you delegate the entire product development lifecycle to a third-party product development company.

Software product development services provide a comprehensive solution to launch a new product. They cover all aspects of product development software 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 while leaving product development to external experts.

By outsourcing product development you can free yourself from a lot of work associated with running the project. In addition to the fact that you do not need to directly engage in software development, you also do not need to hire staff, plan and distribute tasks, set up IT infrastructure, and check the quality of the written code. Additionally, product development companies usually undertake project management, so all you need to do is accept the work done and say if you are satisfied with it.

Comparing Outsourcing Models: Software Outsourcing vs Product Development

Choosing between outsource vs. product depends on project complexity, budget, timeline, and in-house capabilities. 

In a nutshell,

• Outsource development services are more suitable for well-defined projects with specified scopes and technologies. 
• Product development solutions are beneficial for end-to-end development when you have an idea but don’t have deep technical knowledge about how it should be built. 

Let’s explore the differences between software product development and outsourced projects using examples.

Example of project suitable for outsourcing development services

Imagine that you want to develop a mobile budgeting app. Your technical team has defined a scope of work and feature list and outlined the technologies to be used.

For example, the features to be implemented in a budgeting app:

• Expense tracking
• Budget categories 
• Finance goal setting
• Reporting and analytics
• Bill reminders
• Payment status update

Technologies to be used:

• Swift for iOS development and Kotlin for Android development
• Node.js for backend development
• SQLite for local storage on mobile devices
• Firebase for real-time database and backend as a service
• PostgreSQL/MySQL for relational database management
• Plaid for connecting to users’ bank accounts and fetching financial data
• Yodlee for financial data aggregation and analysis
• Stripe for handling payments and financial transactions
• AWS for hosting, storage, and other cloud computing needs

Having the technical documentation in place, you contact an outsourced product development team and explain to them what needs to be done. You can even make a direct request for the number of talents along with their expertise. For example, you can specify that you need a senior team of iOS developer, Android developer, backend developer, and DevOps to make a budgeting application according to your specifications within 8 months.

Example of project suitable for product development services

Imagine that you need to develop a banking application, but you don’t know what technologies to use, what experts to hire, and how to manage the product software development process.

In this case, it is better to partner with a product development firm which can undertake the entire product development cycle and suggest the most efficient ways for successful product launch.

You can compose a Request for Proposal (RFP) and send it to several product development companies. Once they send you their software proposal back, you can choose the most suitable partner that matches with your project needs.

When you partner with a software product development company that has expertise in your domain and track record of similar projects, you can count on a more efficient development solution.

For example, in the case of a banking application, the company may advise you to use a white label modular fintech solution instead of a custom development. This approach greatly reduces development time and cost. As a result, you will be able to quickly enter the market with a highly customized and secure banking application.

Apart from technical and business advice, the product development agency will

• gather the development team
• create a detailed development plan
• set up IT infrastructure
• design software product architecture
• create UI/UX design
• write code
• establish security measures
• test the app and ensure its quality
• deploy the app
• maintain and upgrade the app

Product development firms keep clients informed about all the steps in the software development process and timely react to their propositions and project changes.

Outsource vs. product: comparison table

When comparing software outsourcing and digital product development services, the main distinction lies in the level of accountability and industry knowledge 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 product vs. outsource:

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 outsourcing software for 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 product development firm with experience in the industry, you can save yourself tons of time and money leveraging its expertise.  

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.  

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 services demand less involvement in the development process and requirement management.

By carefully assessing these factors, you can make an informed decision. It’s important to find a product development company 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 Services?

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

Focus on business goals. In software product development, all project processes are 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.

Responsibility for the final result. Software product development company takes ownership and is responsible for the product development process. It actively works towards achieving the desired outcome. Choosing the right product development firm is a fundamental aspect of an efficient working environment.

Expertise in dealing with the same problems. The relevant expertise of the product development agency 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.

Flexibility and adaptability. Companies providing product development services can offer you deverse development approaches and a skill set required for your project. 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.

Change management. Product development companies understand the need for change. They adapt their approach to evolving requirements, employ cost-effective techniques to validate ideas, and utilize minimum viable products (MVPs) to understand customer needs. By using product design and development services, you can pivot your product in time, and ultimately reduce the risk of market failure. 

Final Thoughts

Implementing a software development project on your own can be a challenging task. As a business owner, you need to assemble an in-house team, select development technologies, and guide the software development process.

However, opting for software development outsourcing or product development services can greatly simplify your task. Both models ensure high quality development. With both models, you can easily hire the right talents and receive an optimal development plan.

The choice between a product company vs. outsourcing company must be guided by your project nature. For example, if you have clearly defined requirements, or your project is short-term, or you need to implement specific features, it is better to choose software development outsourcing. If you want to develop a new product, lack technical expertise, and don’t know where to start, product development services should be your choice.

At DashDevs, we work both on outsourcing and software product projects. We specialize in fintech, eCommerce, health, and hospitality apps. We also serve startups and established businesses.

Not sure which cooperation model is best for you? Don’t hesitate to contact us. We will hold an interview with you, gather project requirements, and provide you with a detailed project estimate. After that, you can decide on further cooperation.