The Startup's Guide to Outsourced Product Development

The Startup's Guide to Outsourced Product Development

Quick Summary: Outsourcing product development is often known as a boon for startups. Discover the advantages it brings, the best practices for successful software product outsourcing, and the pitfalls to avoid.


In the dynamic landscape of modern business, startups must maintain a competitive edge by crafting groundbreaking software product development that aligns with customer expectations. And that is why the need for high-quality IT services is at its peak. 

Do you know?

A report indicates that 74% of businesses are currently outsourcing IT services, and a substantial 87% plan to sustain or augment their reliance on IT outsourcing; collaborating with remote product development teams is not just a passing trend or a prospect but an existing reality.

According to GlobeNewswire, the outsourced product development market is projected to reach a value of $425.19 billion by 2026. With increasing numbers of companies opting to fully outsource product life cycles or specific functions, outsourcing product development has become a prevalent practice, particularly within the tech industry. Well-recognized global product companies like Skype, Opera, and WhatsApp have achieved significant success through product development outsourcing.

Recent research indicates that the business process outsourcing market is projected to undergo a robust growth of 8.9% from 2023 to 2030.

Key Takeaways
  • Outsourced Product Development requires accurately defining the scope of work, clearly specifying the requirements and expectations, and sharing a plan of action with the outsourcing team to ensure everyone is on the right path and on the same page.
  • Outsourcing product development significantly saves time by entrusting the core responsibilities of the process to an experienced team, eliminating the need for direct management.
  • Outsourcing Product Development utilizing the Agile model accelerates the process, significantly reducing time to market.

These statistics are not enough to share the importance of outsourced software product development services. There’s a lot more to it. But before that, let us learn about outsourced product development, how it is beneficial to businesses, and everything else you need to know about it.

What is Outsourced Product Development?

Outsourced product development involves enlisting an external company to create your startup's new product or software. This process entails entrusting the product's design, development, testing, and implementation to a specialized third-party vendor in product development.

When contemplating outsourcing your product development, external developers can assist in pinpointing fresh technological solutions and expediting the development process at a reduced expense.

However, while counting on outsourced product development, a multitude of questions may arise:

  1. When should you consider outsourcing product development?
  2. Is it suitable for your business?
  3. What are the expenses associated with outsourcing product development?
  4. What sets in-house development apart from outsourcing software development?
  5. What criteria should you use to select a product development outsourcing company?

And many more! If you are also looking for answers to these questions, you have come to the right place. This blog will provide you with complete insights about it. Let's begin with its benefits first.

Benefits of Product Development Outsourcing for Startups?

The benefits of choosing to outsource product development are manifold. However, a few of them include:



Access to Expertise

Gain access to specialized skills and knowledge from experienced professionals in product development.

Cost Efficiency

Reduce operational costs by leveraging external teams often located in regions with lower labor and overhead expenses.

Accelerated Time-to-Market

Expedite the product development process through an external team's dedicated resources and expertise.

Focus on Core Competencies

Allow the startup to concentrate on core business functions while delegating product development to experts.

Flexibility and Scalability

Easily adjust team size and resources to adapt to changing project requirements and scale as the startup grows.

Risk Mitigation

Share project risks with the outsourced partner, drawing on their experience in handling challenges and mitigating obstacles.

Global Talent Access

Access a diverse talent pool, potentially leading to innovative and high-quality product outcomes from professionals worldwide.

Expanded Network and Resources

Leverage the partner's network and resources, which may include technology access, tools, and industry connections.

Enhanced Focus on Innovation

Allocate more time and resources to innovation and ideation while entrusting technical development to external experts.

Reduced Time-to-Market

Capitalize on the outsourced team's expertise and streamlined processes to bring products to market faster for a competitive edge.

Control of your app development

Engaging in outsourced product development may lead to concerns regarding the level of control startups maintain over the development process. However, opting for a trustworthy outsourcing company can effectively address and mitigate these apprehensions.


One of the most substantial benefits of outsourcing software product development is its cost-effectiveness. 

As per Deloitte's research, startups opt for outsourced product development due to its cost-effectiveness and the substantial time, resources, and expertise required to create a product that aligns with customer requirements and stands out in the market.


The above graph clearly represents the cost reduction parameter percentage attained due to software product development outsourcing. But how to know what kind of services can be outsourced in product development? Check out the next section to know about it.

What can you outsource in Product Development?

Launching a startup is itself challenging; that is why people often count on outsourcing. They benefit from various services to be outsourced while launching startups. However, when talking specifically about Product Development, things turn out to be challenging as you don't know what services can be outsourced. 

Startups and tech companies often hassle with deciding whether to outsource the development of an MVP, MMP, or any other type of minimum viable product. 

Outsourcing can be a viable approach from end-to-end product development to various stages like MVP, MMP, EVP, and beyond.

Do you have a product concept in mind? Are you eager to refine it and dive into development?

The optimal starting point is to establish a development roadmap. Organizations utilize this to streamline the process, save time and costs, and create an effective product that meets client demands and expectations.

  • Outsourced End-to-End Product Engineering 

The outsourcing landscape for product engineering has evolved, with service providers becoming highly specialized in specific phases of the product development lifecycle. Outsourcing the entire end-to-end development process can yield greater benefits and profitability for your business. This approach allows you to automate procedures while maintaining focus on core operations.

  • Holistic Product Management 

The shift towards customer-centric digital technologies has redefined how businesses operate in global markets, enabling them to craft innovative solutions that enhance their future business growth. By expanding your product team, you can maintain a competitive edge, enabling you to become more technologically efficient and performance-driven.

  • Revamping Your Current Applications 

Ensuring top-notch code quality is crucial for meeting user expectations and giving your applications a fresh look. This is why code refactoring constitutes a valuable, long-term investment in outsourced product development. It will yield an optimized product, empowering you to reach your business objectives and maintain a competitive edge.

  • Expanding via Product Architecture

Employing product engineers empowers companies to quickly scale up or down to their projects' requirements and volumes. This allows for an agile response to any unforeseen challenges brought about by economic shifts. Coupled with skilled product engineers and advanced technology, this leads to a shorter time-to-market for your product.

  • Crafting Intricate Web Applications 

Outsourcing product development empowers companies to tackle the intricate tasks of web and mobile application development while maintaining the desired control over the project/projects.

How to Outsource Product Development (step-by-step process)

  • Establish Project Scope and Objectives

Outline your product's aims, features, and prerequisites to facilitate clear communication with potential outsourcing collaborators.

  • Identify Appropriate Outsourcing Models

Decide whether a dedicated team, a fixed-price project, or a time and materials engagement model best aligns with the nature and scale of your project.

  • Research and Narrow Down Prospective Collaborators 

Perform comprehensive analysis to pinpoint potential outsourcing partners possessing relevant expertise and a well-established track record. Consider factors such as reputation, portfolio, client feedback, and cultural alignment.

  • Assess Proposals and Conduct Interviews 

Solicit comprehensive proposals from your shortlisted partners and assess them based on technical proficiency, project methodology, and cost criteria. Additionally, conduct interviews to gauge their communication skills and cultural compatibility.

  • Set Up Transparent Communication Channels 

Create efficient communication channels to guarantee regular updates and open collaboration between your team and the outsourced team.

  • Create Thorough Contracts 

Outline project milestones, deliverables, timelines, and ownership rights in a comprehensive contract to safeguard the interests of both parties.

  • Commence Development and Project Oversight

Initiate the development phase, maintaining consistent oversight, feedback loops, and progress tracking. Employ project management tools and methodologies to facilitate seamless coordination.

  • Enforce Quality Assurance and Testing

Institute rigorous quality assurance procedures to verify the product's functionality, performance, and security. Conduct comprehensive testing at different stages of the development process.

  • Deploy the Initial Version of the Product 

This initial version could be a basic prototype or even a white-label rendition of your product. Launching the MVP is essential if you aim to generate revenue, as it provides invaluable feedback on areas for improvement and enables potential customers to understand the value they're investing in.

  • Continuous Assistance 

Post-launch, ongoing support is vital. This includes having a team on standby for website or app issues like bugs, extensions, or quality assurance. Some companies switch to cost-effective developers for this phase, a decision to be carefully considered and documented in the contract with your vendor.

Factors to consider when deciding on technology for product development outsourcing

When developing a product, selecting the appropriate technology is paramount to its success. This necessitates startups to initially possess a comprehensive grasp of the presently popular technologies, assess them in relation to the product they intend to create, and subsequently opt for the one that most closely aligns with their product specifications. Here are some key factors to contemplate when determining the technology for the product:

  • A thorough comprehension of the product roadmap is equally crucial when making a technology decision. Assessing factors such as the product's scalability and the ease of incorporating new features significantly influences the choice of technology.
  • Technology selection is heavily contingent on both the business context and the industry for which the product is being developed. It must align with the specific business requirements the startup aims to address.
  • Choosing a technology that seamlessly integrates with other systems is also crucial. A technology that facilitates add-ons and plugins ensures that new requirements can be effortlessly accommodated.
  • Deciding whether the startup will utilize open-source or proprietary tools is a significant factor to ponder. Open-source tools are cost-free and often have a sizable online community, while proprietary tools typically provide enhanced security and support.
  • For startups embarking on their journey with ambitious goals and limited resources, selecting a technology that is both future-ready and cost-effective is crucial. Being mindful of current trends and capabilities greatly influences this decision. Opting for a popular technology that excites customers can increase satisfaction.

Why Outsource Product Development to India?

India stands at the forefront of the global outsourcing industry. It has remained the favored outsourcing destination for numerous Western countries for over twenty years. Opting for India as your outsourcing partner brings forth several advantages, some of which are:

  • Friendly Policies 

India has introduced a series of favorable policies towards the IT industry. The Indian government has put in place various measures to support the Information technology-enabled services of the country, solidifying Outsourcing in India as a prominent option.

  • Abundant Talent Pool 

In 2022 alone, India graduated 1 million engineering students and 300,000 postgraduates. With such a vast reservoir of skilled and proficient professionals, India has the capability to accommodate a substantial number of product development projects.

Moreover, India boasts a dynamic and eager workforce, with over 50% of its population under 25. This translates to a rich reserve of young and proficient engineers for the product development industry.

  • Smooth Communication 

Communication between the product owner and the client is vital to the product development life cycle. Language barriers can pose a considerable challenge in outsourced software product development, impacting the effectiveness of owner-developer interactions.

Fortunately, with 125 million English speakers in India, concerns about communication hindrances due to language barriers are alleviated.

  • Cost Effective  

Opting for product development outsourcing in India proves to be a cost-effective choice. With a substantial number of engineers in product development firms, India provides a competitive landscape for CTOs and entrepreneurs.

For instance, the expense of hiring product developers is notably lower compared to Western countries. In the US, hiring a product developer can range from $70 to $150 per hour and, in some cases, even up to $250 to $459 per hour. On the other hand, in India, this cost is as low as $15 to $40 per hour. 

  • Quick Time-to-Market

Collaborating with experienced engineers ensures timely product deployment and the fastest time-to-market. Say goodbye to delays in meeting deadlines and delivering products on schedule.

  • Proficient in Cutting-Edge Technologies 

Despite being a developing nation in product and software development, India stands as a formidable contender. An abundance of skilled young engineers and top-notch technology and infrastructure solidify India's position as a preferred destination for outsourcing product development solutions.

  • 24/7 Availability and Expedited Delivery 

If you have concerns about time zone differences while outsourcing to India, it's worth noting that Indian developers address this challenge by offering round-the-clock service. This continuous development approach not only boosts productivity but also guarantees timely delivery.

How to choose an outsourced product development company?

Selecting the right outsourced product development company is crucial for your business, as a well-chosen partner can turn your product vision into reality. Follow a systematic process to evaluate and align with your business goals and requirements.

Below are steps to guide you in finding the right IT Outsourcing Partner that will help you make an informed decision:

  • Specify Your Needs: Define your project's objectives, scope, and specific demands. Define what you anticipate from the outsourced team, encompassing technical proficiency, domain expertise, and project management skills.
  • Explore Potential Collaborators: Investigate organizations with a proven history of successful product development endeavors. Consider checking out industry background, portfolio, client endorsements, and case studies.
  • Evaluate Technical Proficiency: Verify that the company possesses the necessary technical skills and expertise pertinent to your project. Scrutinize their mastery of programming languages, frameworks, and technologies associated with your product.
  • Verify Industry Expertise: Specialized knowledge within your industry holds immense value. Seek out companies with experience in your specific domain or a related field. This can result in deeper insights and a customized approach to your project.
  • Assess Communication Proficiency: Verify that the company's team members can communicate adeptly in your preferred language and that there are established channels for regular updates.
  • Examine Previous Projects and Client Feedback: Request case studies or client references. This offers valuable insights into the company's capabilities, work quality, and client satisfaction.
  • Take Cultural Compatibility into Account: Recognize that cultural disparities affect collaboration and comprehension. Opt for a company whose work culture aligns with your own and can adjust to your work methodologies and practices.
  • Assess Project Management and Processes: A well-structured project management approach ensures punctual and efficient delivery. Gain insight into the company's project management practices, encompassing methodologies, tools, and reporting. 
  • Engage in a Data Security Discussion: Clearly outline how data security will be managed. Guarantee the safeguarding of your ideas and sensitive information throughout the development process.
  • Consider Scalability: Verify the company's ability to adjust resources according to your project's needs. This is crucial if the project scope evolves.
  • Look into Pricing and Contract Terms: Clearly define pricing structures, payment terms, and supplementary expenses. Focus on the flexibility and transparency of the pricing model.
  • Begin with a Small-Scale Project: Last but not least, consider beginning the partnership with a smaller, less pivotal project. This allows for assessing the company's performance and compatibility with your team.

Mistakes to avoid when outsourcing product development

Despite careful attention to detail, businesses might overlook certain aspects during IT project outsourcing. To avoid such scenarios, it's imperative to verify the following points.





What to do?


Unclear and Incomplete Software Requirements


Make sure to have a comprehensive understanding of the detailed scope of work, covering everything from the project's primary objectives to specific tasks that need attention.



Understanding the Development Cost


Request a comprehensive quotation from your product development partner. Additionally, explore the availability of similar services globally to ensure an accurate cost estimation.



Lack of a Defined Project Plan


Ensure both you and the outsourced team possess a well-defined project plan, ensuring everyone is aligned to complete their tasks on time. This not only minimizes miscommunication but also prevents potential frustrations along the way.



Absence of a Clear Communication Process


Establish transparent communication, actively share your thoughts and listen attentively to feedback.



Unfamiliarity with the Latest Technologies in Product Development


Engage in open communication with your remote team regarding the methodologies employed in your software development. Seek input from your outsourcing partner on their preferred development approaches and options.



How YTII can be your Outsourced Product Development Partner?

Startups venturing into the job market often encounter a range of challenges, from a lack of prior product development experience to limited domain-specific knowledge and budget constraints. Establishing a product-based business from the ground up is no easy feat, but startups can attain their objectives with strategic planning and the right support.

Your Team in India facilitates businesses to align their product development objectives, ensuring they stay at the forefront of their industry with a curated team of experienced professionals.

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Amit Dua

Amit Dua

Amit Dua is the Co-Founder of Signity Solutions and Your Team In India. A tech-evangelist, he has an uncanny ability to synergize and build associations, thriving teams, and reputable clients. He has 17+ years of experience in technologies such as Big Data, AI, Business Automation and more.