Outsourcing Software Development for Startups [2024 Guide]

Arshpreet Kaur
Listen to this Guide

Table of Contents

Table of Contents

We often think of large, established enterprises working with outsourcing companies to extend the work of their in-house teams, but many great companies worked with outsourcing teams during their startup phase as well.

Companies like Google, WhatsApp, Slack, and GitHub relied on IT outsourcing in the early stages of their development when hiring an extensive in-house development team would have chewed up too much of their seed money.

If you’re a startup founder or early employee looking into outsourcing services, read on to learn about the benefits and challenges associated with outsourcing and tips on finding the right outsourcing partner.

10 Key Benefits of Outsourcing Software Development for Startups

Startups face unique challenges, not the least of which is staying ahead of their burn rate long enough to make it to their next round of funding or turning enough of a profit to keep themselves afloat.

10 Key Benefits of Outsourcing Software Development for Startups

Outsourcing can provide startups the flexibility to launch their Minimum Viable Product (MVP), gather feedback, and scale strategically. With this in mind, here are 10 core benefits of hiring an outsourcing partner as a startup.

  • Efficiency

    Efficiency is key in the early stages of a startup when funds are limited, and entrepreneurs need to move quickly to bring their MVP to market.

    Working with a dedicated team at an outsourcing company can speed up the time to market for each version of your software, assuming you work with a provider that uses a strategic methodology like Agile and has their development process down to a science.

    Even if you or one of your cofounders has a strong background in app development, working with an external team of developers allows entrepreneurs to focus on the larger strategy. Meanwhile, its external software development team can leverage its core competencies to expedite each version’s release and push the business forward.

  • Cost cutting

    Hiring a qualified software development company is almost always more cost-effective than hiring an in-house team, especially in the early stages when funds are limited, and work is variable.

    What makes outsourcing custom software development more cost-effective than hiring full-time software engineers?

    • Offshore teams are less expensive due to the lower cost of labor in countries like India and Ukraine
    • Employees come with hidden costs, such as payroll taxes, benefits, onboarding costs, etc.
    • Work ebbs and flows in the initial phases of a startup, but you still have to pay in-house employees, even when they’re sitting on the bench waiting for work

    Cost savings is one of the major advantages of outsourcing, especially for early-stage startups with limited funds.

  • Adaptability

    Anyone who has worked for a new business knows that startup life is crazy. Nobody knows how the market will shift at any given moment or what your target audience will demand.

    One reason startups outsource software development is that outsourcing offers the flexibility and scalability to adapt to changing conditions. If your software development project expands overnight, you can simply contact your project managers and see about adding more team members to address the crunch.

    When work slows between releases, tech startups can reduce the number of outsourced team members working on the project based on their needs. This would be impossible when working with an in-house team.

  • Well-defined approach

    Experienced software development firms with years of experience and case studies that point to satisfied clients will have a fine-tuned approach to product development.

    Taking a DevOps and Agile approach to UX Design, development, and Quality Assurance (QA), experienced teams can produce high-quality software that meets your specifications. You should meet with your project managers regularly so they can adjust their approach based on your feedback and core business needs.

    There’s no substitute for experience, so before hiring any outsourcing partner, ensure they have a track record of delivering quality software for their clients.

  • Technological advancement

    As a startup, you may not have access to all the technology you’d like to purchase down the line. Fortunately, when you work with an outsourcing partner, they often possess an array of technology (e.g., automation tools, testing tools) that you’ll need.

    With diverse talent and expertise with various tech stacks, outsourcing can push your company forward, introducing you to new systems and techniques to help you remain lean and competitive throughout your startup phase.

  • Innovative ideas

    Software development doesn’t take place in a vacuum, and even the most innovative founders can benefit from the feedback of designers, project managers, and developers from outside their small businesses.

    The best outsourcing firms offer more than software development services—they’re strategic partners willing to think outside the box and consider the big picture.

    Before hiring someone, look at their reviews on websites like Clutch.co to see what their clients say about them. Are they simple order-takers? Or do they bring fresh ideas to the table and treat software development like the iterative process it was always meant to be?

  • Risk mitigation surrounding the hiring process

    Hiring internally comes with risks you won’t experience when working with an external team. After all, when you hire internal staff, it can be difficult to fire the underperformers without going through a complex process to prove just cause. This is especially true in many European countries, but it can also be a hassle in the United States and Canada.

    When working with a reputable outsourcing partner, you can easily ask to replace a dedicated team member with a better fit. Drawing from their vast talent pool, an established outsourcing company can typically find a better candidate for you overnight.

  • Work precision

    Outsourcing partners that have stood the test of time have typically done so by hiring the best talent in their region.

    Again, if a given developer or designer’s work is sub-par, you can ask your partner to assign someone new to the project. However, if you work with a talented team with plenty of positive reviews and testimonials, you’ll unlikely face this problem.

    After all, outsourcing partners hire so many developers regularly that they’ve got hiring down to a science, and they quickly weed out the unimpressive candidates. This results in precise, accurate code that will serve your startup well.

  • Company expansion

    Working with an outsourcing partner makes scaling much easier since you don’t have to interview, hire, and onboard new team members each time your team needs to grow.

    Let’s face it, the goal of any startup is to grow into a successful, profitable business, and removing the extra costs, hassle, and time it takes to recruit and hire new candidates offers a powerful benefit.

    Not only does it allow you to focus on the overall business strategy, but you’re not forced to cut staff when business slows. This protects company morale and lets your core team remain excited as they navigate the adventure of growing a startup.

  • Appeal to a diverse market

    There is tremendous strength in diversity, and working with outsourcing partners in other parts of the world gives you access to diverse perspectives that will help you appeal to a range of potential customers.

    This can be especially helpful for companies creating software products with no borders. Software products like WhatsApp and Google Maps appeal to customers from Miami to Madagascar, and having an international perspective regarding design and development will help you appeal to diverse markets across the globe.

    For all these reasons, startups worldwide adopt various outsourcing models to support their efforts, from full-service outsourcing to staff augmentation.

Main Staffing Challenges that Startups Face and How Outsourcing Can Help You Overcome Them

Staffing an IT department at a startup comes with several potential challenges, from securing the best talent to avoiding running your team ragged. Working with an experienced outsourcing firm can help address the four common issues outlined below.

 How Outsourcing Can Help You Overcome Them
  • Workplace fatigue

    Startup life is rewarding but challenging, and in-house design and development teams can easily become exhausted from working long hours. When you’ve got a small team of talent trying to handle everything that comes their way, they can end up exhausted and burned out.

    Using an outsourcing staff augmentation model to support an in-house team can take some pressure off your core talent, leaving them excited and energized to produce excellent work. They’ll also be able to produce at a higher level when refreshed, and your outsourced team can offer them the necessary relief.

  • Major firms secure the best talent

    One challenge startups face is that experienced, older developers are often drawn to the pay and benefits offered by established companies.

    Undoubtedly, there are skilled developers who take jobs at startups, but many mid-to-high-level developers aren’t as attracted to the high-risk/high-reward world of startups and stock options. Perhaps they were in their younger years, but with families and mortgages, many go with the safer option.

    Working with an outsourcing partner is a great way to introduce experienced developers to the mix. They can work alongside young, ambitious full-time hires, and you can fuse the energy and experience of both parties.

  • Extended recruitment process

    Recruiting, hiring, onboarding, and training take a great deal of time—and time is a luxury that startups don’t have!

    When you work with an outsourcing firm, your partners have already done that work upfront, and you can quickly tap into their talent pool and the wide skill set their employees bring to the table.

    As mentioned above, if things aren’t working with specific team members, you can easily have your partner swap them out with other candidates. This is much easier than going through the long process of writing up a problem employee, coaching them, hoping they improve, and firing them if they don’t meet expectations.

  • Unattainable objectives

    Start-ups are ambitious by nature, but some first-time leaders can be tempted to set unrealistic objectives, which can kill a startup's morale. It’s great to stretch yourself and your team, but it’s equally important to identify tangible limitations.

    Experienced project managers at established outsourcing firms have done so many projects that they’ll have a very clear idea of what is realistic, and they can add staff to speed up the process if your budget allows.

How can a Startup Choose the Right Outsourcing Partner?

If you’re considering working with an outsourcing firm, you may wonder how to choose a qualified partner.

It’s important to carefully vet potential partners to avoid common outsourcing challenges. The following four factors are important to consider when evaluating prospective vendors.

Factor 1: Language and cultural fit

Working with an offshore or nearshore partner may present some challenges if the team doesn’t speak English (or your operating language) fluently or if they don’t understand your culture.

You can help ensure clear communication by having extensive conversations with potential vendors and reviewing the content on their websites. Many firms post content in broken English, and that’s clearly a bad fit for an English-speaking company.

Factor 2: Years of Experience

There’s no substitute for experience. If an outsourcing firm has been in business for 10+ years, they clearly deliver on their promises. Otherwise, they would have gone out of business a long time ago.

Factor 3: Satisfied clients

Successful outsourcing firms will have solid reviews on websites like Clutch.co, and their website will feature case studies with client testimonials. If they didn’t produce quality products, follow proper cybersecurity guidelines, and protect their client’s intellectual property, they wouldn’t have strong testimonials from different clients.

Factor 4: Time Zone Flexibility

Time Zone differences can sometimes work to your advantage, assuming you’re looking for round-the-clock production and hiring a firm on the other side of the world.

If you need a firm that will adapt to your time zone, ask upfront if possible. At Net Solutions, we’re happy to adapt to our clients’ needs, but not everyone is willing.

Looking for an outsourcing partner to power your startup?

Net Solutions is an outsourcing firm that has been helping startups (as well as large enterprises) produce quality software at a reasonable price—for more than 20 years!

Look at our wide array of case studies to learn more about our satisfied clients, and contact us to explore how we can help your startup achieve its goals. We’re on top of all the latest software development and outsourcing trends, and we’ll help you build a strategy to set you up for success.

Arshpreet Kaur
Written by

Arshpreet Kaur

Arshpreet Kaur is a Lead Business Analyst passionate about resource management and in-depth, data-driven competition analysis. She is a highly motivated and results-oriented individual with a proven track record of increasing team productivity.

Arshpreet’s well-rounded knowledge of engineering concepts and a certification as a Scrum Product Owner helps her handle multiple projects effectively while defining the product vision and delivering value to customers.

contact us