The Pros and Cons of Outsourcing SaaS Development

SaaS product development is quite a choir. Not only are daily processes extremely arduous, but they also require a high level of acuity and precision. Small mistakes can push you several weeks back, putting extra pressure on the teams.

Because of that, software brands often outsource parts or whole projects to external providers and freelancers. SaaS outsourcing is fantastic for companies of all sizes, allowing them to delegate tasks and reduce micromanagement. This is especially true if your in-house team is green and uncoordinated.

In this article, we explain the term SaaS development outsourcing and all of its benefits and drawbacks. In the end, we'll also share a few tips for hiring an external software team.

What is outsourced SaaS development?

As the name implies, SaaS software development outsourcing is similar to any other business outsourcing. Basically, a client hires an external provider to help with their SaaS development.

During the length of the contract, the outsourcing partner can become a part of the client's team or can work independently from their office or home. Occasionally, the client might not even have an IT department, and they fully rely on a provider to deliver a SaaS product while they assume a managerial role. 

Regardless of its drawbacks, many companies still decide to outsource software development. With the right outscoring partner, the SaaS project can be extremely profitable and help scale the business much faster. This is especially true if the client company can’t handle a project of that size.

It’s worth noting that SaaS outsourcing is generally perceived as a bit more complex than other types of business outsourcing. The biggest issue is that SaaS product development requires enormous expertise, great planning, and adherence to tight schedules. If a provider fails at any of these, the entire project can be categorized as a failure.

SaaS development outsourcing models

Clients can choose several types of software outsourcing models, each with a set of pros and cons. Here's the most common classification:

• Full-time outsourcing
• Part-time outscoring
• Fixed price

Here’s what each of these approaches entails:

Full-time outsourcing

Otherwise known as having a dedicated team, full-time outsourcing has become the dominant model not only in the SaaS industry but also in other businesses. With this approach, you can significantly cut costs, including software and hardware expenditures, while reducing micromanagement.

Companies can outsource the entire process to a single vendor's team or create a dedicated in-house team comprising foreign, cheaper talent. Having a dedicated team is usually much better, as vendors tend to have higher prices.

Creating a dedicated outsourced team works similarly to having a domestic in-house team. The client company usually oversees recruiting of each team member, and they introduce them to internal processes. The only difference is that outsourced experts work online and usually from a different time zone.

Pros

• Much cheaper than having an in-office team
• Allows you to avoid domestic regulation, insurance, and tax obligations
• The lack of contracts makes it easier to part ways with employees
• Allows you to hire top-tier global talent at a low cost
• Long-term hiring helps you get price discounts compared to short-term outsourcing
• The team is dedicated to your company, so they're unlikely to bounce (unless they get a better, long-term offer)

Cons

• Team members are often from different time zones
• Less flexibility compared to part-time and fixed-price outsourcing
• It isn't ideal for short-term projects and projects with unique requirements

Part-time outsourcing

Unlike having a decided outsourced team, part-time outsourcing presumes short-term hiring. You might pay a freelancer for a certain project or a part of the project. Unlike dedicated teams, you don't have to micromanage them as much, and there is much less contact between the two sides.

Part-time outsourcing is the ideal solution for bottlenecks and when you're running late with a delivery. Also, you might use this model when you need a specific skill set that your regular employees don't have.

Pros

• Helps delegate duties
• Easier project management
• More flexibility when hiring and during other practices
• Spending according to current needs

Cons

• Onboarding can be a nuisance, especially if you have high requirements
• Coordination between teams can be arduous
• Heavy dependence on external teams for delivery
• Common risks related to outsourcing

Fixed price

Fixed price outsourcing is a type of part-time outsourcing where a client company signs a contract with a vendor for a specific service or SaaS feature. After a pre-specified period, the outsourced freelancer has to deliver that service in accordance with the client's requirements.

Pros

• Predictable pricing
• Reduced micromanagement
• Easier to meet the deadliness

Cons

• Technical aspects of the product are lacking
• Lack of control
• Other issues related to outsourcing

6 Benefits of outsourcing SaaS development

If we were to put the benefits and drawbacks of SaaS development side by side, the pros would always outweigh the cons. Despite certain risks, the approach has become popular because it provides increased efficiency while reducing management's involvement.

Keep in mind that some of these benefits might vary depending on the model you’re using.

1. Improving cost efficiency

In the majority of cases, SaaS outsourcing will be cheaper than managing an in-house team. In fact, the main reason why businesses started outscoring development in the first place was to hire cheaper foreign labor. Still, there are also cases where you can save money by forming an in-house team consisting of young professionals.

Hiring an outsourcing team is fantastic for small and large Western companies. As the cost of skilled labor is extremely expensive in these countries, you can always find cheaper alternatives abroad. Even better, when paying for offshore SaaS development, you don’t have to worry about insurance and pensions.

Outsourcing SaaS solutions is especially beneficial for clients who aren’t in the software business. In most cases, these companies act as investors and have little to no understanding of SaaS products. Whatever the case, they might not want to deal with the software side of things and want to prioritize other processes, such as marketing and sales.

In these cases, building an in-house team can be devastating for their budget.

2. Filling the staffing gaps

Hiring external professionals is excellent for filling the gaps on your «roster». For example, you might need a developer with a particular skill set that no one in your company possesses. They might have a keen understanding of a tool or programing language that you don’t otherwise use.

Hiring outside of the company is also great in case of sabbaticals, illnesses, or pregnancies. If you have a highly skilled professional on your team, and you don’t want to part ways with them, you can find a temporary replacement until they’re back.

Of course, there are also situations where you just need a «plus one» to meet the deadline. This professional might not be a part of your regular workforce but just a person you hire from time to time. Better yet, if you already have a designated freelancer for this spot, you won't have to hire new software experts over and over again.

3. Reducing tech costs

Another major benefit of outsourcing projects is that you don’t have to worry about software and hardware. External development teams usually have all the necessary tools to perform a certain role. In fact, they might even have several clients for which they perform the same task.

Managing software and hardware costs is vital for brands that don’t have in-house development. It usually doesn’t pay off to spend all this money on things they don’t otherwise need. So, outsourcing comes as a perfect solution where you only have to account for the price of labor.

4. Improving quality and delivery

The SaaS industry is one of the fastest-growing industries in the world, fueled by consumers' constant need to make their lives easier. Competing on the market requires incredible software development efforts but also great marketing and sales teams. In many cases, SaaS products fail because of the slow rollout, as their features are no longer suitable for the market.

Because of that, flexibility is considered one of the best qualities of SaaS brands. Outsourcing can bring extra agility to your development process, allowing you to hire freelancers for specific product features or to hasten the launch.

By adding experienced software engineers to your team, you can scale the process as much as you want. Even if you encounter bottlenecks, you can easily surpass them with top-tier talent. All of this will result in higher-quality SaaS products, which will allow you to compete in the market.

5. Delegating tasks

One of the reasons why outsourcing is so efficient is because it allows you to delegate tasks. Management teams can focus on your core business instead of having to control every small process and delivery. Although this doesn’t mean you’ll never communicate with an external team, you'll do it less often.

Most notably, you can transfer difficult tasks to outsourced experts who aren’t on your regular payroll. This will reduce the stress on your in-house employees, which can yield various benefits in the long run. In fact, this is one of the better ways to utilize the expertise of your external, outsourced employees.

6. Eliminating the hiring process

Although you still need to do the hiring, the process is usually much faster compared to creating in-house teams. This is especially true if you want to outsource entire teams. The provider already has a reliable, self-sufficient crew, so after paying for the service, you won’t have to think about that anymore.

However, it’s worth noting that the hiring complexity might vary depending on your needs and timeliness. If you need highly-specialized employees in the next few days, each one of them will have to be vetted before signing a short-term contract.

4 Drawbacks of outsourcing SaaS development

Despite all the benefits, outsourcing isn’t always the best choice. Hiring external software engineers is fantastic for patching a few holes, but there are also situations when you’ll need a highly functioning internal team on a long-term contract.

1. Struggling to find good providers

As you’re trying to find the cheapest providers, you’ll have to dig deep into the local markets. Ideally, you're looking for young talent that still hasn't peaked in terms of their revenues and has room to take on new clients. Otherwise, you'll have to pay extra for software engineers with a good track record.

Finding the best balance of price/quality is tricky and can often lead you to the wrong path. Most notably, these young professionals don't have that many positive online reviews compared to seasoned freelancers. Vetting an outsourcing provider can also be tricky if all the reviews are in their language (i.e., they've only worked in the domestic market).

In your attempts to save as much money as possible, you might even endanger the future of your project. It's even worse if you hire an expensive vendor only to realize they provide inferior results compared to your in-house team.

At IT Companies Network we have a directory of Top SaaS development companies that you can use to find the right partner.

2. Suffering high long-term costs

Some companies have stable in-house teams and only outsource when they need extra hands on deck. For example, when they need to fill the gaps in their team or need to meet specific deadlines. Unfortunately, when facing deadliness, SaaS brands are forced to pay extra for quality IT experts.

While these short-term hiring might not be that important in you only do it once or twice, they become an issue if you do it all the time. Constantly hiring top-tier providers for minor tasks will eventually come to bite you. So, depending on your specific situation, you might be better off forming a dedicated outsourced team or simply hiring in-house.

3. Incurring various security risks

Unless you have a dedicated outsourced team, transferring control to external factors might pose an issue. In the end, your SaaS is a proprietary technology susceptible to various risks. Even if you sign an NDA, you can never be certain that the other side will stick to their side of the deal.

SaaS businesses that often outsource are always exposed to data theft and security breaches. Sometimes, the issue might not even be caused by the provider's deliberate action; it might be a result of poor security protocols.

4. Losing control

Loss of control can be a blessing and a curse. While this can free up management’s time, it also means you don’t know what the provider is doing on the other side. Lack of control is especially troublesome when creating revolutionary SaaS products or having to meet strict deadlines.

The best way to avoid this issue is by finding vendors who have a similar management style to yours. Furthermore, depending on the size of a project, it would be nice to have a designated manager on the other side who can provide you with daily project updates.

6 Tricks that will help SaaS outsourcing

Relying on SaaS development outsourcing models definitely has its advantages, but it can also cause major headaches. This is especially true if you're outsourcing for the first time and don't have a well-defined hiring process.

To help you out, we’ve shared 6 steps you need to efficiently outsource SaaS development:

1. Define your objectives

Before outsourcing software development process, you need to consider your budget, timeliness, and requirements. Many companies hire external professionals for their SaaS projects only to discover they could've done everything in-house. Furthermore, although delegating duties to outsourced teams sounds great, it will put an extra burden on your budget.

If you have the necessary in-house talent and you think you can handle the entire project yourself, the main obstacle is the timeline. Even if you're a small company that doesn't have to answer to shareholders, you want to hasten the project development process. Waiting too long might make your product obsolete, leading to a loss of SaaS market share.

Most importantly, you need to be realistic about your requirements. Sometimes, brands hire a SaaS development outsourcing partner because they believe that their in-house crew isn't up to snuff. This can lead to a major overpay, especially if you pick a high-end outsourced vendor.

2. Consider the costs

Before you outsource SaaS development, you’ll need to take a long, hard look at your available resources and decide whether it's worth the money. Even if you don’t have a dedicated team, it might be better to onboard a few young but skilled software engineers. This is especially true if you’re not facing any financial or time constraints.

Given that most companies have started ignoring physical borders, you're no longer limited to hiring professionals from your home country. You can create internal teams consisting entirely of foreigners or even establish headquarters in foreign countries. And as you’re hiring software experts for the long term, their prices will always be lower than short-term outscoring services.

3. Assess available providers

Take your time to get acquainted with the outsourcing vendor. Besides regular checks, such as going through their website and social media, you should track their previous clients and ask them for feedback. You should be skeptical about the testimonials posted on their site, although Google reviews might help.

Checking the outsourcing SaaS development cost can also serve as an indicator of the provider's expertise. Although more expensive brands aren’t always the best solution, you can rest assured they’ll do a good job during the software development project. 

Among others, during this process, you'll get a better insight into their project development process, which will help determine if they're the right fit.

4. Simplify hiring process

SaaS clients should also create a fast yet efficient hiring process. First off, you need to clearly describe what you're looking for in an outsourced team or professional. Make sure they understand their tasks and what kind of technology they will be using. As time is of the essence, you need people who can jump right into the SaaS project. 

You should also make things easier on the outsourcing vendors by hastening the application process. Although using a few tests can help out, you should also be realistic. The last thing you need to do is drive away good experts because your requirements and tests were excessive. Keep in mind that the external team is simultaneously accessing your company.

In most cases, companies involve their project management team in the headhunting and hiring process. This can be tricky if you're in the middle of a complex software project. Not only can this engagement reduce the team’s productivity, but it might also pose issues in case of bottlenecks.

5. Create a plan

Before hiring external SaaS developers, make sure to create a development workflow. You need to have an outlined plan of all the procedures and tasks you want to accomplish in the forthcoming period. SaaS clients also need to understand their duties, so they can give you a better price assessment. The last thing you need is renegotiating the terms mid-project.

Put emphasis on goals, milestones, and deliverables. Each process should be detailed and shared via team management tools like Trello and Asana. Although there might be some deviations, you should put the necessary steps on the paper. It’s better to assign additional duties to the external development team than to allow them too much free time.

6. Stay on top of things

Many people mention reduced micromanagement as one of the main benefits of outsourcing SaaS development. In theory, finding the right outsourcing partner can save you a lot of time, both for day-to-day tasks and communication. Still, that doesn’t mean you should take a hands-off approach.

 A client should get detailed reports from an outsourcing company every week or month. Alternatively, using team management software can track where they're at with specific project milestones. That way, you'll stay in the loop without having to distract your software development work.

If you’re looking for top-tier IT companies to outsource daily tasks, we suggest you browse our online directories!