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Why Should Startups Outsource Software Development Projects?

Building a solid relationship with a third-party team is incredibly helpful for the in-house team for a variety of reasons.

Luis Paiva

By Luis Paiva

SVP of People, Technology, and Operations Luis Paiva helps manage and lead teams across BairesDev to implement the best industry practices possible.

10 min read

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Realizing ideas into consumer-ready products is the goal of young enterprising startups. In fact, there is significant pressure to demonstrate to the market and investors that they have the solution to a real-world issue. However, startups face many challenges to this end. 

Startups have much smaller internal development teams than established companies. They may also have a much smaller operating and recruiting budget. Startups face difficult odds, with 90% of them failing, and over 20% falling apart in the first year. Smart business decisions are vital to surviving the early years. 

Software development is a necessary component for any modern startup. But, software development is a broad field with too many specialties and technologies to count. Hiring permanent software developers can be an expensive and lengthy process. Thankfully, outsourcing software development can solve these growing pains. 

Software development outsourcing companies focus on delivering a specified product under the startup’s terms. There are many benefits associated with outsourcing this work, including cutting costs, reducing onboarding and recruiting time and resources, taking advantage of the outsourced product development team, improving scalability, and accessing software specialties that don’t exist in the core internal team. It helps companies avoid issues with the current global talent shortage.

Reasons Startups Should Choose to Outsource 

Cost Savings 

Top-tier talent is expensive. A software developer can cost a company between $50,000 – $150,000 a year in salary, plus benefits. Startups also have difficulty hiring talented developers because there is a certain level of risk associated with working for a new company. 

Their total compensation package may be less impressive than can be found at established companies. Hiring more developers also means providing training, hardware, software licenses, and workspace to that employee. On average, a company spends $4,000 on each new hire.

Outsourcing labor dramatically cuts costs associated with developing a new software product. The company doesn’t need to pay extra rent for a bigger workspace, payout for sick time, or pay for benefits. Overall, the cost of outsourced labor is cheaper. Software development outsourcing companies located internationally provide great cost savings for development labor.

India, the Philippines, Mexico, Argentina, and others, are popular choices for offshore outsourcing. If the time zone differences or language barriers are concerning, then nearshore options can still provide fantastic savings. 

Product Development Expertise 

Companies that specialize in providing startups with outsourced software development have experience in product management and development lifecycles that a startup’s internal team might not. It won’t be their first rodeo. These companies work with a variety of clients and understand how to evaluate the unique needs of the startup.

Software development outsourcing service providers will have access to a suite of professional product managers, project managers, DevOps engineers, and more. This experience will keep the software development on task while steering away from any potential cliffs.

Startups should have the budget for their own management team but they may want to focus on other areas, such as customer engagement and relations. External product and project managers will work in the best interest of the startup. They are bound by the conditions set in the startup’s contract. Additionally, they act as the first point of contact between the internal and external teams. 


Startups may be highly concerned about their ability to scale the product appropriately. Investors want to see a software product that can perform and grow to meet new consumer levels. If the product isn’t built with capacity adjustments in mind, then major software instability and downtime may be ahead.

Because of social media and social media marketing, the market can be incredibly volatile. A startup can go from a very small user base to viral without any warning. Being able to upgrade and improve the software easily and quickly is an essential design component.

If the scope of the initial product grows or shrinks, outsourced development teams also have the ability to adjust labor accordingly. The software development service provider can quickly add new developers to the team because they have a large pool of developers ready to jump in a project.

Specialty Skills  

At the inception of the Software Development Life Cycle, the involved parties conceptualize and outline all expected features and technologies required for a project. If this includes any skills not already provided by the internal development team, outsourcing is a great option. Instead of having the internal team struggle to learn new technology, an expert has the ability to handle that component.

As the project progresses, the goals set by the startup may change. After all, businesses are ever-evolving and so are their users. If halfway through the project, a new skill is highly needed, a software development provider can easily select from their existing workforce or contract out this work. 

Eliminate Recruiting and Onboarding Time 

The process of finding talent is a difficult one, but the time investment involved is also a hurdle. Recruiters are hiring for a highly technical job, so it can take time to find the best candidate to suit a permanent position. The startup typically wants to find someone that matches the company culture, fits in with the team, and is within their budget and desired skills. This process can sometimes take months from the time of the interview to onboarding.

Software development outsourcing allows the company to completely skip this process. Recruiters can take their time curating the best people for permanent positions because the outsourcing agency will provide all the immediately necessary talent. These companies already have vetted their developers and know what they can bring to the table, so they can choose the best to suit the project. 

Outsourcing: A Common and Helpful Solution

Outsourcing is quite a common tool used in the startup stages of many established companies. The most popular messaging application, WhatsApp, outsourced the applications’ development and it’s now valued at over $19.6B.

GitHub is a behemoth in the software development world, with its version control and code management platform in use by over 70 million developers. GitHub’s CIO, Scott Chacon, started the company during its earliest stages, writing the backend of Gist as a freelancer. Slack, UpWork, Alibaba, Opera, and MySQL are other companies that greatly benefited from using software development outsourcing during their lean startup days.

Make the Most Out of Outsourcing 

Startups should strongly consider outsourcing software development as the benefits are numerous and the cons few and far between. The startup will need to curate a good working environment for both the internal and external teams and promote fluid communication between the two. 

Ideation and planning are the first steps upon hiring an outsourced development team. Once the planning phase is complete, the outsourced development team will move on to designing the layout and structure of the software. Finally, the team will begin coding and testing the software. When the product is complete, the startup may decide to keep the outsourced team part-time to work on deployment and maintenance issues. 

Luis Paiva

By Luis Paiva

Luis Paiva helps lead BairesDev's Delivery, Tech, Client Services, PeopleX, and Executive Assistant departments as SVP of People, Technology, and Operations. Working with Operation, PMO, and Staffing teams, Luis helps implement the industry best practices for clients and their projects.

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