In the realm of software development, the significance of outsourcing has become increasingly prominent. The sector has witnessed a remarkable shift with the IT services segment forming the backbone of the global outsourcing market. In 2023, IT services represented a substantial portion of the overall contract values in the outsourcing sphere, amounting to $66.5 billion of the $92.5 billion generated by global outsourcing firms. This trend underscores the strategic pivot of companies towards leveraging external expertise to bolster their technology capabilities.
This post will go through a few of the greatest SaaS organizations outsourcing software development to third parties.
What will you learn from this article?
- How does outsourcing help companies manage risk and focus on their core business operations more effectively?
- Examples of successful companies that have utilised outsourcing in their SaaS development, and what benefits they reaped from this approach?
- What are the primary benefits of outsourcing services for businesses, particularly in terms of operational cost and expertise?
- What considerations should companies keep in mind when deciding to outsource certain business processes or tasks?
What is Outsourcing?
Outsourcing services occurs when a company contracts an external provider to supply goods and services instead of completing the work in-house. This practice, originating in the 1970s, has gained prominence as businesses seek to reduce operational costs. The decision to outsource is strategic, especially when the cost of procuring goods or services externally is significantly lower than in-house production. However, companies have realised that factors beyond cost also play a crucial role in the outsourcing decision-making process.
Advantages of Outsourcing
Outsourcing offers a plethora of benefits, each contributing to the operational efficiency and strategic growth of a business. Here is a list of the top advantages of Outsourcing:
Access to Technical Expertise:
Companies often find that while their core staff excels in certain domains, they may lack expertise in others. Outsourcing allows businesses to tap into the wealth of knowledge possessed by specialists in specific fields, thereby boosting performance.
Things Get Done Fast
One of the most common motivations for small or medium sized businesses firms to outsource work is to complete it faster. If you have a small team, delegating time-consuming tasks to freelancers or outside organizations can help you get things done much faster.
Focus on What Matters
Another advantage of outsourcing jobs is that it gives you more freedom. You will be able to focus your expertise on strengthening and refining the essential procedures that keep your organization running smoothly by passing on supporting processes.
Share Some Risk
Risk assessment is one of the most important factors for any project. You will manage risk by outsourcing a particular process or campaign to experts or specialists.
Reduce Costs
Outsourcing fragmented work is nearly always less expensive than recruiting full-time employees. You will not only save time and money on recruiting but your profit margin will also be increased due to lower overheads.
Work Around the Clock
The biggest advantage of outsourcing is digital work to another country is the significant time zone and holiday variances you may experience.
Simplify Project Management
When you opt to outsourcing companies and outsource work through various specialist freelancing websites and online services, you'll frequently be given active and straightforward platforms to help you keep track of what's being done, when it's due, and how it'll be paid. Most of this may be automated, allowing you to focus on other vital tasks.
Simplify Work Relationships
Many small company teams are made up of close friends and family, which is wonderful. When you're close to your coworkers, though, it might lead to problems if work isn't done properly. You can usually reduce work connections to basic, contractual arrangements by outsourcing tasks.
Efforts Are More Targeted
Another advantage of outsourcing is that it allows you to develop and execute more effective, focused campaigns and initiatives that you otherwise wouldn't be able to handle. This allows your company to take new risks and test alternative exposure approaches.
Peace of Mind
Opting to outsource software development company with a trustworthy individual or agency should calm you that jobs will be done correctly and effectively without you needing to worry or raise a finger. What could be better than that?
What is SaaS?
Software as a Service, or SaaS, is a software licensing model that allows users to access software hosted on external servers via a subscription fee. Unlike traditional software installation, SaaS users can access the software through a web browser, offering a more flexible and maintenance-free solution..
Benefits of SaaS (Software as a Service)
Here are the benefits you will get using SaaS for your next project.
Cost-Effective
For many reasons, using SaaS can save you a lot of money. To begin with, SaaS reduces the user's upfront fees of purchase and installation. SaaS is simply downloaded and essentially maintenance-free from the user's end, eliminating the need to spend big sums of money on physical resources.
Time Management
Time is a valuable commodity. Fortunately, SaaS can assist firms in reducing both costs and time. Installation of SaaS apps requires only an internet connection and the activation of a login.
Scalability and Accessibility
Another advantage of SaaS is the incredible customization it provides. Businesses that use SaaS can modify their consumption plan without giving early notice because the software is maintained externally by the vendor. Furthermore, because SaaS solutions are web-based, they can be accessed from anywhere in the world.
High Compatibility
Users can connect to the most recent updated version of their SaaS product when using SaaS. Updates and upgrades are managed by the SaaS vendor, which eliminates the need to install patches.
SaaS guarantees that the end-user has access to the most recent version of the program at all times. The concept of software as a service involves removing software maintenance and incompatibility issues, resulting in a more streamlined focus and increased productivity for your business.
Amplified Security
SaaS solutions, in most cases, can keep a company's corporate data safer than traditional software. For example, at Radixweb, we have many data centers located throughout the globe that communicate with the IT infrastructure to serve our SaaS products. If an issue arises in one of our data centers, the other will continue to provide our services.
High Adoption Rates
Because SaaS solutions are offered through the Internet. They often require significantly less training because employees are already accustomed to working on the Internet, resulting in quick acceptance by the workforce.
Top SaaS Companies That Outsourced Software Development
Outsourcing brings many advantages to SaaS development. Building a SaaS product introduces many challenges, especially acquiring the right talent for the project meeting budget and time targets. Many successful businesses out there recognize their shortages and turn to development companies.
This article presents a list of top SaaS companies that outsourcing software development and became successful.
Slack
One of the most popular communication tools many businesses use, including Selleo and some of our key clients, is Slack. Not everybody is aware that the development of this collaboration application launched in 2013 was outsourced.
The four founders of the startup contacted a design company to handle the website, application, and Slack’s logo. The MVP was later distributed to beta testers and gained 8k users on the final launch day.
As for today, Slack is used by nearly 8 million users per day and is steadily gaining momentum and recognition.
Expensify
Founded in 2008, Expensify is a tool that helps to organize, collect and store expenses, receipts, and other transactions. To shorten their time-to-market, they decided to outsource the development of the entire back-end.
That allowed the Expensify team to focus solely on the front-end and other business operations crucial to a successful release.
They are a company with over 130 employees used by 2 million users growing day by day.
Klout
Klout is a ranking tool created for social media. It allows users to rank users based on their social media influence. The founder of Klout recognized the power of outsourcing and went even further with the development, flying over to meet the team and working with them on-site.
After just three months of intensive work, they created a working prototype. Working this way allowed them to save money and time while focusing on a distraction-free environment. Although Klout is a rather extreme example of outsourcing, it is surely one of the more interesting ones.
Groove
Groove - an online customer support platform - is yet another amazing example of what outsourcing can give you. After selling his previous company, its founder, Alex Turnbull, wanted to get back into the game as quickly as possible. Lacking technical knowledge and staff, he decided to outsource the product's entire development.
This allowed him to save money that would have been spent on hiring employees, offices, etc.
In 2016, Groove gained a total revenue of $5.2 million and is now employing people worldwide.
AppSumo
This is an example of a company that decided to outsource its initial development and continues to outsource many business areas. AppSumo is a website that distributes and shares deals on subscriptions, software, and online courses.
Noah Kagan - the founder of AppSumo - hired developers to code a PayPal integration into his MVP. This integration allowed him to start selling subscriptions and grow the business.
Over 700k people now use AppSumo, and its value exceeds 2 million.
Splunk
A Data-to-Everything Platform deals with data search and analysis used by enterprises like Airbus or Porshe. They decided to reach out to outsourcing agencies to design and develop the infrastructure and a ready solution. With over 5k employees and 27 offices in various locations worldwide, Splunk is yet another business success story of outsourcing.
Microsoft
Yes, Microsoft is a giant that does not have to be introduced. Employing more than 131k people, Microsoft is said to have as many remote contractors as its direct employees.
In 2010 Microsoft signed an outsourcing deal with a provider in India to manage its internal IT operations. The partner was responsible for managing the IT help desk and servicing applications, devices, and databases in 450 locations in more than 100 countries.
This allowed Microsoft to reduce IT support costs and even scored them an award thanks to the consulting with Accenture.
DocuSign
This electronic signature service provider has been outsourcing product development, which allowed them to cut costs by half and provided flexibility in the team size. The outsourcing team joined the existing DocuSign and is dealing with adding new features to the service and support and maintenance of the system.
Adroll
Adroll is a marketing platform supporting their clients in attracting, converting, and growing their customer base. It serves over 30k clients worldwide. Adroll decided to outsource the marketing platform development by expanding its existing team with 20 remote full-stack engineers. Technologies like Python, React.js, and Node.js were involved in the project.
15five
15five is a US-based SaaS company helping its clients to improve employee performance. The solution provides managers with tools for giving feedback, objective tracking, reviews, etc. They are serving clients like LinkedIn, Spotify, or Hubspot.
The Co-founder and CTO of 15five decided to outsource Python development as the resources available on-site was not enough for him. This gave him the freedom to scale and focus on the product itself.
6sense
This Account-Based Orchestration Platform utilizes the power of AI and machine learning to analyze buyers’ behavior helping revenue teams gather information about buyers.
Thanks to that, they can prepare better offers, generate more opportunities and deals in advance, and in the long run, be more competitive.
6sense was looking to hire talented engineers in San Francisco, but in the end, they decided to outsource the development, saving money, time and gaining international experts.
Summary
Outsourcing is a strategic business practice where companies hire external providers to perform tasks, offering benefits such as cost reduction, access to expertise, and increased efficiency. The concept of Software as a Service (SaaS) allows users to access software hosted on external servers via the internet, enhancing flexibility and reducing maintenance efforts. SaaS offers numerous advantages including cost-effectiveness, scalability, constant updates, and enhanced security.
Many successful companies, including Slack, Expensify, and Klout, have leveraged outsourcing in their SaaS development to optimise resources, reduce time-to-market, and focus on core business operations. As the trend continues, businesses are increasingly recognising the strategic value of outsourcing and SaaS in achieving operational efficiency and competitive advantage.
And if you are looking for software outsourcing company, contact us!
