SaaS Development Outsourcing Guide: How to Outsource Your SaaS Development Right
SaaS (or Software as a Service) is a multifunctional cloud-based approach to development. It includes various solutions and tools that are available to customers online (through applications, browsers, etc.). Organizations worldwide are implementing this model in a variety of business projects. According to Kimberly Mlitz’s study for Statista, the SaaS market was estimated at $145.5 billion, and in 2022 it will reach $171.9.
The SAS systems development and maintenance require extensive financial resources and advanced expertise. Small-scale or early-stage companies simply don’t have such resources. Therefore, they turn to outsource vendors to accelerate market entry, find practical business solutions, and optimize the development process. So let’s talk about outsourcing SaaS development in more detail.
The Main Benefits of Outsourcing SaaS Development
In a word, SaaS outsourcing makes your life much easier because it takes over a lot of responsibilities. The service provider is in charge of the quality of the software, compliance with all deadlines, communication with the development team, etc. It also provides all the essential resources for successful project completion.
To be more specific, SaaS outsourcing is:
- Reduction of project completion deadlines, faster releases.
- Saving time and effort on recruiting.
- Total budget reduction.
- Advanced technical expertise.
- Professional project management (including all modern methodology like Agile and etc.).
Let’s talk about this in more detail so you can make the right decision.
Specific Development Approach
One of the most important benefits of SaaS outsourcing is the development approach. These teams have enough experience and specific knowledge to make the best decisions. In most cases, tech challenges are something new for your company, but they are just a routine for outsourcing pros because such remote teams constantly solve this kind of problem.
Advanced Tech Expertise
Also worth noting that SaaS outsourcing developers know the market better than anyone else. They are up to date with all modern technologies and the latest approaches to development because they deal with the same challenges almost every day.
So it’s not just a regular development; it’s the advanced approach to creating your product. You get a full team of people who can solve any problem twice faster than any of your employees just because they have more valid experience in crisis solving, making effective decisions, or even choosing the proper technology stack.
No Recruiting Troubles
Another essential benefit is saving time and effort on recruiting. You don’t have to spend your money or time searching for new employees. You can get a cross-functional and innovative SaaS outsourcing development team that doesn’t need any resources on adaptation, studying, or onboarding.
But it doesn’t mean that these people are distinct from you. On the contrary, they become a part of your company, share your values and priorities, and take all responsibility for the result.
Affordable Cost and No Extra Fees
Almost all new tech companies have budgetary restraints. Investment and start-up capital are not always enough for proper product scaling and support. In addition, candidate searches and hiring new developers require extra money. Not to mention that choosing the right person needs some time and effort.
Outsource SaaS development helps you to avoid this. There is no extra spending on recruiting. The cost of development team services is much lower than the salary of internal employees. Why? ‘Cause, you don’t have to pay for the workplace, insurance, taxes, etc.
What About Freelancers?
Well, there are two things. First of all, you can’t get a full development team consisting of freelancers. It’s really hard to organize people who’ve never worked together before in one coherent group. Besides, you have to waste your time managing this team.
Secondly, when comparing the rates of persons with the same qualifications and experience, freelancers’ per hour charge is almost twice higher than the cost of outsourcing company services, especially when we’re talking about agencies from Eastern Europe.
Professional Project Management
As we said before, professional outsource developers understand the industry and have experience and ready-made actions for effective development. However, like any other team, they need some effective management.
And here is another advantage of outsourcing comes to the picture: each outsourcing vendor for SaaS has its project managers, so you don’t have to control the development process. The customer has the opportunity to determine his own level of involvement.
As a result, professional management and extensive experience allow the team to optimize all processes and speed up development. And this, in turn, is beneficial for the customers; they get a quality product that quickly meets all market demands with no extra costs or waste of time.
But What About Cons?
In terms of the pros and cons of SaaS outsourcing development, the most common disadvantage of any outsourcing system is the lack of control. You hand over your MVP to professionals on the one side, so you don't have to spend time managing their work.
On the other hand, you lose the ability to control the progress. You also can't expect the agency to work at the same pace and with the same methods as you. It’s unlikely that the outsourcing team would work on weekends for your cause.
Anyone who decides to outsource their MVP may be at increased risk. It’s perfectly normal because you lose some control over the project. To get rid of shortcomings or at least minimize their impact, you need to find a reliable agency and sign a secure contract.
SaaS Development Outsourcing Models
There are many different models of SaaS outsourcing you can use. They have specific features and benefits. We’ll talk about the three main ones that are used most often and meet modern requirements:
- Part-time model;
- Dedicated team;
- Fixed-price model.
Each option has nuances, so let’s discuss them in more detail.
Part-Time Outsourcing Model
This outsourcing model allows you to hire specialists part-time, just like the name implies. In most cases, startups or small companies need experienced developers for specific tech stacks or some persons for particular tasks.
The system allows a pay-per-hour charge; there are no restrictions on outsourcing time. Furthermore, you can request all necessary changes and subsequent project maintenance. In simple words, you get access to the particular development services when you need them and pay only for work hours.
The Main Advantages of Part-Time Model
This option is really flexible and convenient. There are no overpayments, restrictions, or waste of time. You get the services you need and have the opportunity to make changes under market requirements. Sometimes part-time SaaS development outsourcing can be really useful under unforeseen circumstances.
Who Needs Part-Time Model?
The part-time model can be an excellent option for projects not requiring large-scale changes or improvements. There is obviously no sense paying for the whole team in such cases so that you can hire needed specialists on a part-time job.
You can also choose this model when you need developers for a specific tech stack and on a temporary basis. It makes no sense to spend time and money hiring such people in the team since you need their services for a particular task and a short period only.
The main thing to know about the dedicated team model is that you share all the risks, prospects, and areas of responsibility with the outsourcing vendor. This system is somewhat like staff augmentation since you get access to a cross-functional team that works only on your project. It can include all the persons you need for your project: developers, managers, analysts, scrum masters, etc.
But these people work independently; they have their own system and rules. For example, the outsourcing provider can customize this team without your permission to achieve better results.
Supervising and Management
The team is supervised by its manager, who regularly reports on progress to you or your PM. Your internal manager can also participate in team leadership and maintain consistent communication with the outsourcing team.
It is also worth noting that you define with the managed team all areas of responsibility, the desired results of cooperation, deadlines, and other essential nuances from the beginning of collaboration.
The Main Advantages of Dedicated Teams
First of all, you get more control over the development process. You can be involved as much as you need. Secondly, the dedicated team is about solid communication and better coordination, which allows you to immediately correct mistakes and take into account the nuances of the project.
Finally, this model is quite flexible and scalable. You get an experienced cross-functional team to deal with all your product’s challenges. And these guys become a part of your company ‘cause they share all your pains and responsibilities.
Who Needs Dedicated Team?
A managed/dedicated team is the perfect solution for long-term saas product outsourcing. You’ll definitely need additional improvements and changes, and this model offers you all opportunities for flexibility.
This option also can be used when your employees don’t have enough experience and skills for further project development. You can use the dedicated team’s knowledge, professional expertise, and experience without spending time searching for rare specialists.
This model is also good when your staff has a lot of workloads, and you need to find a full team for an additional project. Since the outsourcing team shares your responsibilities and risks, you can entrust it with any tasks. On condition, of course, that you find a reliable vendor.
Fixed Price Model
As the name implies, the fixed price model involves determining the total cost of development services before starting cooperation. This option can be risky for both the customer and the supplier.
On the one hand, the customer may need to change the specifications or scale of the project during the development phase, which is not possible in the fixed price model. On the other hand, the provider may not understand the project features and details or adequately estimate the number of person-hours to achieve the end result. In this case, saas it outsourcing company loses the profits.
Therefore, the main conditions for the successful cooperation in a fixed price system are experience and deep knowledge of both the customer and the supplier. Therefore, a conscientious agency would first study the list of your requirements, conduct the necessary analysis. Only then the actual value can be determined.
It is crucial to fix and structurize all information and tasks and clearly spell them out in the documentation. In this case, you pay for the final product precisely the discussed amount.
The Main Advantages of Fixed Price Model
The fixed price model allows you to know the cost in advance and conveniently plan your budget. As a result, you can get what you need without overpayments. In addition, you agree on deadlines, so you get the finished product on time. Again, provided you choose the proper SaaS outsourcing vendor.
Who Needs a Fixed Price Model?
This model isn’t a good option for large projects requiring flexibility and complex improvements. It doesn’t have any room for changes. You can only get what you’ve discussed before. You also have no control of the outsourcing team, which makes risk management really difficult.
However, you can use this option for specific tasks or a small project with minimal requirements. Again, your tasks should be as straightforward as possible, and the project deadlines should be short. Most often, such a model is convenient in cases where you need to add some features or make small changes.
Countries to Outsource SaaS To and How Much Does It Cost
The specific cost of SaaS software development outsourcing depends on the following key factors:
- SaaS product’s type, features, scope, and complexity.
- The number of specialists/ the development team size.
- The experience, qualification, specialization of team members (backend/frontend developers, UX/UI designers, PMs, business analytics, etc.).
- SaaS development vendor location.
- In some cases, the number of hours for product development.
If we talk about the best countries for outsourcing, we should consider the ratio of the provided services quality and the size of the developers’ hourly range. For services of Canada and US agencies, you’ll pay between $70 and $300 per hour depending on employees’ qualifications and experience. The cost of the same level services of Western European countries is $35-120 per hour. Eastern Europe specialists, in comparison, cost between $25-85 per hour.
To be more specific, in the USA, a senior developer makes on average $153-164 per hour, while the same specialist from Ukraine has $35-70 per hour. This striking difference is due to several factors: the cost of education, market competition, and even the overall level of GDP in each country. However, the knowledge and experience of such specialists are almost identical; they work at the same level of qualification and give the same result.
However, it should also be pointed out that the Ukrainian IT market is developing rapidly. For example, in the list of the 100 best IT outsourcing companies provided by The International Association of Outsourcing Professionals, you will find 11 Ukrainian. And all these thanks to powerful technical education, huge motivation, and hard work.
How to Sign SaaS Development Outsourcing Contract?
Of course, the list of particular contract elements depends on the chosen outsourcing model and individual details of the project. However, you should include some critical points in the SaaS development outsourcing agreement.
Main Project Details: Scope, Time, Provided Services
This section describes which services your vendor should supply and the main requirements for these services (software acceptance criteria). It’s important to reinforce this description with a professional specification. The more detailed the specification, the more you are protected from manipulation.
Another essential thing to indicate is the scope of your project together with an explanation of the making changes procedure. You should also state in the agreement that any changes to this paragraph should be made in writing and formally. Thus, each change will be clearly documented with deadlines and a detailed explanation.
Execution Time and Project Completion Date
In the case of outsourcing, the issue of time is fundamental because you adjust the processes in your company to an external team. Therefore, be sure to specify the exact time for the described services and the date of termination of cooperation. It allows you to be more flexible in case of changing vendors for later development stages.
If you don’t have experience with the company, it’s better to sign a shorter contract and think about a long-term agreement later. In this way, you insure yourself in case of an emergency or poor services, etc.
Project Costs and Payment Procedure
This part is also crucial because you indicate the project’s cost and ways to reimburse your costs in case of poor service. The price is prescribed depending on the chosen outsourcing model (per hour, for each stage of development, or the entire project).To be more specific, the current price should include:
- pay for the services of all specialists involved in your project;
- taxes and all necessary state fees;
- cost of licenses and software (depending on the project type and agreement with the supplier).
At this point, you should indicate the reconciliation of your costs in case of changes and take into account the dynamics of the tech market. Don’t forget to prescribe the responsibility of each party in case of missing deadlines.
As for the payment method, it all depends on your agreement with the vendor. You can discuss this point in the negotiations and include it in the contract.
Intellectual Property Rights and NDA
These two points are crucial in the case of outsourcing software development. First, it’s essential to clearly state in your contract that the customer is the owner of the software developed in cooperation. Specify that you own the source code, which you can use further and change according to your own needs.
Secondly, It’s also useful to note that you receive the rights to the code in the case of agreement termination, and the supplier is obliged to destroy all templates and development plans immediately.
A non-disclosure agreement or NDA is a guarantee of your security and peace of mind. In some cases, it can be included in the general contract and sometimes signed as a separate document. But, of course, it all depends on the individual details of the project and the decision of your lawyers.
Be sure to write down what data is confidential and can’t be disclosed no matter what happens. Also, indicate liability for the violation of the agreement. It will protect your interests, ideas, and plans from disclosure to competitors.
Such contracts can also specify the transfer of assets, patent and IP protection, dispute resolution paragraph, and so on. There are many variations and forms of these docs. We have a good SaaS outsourcing contract template, and we’ll be pleased to share it with you. So feel free to write us, and we’ll send it to you.
How to Manage SaaS Development Process
When we deal with the complete SaaS development process, the management requires the control of three main phases: discovery, UX design, and development. Of course, in the case of part-time outsourcing and minimal involvement, the process may look a little different. But in general, quality work on the SaaS product requires the presence of all these phases in the project SDLC.
This is the first and one of the essential steps in SaaS outsourcing development. The success of the future collaboration directly depends on the in-depth, comprehensive analysis. Before signing the contract and starting development, the agency needs to clarify the following points:
- Main customer tasks and requirements.
- Project details: type, tech stack, features, strengths, weaknesses, etc.
- The target audience of your product, its requirements, pains, and wishes;
- Development prospects of the future system.
Ideally, the service provider conducts an in-depth analysis to determine the timing and workload. But, of course, this is not always the case. In models with minimal external specialist involvement, vendors can only explore the aspects related to their work.
Why is this important?
In reliable outsourcing companies, business analysts and architects, designers, etc., participate in the research. They create a list of improvements or features based on information received to make your product competitive and up-to-date.
It doesn't matter if you make an app or website from scratch or upgrade your software. In-depth analysis is fundamental in both cases. It contributes to:
- engaging the audience;
- forming a solid team with needed experience;
- development process optimization;
- improving the user experience and efficiency of the platform.
So, it’s a huge amount of work, as you can see.
UX design is a must for any modern platform. It provides a seamless and user-friendly experience, so users come back again and again. This is especially true for Saas projects, as you expect the outsourcing team to do their best to make the product accessible and up-to-date.
At this stage, designers create a prototype based on preliminary analysis, your wishes, and market requirements. You can evaluate the result from the user's point of view, make revisions, etc. So, the UX design is actually about the interface your product will have. It improves the user experience through convenience, intuitiveness, and ease of use.
Why is this important?
Almost all factors (94%, actually) that influence the first user impression of any digital project are design-related. And websites’ appearance is one of the most powerful tools for creating credibility. So here are the stats that speak for themselves.
After the in-depth analysis and creating UX-prototype, we have all critical data for beginning the last and the most vital phase – development. Here we should pay attention to the two main stages:
- Frontend development. First things first, we need to create the appearance of your platform or app according to the design prototype and users interaction part. So this stage is all about the product interfaces, server access configuration, etc.
- Backend development. We work with server technology, namely databases, security, software architecture. This part is responsible for transactions, authorization, etc.
Developers can use different technology stacks to create a platform. You can choose the stack you need or ask the provider for advice. Designers are also working at this stage, making adjustments and controlling the results.
Of course, the processes of this stage depend on the individual characteristics and requirements of the product. The team can perform testing, third-party integration, deployment, customization, etc., at this stage.
Whatever additional processes development includes, this is where the scalable architecture of your product is created. Therefore, this stage requires time and effort.
Why is this important?
Well, as was said before, during this phase, the basis of the platform or app and all its functionality must be created. So, it’s essential to find a reliable team with advanced expertise for this job.
Looking for a Reliable Tech Partner?
So, SaaS outsourcing development can be helpful to anyone who needs professional expertise and strengthening their team. Such suppliers can be quickly involved at any stage of your project development, not only at the MVP stage. Outsourcing development cuts costs and saves your time. It allows you to use experienced developers’ services without hiring them.
However, only reliable partners can help you successfully launch your product and take a leading position in the market. So it is essential to find those who are willing to share all the risks and responsibilities with you. We’ll be happy to consult you better on this topic and help you to make your decision. Just contact us with any questions and in any convenient way.
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