Real Case of Outsourcing SaaS Product Development [a Step-by-Step Guide]

2195 Updated 01.11.2023
Yuriy Matviyuk

Development Tech Lead

5/5

Table of contents

Globalization has forced many companies to improve their competitive advantages constantly. Outsourcing reduces the company’s internal costs and allows owners to focus on core competitiveness. In the rapidly evolving world of technology, your company is unlikely to develop a full range of technology software. SaaS development outsourcing is becoming more and more popular. This article is dedicated to this topic.

SaaS development outsourcing: Short overview

The Northell team put all their knowledge and experience on SaaS development outsourcing into this article. Today we will look at the following aspects of this topic:

  • What are the main advantages and disadvantages of SaaS development outsourcing?
  • How to properly outsource SaaS product development?
  • How can the Northell team help you with SaaS development outsourcing?
  • What challenges might you face when outsourcing SaaS product development?
  • Which pricing model is better to choose, and in which region to look for a team?
  • How much does it cost to hire a SaaS development outsourcing services team?

In this article, you will find many useful materials that will help you successfully outsource SaaS product development.

What is outsourcing SaaS development?

Outsourcing SaaS development is the transfer of work on developing a SaaS product to a specialized company. At the same time, the contractor can be entrusted with both the creation of the entire product (full outsourcing) and its individual processes (partial outsourcing).

The rise of outsourcing SaaS development in 2023-24

As we said earlier, outsourcing SaaS development is becoming increasingly popular. And in 2022, the demand for this type of service has grown rapidly. Since 2000, the outsourcing industry has grown from $45.6 billion to a $92.5 billion business. There are several reasons a company may outsource SaaS development, but the most prevalent is a lack of resources, such as money, time, or developers.

Another factor might be a lack of in-house knowledge, with businesses preferring to rely on the expertise of other organizations with an established track record in the field.

Another advantage is that most software development organizations concentrate entirely on software development and usually provide several services. These services may involve improving an existing system or designing a whole new one from scratch with the client’s participation.

Contracting with other organizations also provides businesses with resources such as new technology, information, best practices, tools and skills that would otherwise be unavailable inside the company receiving the outsourced services.

What are Pros & Cons of outsourcing SaaS development?

Of course, SaaS development outsourcing has both advantages and disadvantages. Let’s take a closer look:

What are Pros & Cons of outsourcing SaaS development?

What are Pros & Cons of outsourcing SaaS development?

How to outsource SaaS product development from scratch in 6 easy steps?

How to outsource SaaS product development from scratch in 6 easy steps?

How to outsource SaaS product development from scratch in 6 easy steps?

In order for you to better understand how the outsourcing process works, we have prepared a step-by-step guide for you.

Let’s look at the main steps:

Step 1: Formulate a SaaS product idea, determine requirements and identify business goals

If you are going to outsource SaaS product development from scratch, you first need to formulate the idea of ​​your project clearly. Describe in detail how you see your future product.

This will help the future team to navigate better and work faster. If, for example, you have a design but you need development, then you should start by preparing all the necessary documentation about your product.

Next, write a list of requirements for both your future product and your future team. The more detailed this list is, the better. Also, decide on your main business goals. By understanding them, your future team will know in which direction it is better to move.

Step 2: Prepare a project transition plan

A project transition plan is a plan to transition a product development project to another team for outsourcing. A project transition plan template is a plan that includes all of the information and stages for transitioning the existing project to a new team.

In most cases, the changeover strategy necessitates thoroughly examining and mapping the supporting infrastructure for hardware and software agreements. Careful transition management is necessary to guarantee that service-level agreements (SLAs) are taken into consideration and that the company runs smoothly.

There are two options for project transition:

  • project from scratch transition
  • project with sketches transition

If everything is pretty simple in the first option, then you need to prepare well for the second one. In order to transit your project with some sketches to a vendor, you need to do the following steps:

  1. Prepare all necessary project documents (sensitive data, NDA, source code ownership details, termination agreement, etc.) and source code documentation (repository URLs, key algorithms, specifications, etc.)
  2. Organize the right workflow (project scope, deployment guidelines, bug tracking data, development process, toolset, etc.)
  3. Gather all accesses (access to the current environment, 3rd party integrations, etc.)
  4. Prepare other product materials (design files, user flows and user stories, project roadmap, product architecture, etc.)

Step 3: Select 10 outsourcing SaaS development companies

The next step is to start looking for an outsourcing team. You can find a good team providing quality SaaS development outsourcing services on social networks such as LinkedIn, rating sites such as Clutch.co, or using Behance.

Select about 10 outsourcing SaaS development companies that you think are the most suitable for your project. We advise you not to start cooperation with the first company on the LinkedIn list. It is worth spending some time looking for that perfect team.

Step 4: Check portfolio, reviews, social networks and the level of experience

Once you have compiled a list of potential outsourcing companies and teams, you should analyze them. Check out a portfolio with previous projects. Pay attention to the style in which the team works.

Check out their social media and read reviews. You can get a lot of information about the team from previous clients’ feedback. Also evaluate the experience in the field of SaaS development. More often than not, teams list work experience on their corporate social media profiles.

Step 5: Make a list of essential questions and conduct interviews

The next step is to prepare for interviews with each of the teams. We have compiled a list of possible interview questions for you:

  • How long have you been working in SaaS product development?
  • What was your most successful project and what do you think is the reason for success?
  • What was your most failed project and what do you think was the reason for the failure?
  • What is the level of specialists in your team?
  • Do your specialists have all the necessary knowledge and skills to carry out a complex project?
  • What design practices do you use in your work?
  • What technical stacks do you use for development?
  • Do you have an experienced and skilled QA engineer on your team?

Of course, this is a rough list of questions. You can add questions that are important specifically for your company and project.

Also, at this stage, we recommend you choose a cooperation model. It can be a Time & Materials or Fixed Price model.

Fixed Price is a contract that fixes: the scope and content of work on the project (terms of reference), implementation time and cost. Time & Materials is a contract that fixes the developer’s hourly rate. The customer pays for the time spent on solving his problem and the materials used in the course of work.

Step 6: Sign up a contract and start a project

After conducting an interview and choosing a team for your project, you can sign a contract. You should draft a solid agreement with your vendor to prevent expensive and ongoing disagreements. The contract should include all the essential details of your cooperation with the team (cooperation model, cooperation conditions, deadlines, project price, etc.)

It is important to realize that the parties’ agreement must fulfill the legal criteria of the countries in which they are registered. What is lawful and truthful in one state may be considered objectionable. If your issue goes to court, the most crucial aspect will be your agreement.

The main legal aspects you should pay attention to while signing up the contract:

  • Services aspects
  • Taxation aspects
  • Force Majeure
  • Property aspects
  • Legal aspects
  • Termination aspects
  • Confidentiality aspects
  • Supplemental provisions
  • Pricing and payment aspects

Get the best SaaS development outsourcing with Northell team

The Northell team can help your organization stand out from the crowd by delivering a differentiated, secure, and scalable solution. We are excited to share our skills, knowledge and enthusiasm for cloud solutions with you and support you in dealing with any SaaS-related issue, whether you need to construct a new cloud-based application for your business or maintain an existing one.

Our SaaS development outsourcing team follows sophisticated and current software development standards and processes in order to create great SaaS solutions as quickly as possible while ensuring product security and quality.

Northell team can provide you with the following SaaS development outsourcing services:

  • SaaS application development. Our experts build complex, multi-tenant solutions that match the needs of your business. We focus on robust structure, smooth integration, and uncompromised security while developing, deploying, and maintaining SaaS solutions.
  • SaaS architecture creation. Our experts can assist you in developing the best architecture for your SaaS solution. We understand how to design such an architecture so that your SaaS solution functions smoothly and rationally and product navigation is proper and straightforward.
  • SaaS UI/UX design. Northell assures that a world-class product is developed based on your company’s objectives, customer satisfaction, and modern technology since a functional UI/UX design is an essential component of every first-rate application!
  • SaaS product testing. Northell team includes professional testers and quality assurance specialists that will assist you in checking your SaaS product for faults, inconsistencies, and bugs. We will suggest changes and even completely redesign your product. Our staff can undertake usability, performance, functionality, and other forms of testing for you.
  • Cloud migration. From Cloud continuum landing zones to data sovereignty rules, Northell aids businesses in negotiating complexity. We work with you to determine the best cloud strategy, operational model, roadmap, and ecosystem partners. We then work with you to expedite your migration and modernization to the Cloud, which is secure, cost-effective, and agile.

If you want to take a look at our SaaS projects, visit our portfolio. We also recommend that you check out the following articles written by our team of experts:

If you have an idea for a new project or need a reliable team to redesign your legacy SaaS application, contact us. Our team will discuss the details of your project and offer the most suitable solution.

Top outsourcing SaaS development challenges [+ Northell solutions]

You will most likely face certain challenges when outsourcing SaaS product development. We have prepared a list of the most common difficulties faced by companies and solutions offered by our team:

Communication restrictions due to time zones and linguistic differences

Very often, due to differences in cultural values ​​and language barriers, companies cannot properly organize work with a team and achieve a good result.

Northell solution. Our team advises you to choose a company located in a more culturally neutral country. Most often, these are the countries of Eastern Europe. The country you choose for outsourcing shouldn’t have strict religious or cultural prohibitions and rules.

Team management and different business philosophy

Perhaps you will run into a management problem. Controlling and managing an outsourcing team is much more complicated than an in-house one. Also, the contractor may not have the same views on business and project management as you do.

Northell solution. To build good management, we recommend that you use advanced task management (Jira, ClickUp, etc.) and communication tools (Zoom, Skype, etc.). They will help you organize work and communication with your team, as well as control and manage all development processes.

Data security and risk of concept theft

Working with an outsourcing team can be risky because your ideas and project data can be stolen. However, this is if the team turns out to be unreliable.

Northell solution. We advise you to read previous clients’ reviews before signing a contract with a team. Perhaps you will find someone’s negative experience with this team and it will stop you. Second, be sure to sign the NDA document. This document will become your main protection.

Risk of getting a huge bill compiled of hidden fees

Surely you do not want to spend extra money on your project. However, this can happen if you do not pay attention to the monetary aspect.

Northell solution. First, we recommend that you negotiate the project’s price with your team in advance, including all additional services. Secondly, choose the right pricing model for cooperation. You can find more information about this in the next paragraph.

Weak team skill level

Many companies are faced with the fact that the outsourcing team does not have the necessary knowledge and skills for their projects. As a result, companies do not get the results they expect.

Northell solution. To ensure that your team has everything needed to complete your project, we recommend that you give test assignments and have detailed conversations with the team. Much depends on what is already in your project:

  • If you are developing a project from scratch, ensure that the team’s process is built correctly. Namely, detailed discovery is carried out, product architecture is built, a feature list is compiled, and the project is decomposed, etc.
  • If you already have some sketches in the project, then carefully consider the project migration process.
  • Check the composition of the team. The team should include business analysts, project managers, developers, designers, QA, and CTO/Tech lead.
  • The team should have a relevant portfolio that they should be able to describe and explain.

What outsourcing SaaS development cooperation model to choose?

What outsourcing SaaS development cooperation model to choose?

What outsourcing SaaS development cooperation model to choose?

There are 3 main cooperation models that you can use during SaaS development outsourcing. Let’s look at each in more detail:

Dedicated team

A dedicated outsourcing team is similar to an internal company team. However, the team works in a separate office and most likely in another country. You manage them directly, and that includes a lot of daily communication. With proper management, you will always know what your team is doing and where they are now on the progress bar.

A dedicated team is best suited for companies that need to expand expertise, organizations with tight deadlines, and those that need managed, outsourced IT professionals.

More information about dedicated teams you can find here: How to Hire a Dedicated Software Development Team?

Fixed Price

This type of cooperation implies that you will pay a fixed price for the project per hour. When signing the contract, you should have a clear estimate of all work, which is calculated after an extensive analysis of the project and associated risks.

Remember that the analysis of work and the creation of estimates will depend on the goals and needs of the project. Therefore, it is important to have a technical task that the development team can evaluate.

Time & Material

The T&M approach involves paying for the developer’s time, not the finished product. The customer pays money for person-hours spent on the project. This approach has its advantages. It helps the executor direct the development process in the right direction, in constant contact with the client.

At the same time, it is beneficial for the customer to prevent the project from being inflated. T&M is perfectly combined with the principles of agile development, in which emphasis is placed on the dynamism and transparency of processes.

To know more about models of cooperation, read our article Fixed Cost vs. Time and Materials. What is the Difference?

The best regions for outsourcing SaaS development

The price and quality of SaaS development outsourcing services largely depends on the region where the development team is located. Let’s look at the most popular regions where outsource SaaS product development is best.

The best regions for outsourcing SaaS development

The best regions for outsourcing SaaS development

Eastern Europe

According to A.T. Kearney’s report, the East European software development sector stands for high-quality and improved education, fair rates, a strong communication culture, greater spoken English, and suitable time zones.

The main benefits of SaaS development outsourcing in Eastern Europe:

  • Prices for outsourcing are reasonable. Eastern European prices range from $25 to $50 per hour, according to the UpWork website.
  • A lot of available talents. Eastern Europe is famous for its strong educational sector. In Ukraine alone, 16,000 technical specialists graduate every year. The IT sector in this region is extremely developed.

Asia

Asia, namely China, is considered a very attractive place for SaaS development outsourcing. China is known for its large number of technological minds and offers high-quality outsourcing services.

The main benefits of SaaS development outsourcing in China:

  • Access to the largest economy in the world. China is an extremely developed country and offers a wide range of IT outsourcing services. However, the price for SaaS development outsourcing can be an order of magnitude higher than in other regions.
  • Use of various technical stacks. Since there are a considerable number of IT specialists in China, it will not be difficult for you to find a skilled developer across multiple programming languages.

Latin America

According to the A.T. Kearney Global Services Location Index, Latin America is among the top five best regions for outsourcing SaaS development owing to its location. North American countries sometimes choose Latin locations because:

  • developer fees are quite minimal
  • minor cultural distinctions
  • good level of English
  • working team schedules that are convenient

Middle East

The Middle East is distinguished by its tech-savvy and tech-native population, with more than half of the population under the age of 24. Most notably, software outsourcing firms in the Middle East are incredibly cost-effective. Developer wages are a fraction of what they are in other locations, allowing for low-cost outsourced development options.

The main benefits of SaaS development outsourcing in the Middle East:

  • Lots of young professionals. Young specialists offer lower prices for their services. However, you should pay attention to the quality of the services offered.

How to choose a country to outsource SaaS product development?

We have reviewed the main regions where you can find a good team offering SaaS development outsourcing services. Now let’s figure out how to choose a country for outsourcing. Here are some tips from our team:

Pay attention to time zones

When choosing a country to outsource SaaS product development, be sure to pay attention to the time zone in which the country is located. We recommend choosing the country closest to your time zone. This way, it will be easier for you to communicate.

However, if you have found a great suitable team in a country that is very different from your time zone, you must establish good management and set a time for communication that will be convenient for all parties.

Consider cultural differences

There is no such thing as a bad nation attitude when it comes to outsourcing SaaS development. People don’t always match, and cultural differences must be recognized. We advise you to choose a country that suits your look and style. This is especially true for design. Many countries have their own special beliefs and prohibitions. Therefore, in order to get a product that meets your expectations, choose a more neutral region in terms of cultural values.

Check the level of English

Outsourcing relies heavily on team communication. Companies will have to negotiate and find solutions to challenges.

The key to business success is consistent, effective team communication, and English is required.

When selecting an outsourcing region, it is critical to consider the English proficiency of outsourcing SaaS development service providers. A lack of English knowledge often causes work conflicts and team clashes. Find a supplier with whom team communication is simple and productive in English.

How to manage an outsourcing SaaS development team?

Properly built management is one of the most important factors influencing the success of cooperation with the outsourcing development team. We have prepared some valuable tips that will help you properly organize work with your team.

Use modern task management tools

In order to optimize the work with your team, we recommend using modern task management tools. They will help you monitor how your team is performing on project tasks and track progress. Our Northell team, for example, uses Jira and ClickUp for this purpose.

Schedule daily or weekly calls

At the beginning of cooperation with your team, agree on daily or weekly calls. The frequency of calls depends on your needs and the project’s specifics. The main thing is that the calls should be regular. On these calls, you will be able to discuss with your team the work done, plans and results for each individual process.

Appoint a project manager and team lead

Each project should have a project manager and a team lead. These specialists are responsible for organizing the work and supervising the execution of tasks by individual specialists. Typically, companies communicate with these specialists the most.

Check the project progress regularly

In order for you to get the result you expect, be sure to follow the progress of your project. And this should be done regularly. With this approach, you will be able to make changes to the project in time, and you will not need to spend a lot of time, effort and money on fixing the completed product.

How much do outsourcing SaaS development services cost?

The price of outsourcing SaaS development services depends on many factors. Among them are:

  • project complexity
  • project Size
  • number of features
  • UI/UX design complexity
  • selected tech stack
  • team expertise level
  • and others.

Of course, the price largely depends on the country in which the team that will work on your project is located. We have been studying prices in different regions for a long time and have prepared a little hint for you. Below is a table that shows prices for individual SaaS product development processes in different regions:

How long do outsourcing SaaS development services last?

If we talk about the project’s duration, then everything is also not so simple. Much also depends on the size and complexity of the project, the size of the budget, the number of people on the team, and more.

At Northell, we always try to estimate the project’s duration immediately by analyzing all aspects of a particular project.

We have also prepared a handy table for you. This table will help you understand how much time it takes on average for each SaaS product development process for projects of different sizes:

Outsourcing SaaS development: A few last words

As we said earlier in this article, outsourcing SaaS development will skyrocket. And to be in the course of events, you should know the basic rules for finding an outsourcing team and all the pitfalls of working with it. This article will be an excellent guide for you to successfully SaaS development outsourcing services.

If you have questions about this topic, please get in touch with us! Our team will be happy to help you sort it all out.

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