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Outsourcing Product Development: A Strategic Move for Business Success

Why Outsource Product Development - Reasons

In the current macroeconomic environment, staying ahead of the competition while decreasing costs has become critical for long-term success and growth. Companies always look for new and innovative methods to streamline processes and reduce expenses. Outsourcing product development is one technique that has shown to be helpful for many firms.

Unsurprisingly, companies spent more than $700 billion on outsourcing in 2022. And in 2024, this figure will only increase, despite the slowdown. According to Deloitte, global outsourcing spending is expected to reach $731 billion in 2024

Outsourcing product development involves collaborating with a third party or tech partner to design, develop, and manufacture new products or refactor their existing products. Outsourcing offers multiple benefits over traditional in-house product development, such as access to a larger pool of expertise, lower development costs, and faster time to market.

The State of Outsourcing and Remote Work in Software DevelopmentIn this blog article, we’ll illustrate 12 benefits of outsourcing product development for firms and offer Trantor’s advice on how to make the most of it.

  • 1. Access to a Wider Pool of Talent

    Access to a larger tech talent pool is one of the main advantages of outsourcing product development. Working with an outsourcing partner gives you access to a talent pool of qualified engineers and designers experienced in product design, software development, testing, and QA.

    You assemble a team of multi-skilled and multi-talented people with unique viewpoints and abilities, improving your new product’s likelihood of success. Thus, a diverse team with a wide range of skills and perspectives increases the chances of success for your new product. According to a report by Clutch, 24% of companies said they outsource to improve efficiency, and 18% said they choose to outsource to access expert assistance.

  • 2. Lower Development Costs

    Outsourcing product development can also lead to lower development costs. In 2020, 70% of companies used outsourcing partners to cut costs, according to Deloitte. By partnering with an outsourcing firm, you can benefit from economies of scale and shared infrastructure, which can significantly reduce the costs associated with product development.

    Additionally, outsourcing partners often have lower overhead costs, allowing them to offer more competitive pricing for their services.

    Outsourcing Objectives - outsourcing product development

  • 3. Increased Speed to Market

    Outsourcing product development can also help increase your speed to market. By relying on an external partner, you can use their resources, experience, and processes to quickly and effectively develop your new product. This can help you achieve a faster GTM, giving you a significant advantage over your competitors.

    outsourcing product development - Faster GTM and ROI

  • 4. Improved Product Quality

    A better-designed, higher-quality product meets customers’ needs and stands out in the marketplace. Outsourcing product development can result in improved product quality. When you work with an external partner, you can benefit from their experience, knowledge, and expertise in product development.

    Outsourcing is a no-brainer for companies aiming to achieve higher-quality products at lower costs compared to in-house and maximize their cost-versus-benefit ratio.

  • 5. Flexibility and Scalability

    Adding or removing resources can be difficult and time-consuming in an in-house team. Outsourcing allows you to quickly adjust the size of your development team, giving you the flexibility to respond to changes in your business. This is especially true for companies that experience fluctuating demand for their products and services. Outsourcing, thus, becomes a better option with the flexibility and scalability it provides.

  • 6. Focus on Core Competencies

    By outsourcing product development, companies can also focus on their core competencies. Instead of allocating resources and attention to product development, companies can focus on their core business operations, such as marketing, sales, and customer service. This allows companies to improve their core competencies, increase efficiency, and achieve better results.

    According to Deloitte’s Outsourcing and Shared Services 2019-2024 report, respondents were asked, “How does your organization perceive the benefits of outsourcing?” 65% said outsourcing helps them focus on core functions. 63% mentioned cost-cutting as a critical benefit of outsourcing.

    Benefits of Outsourcing

  • 7. Reduced Risk

    Outsourcing product development can also reduce the risk for businesses. When you partner with an outsourcing firm, you can benefit from their experience and expertise in product development. It helps mitigate the risks associated with product development, such as design flaws, manufacturing defects, and product recalls.

    Even if you don’t want to go all-in, you can partially outsource your business operations. Your organization can successfully lower the risks associated with offshore outsourcing.

    Trantor’s CaptiveCoE™ engagement model provides businesses with the advantages of managing their own team while also having the flexibility of an outsourced, third-party team, as well as ensuring quality. CaptiveCoE™ can be a valuable asset to businesses seeking to reduce risks associated with outsourcing.

  • 8. Improved Time Management

    Outsourcing product development reduces time costs. Companies can free up their internal resources by relying on an external partner and focusing on other critical business areas. This improves efficiency and productivity, allowing companies to achieve their goals more quickly and effectively. With outsourcing, you can begin working on your dream project within 1-4 weeks rather than taking 3–4 months to build an in-house team.

  • 9. Access to Cutting-Edge Technology

    One of the key benefits of outsourcing product development is access to cutting-edge technology. Outsourcing firms often invest in the latest technology and tools, allowing them to stay ahead of the curve and offer their clients the most advanced solutions. This is especially beneficial for companies seeking to develop new and innovative products, as it provides them access to the latest technology and expertise.

    Out of the $92.5 billion in contracts generated by global outsourcing firms, $66.5 billion came from information technology (IT) services.

  • 10. Better Cost Control

    To maintain and increase profitability, cost control is crucial. Outsourcing product development also provides better cost control for companies. With in-house development, it can be difficult to predict and control costs accurately, leading to budget overruns and missed deadlines. However, outsourcing provides more transparency and better cost control, as companies can work with their outsourcing partners to establish a clear project budget and timeline.

  • 11. Increased Innovation

    Another benefit of outsourcing product development is increased innovation. By partnering with an external provider, companies can tap into a wider talent pool and ideas, leading to more creative and innovative solutions. Companies stay ahead of the competition and remain at the forefront of their industry with a proper outsourcing strategy.

    Outsourcing in-house R&D activities

  • 12. Improved Collaboration

    Finally, outsourcing product development can improve collaboration between companies and their outsourcing partners. Companies with an experienced and trusted outsourcing firm establish a strong working relationship based on mutual trust and cooperation. It leads to better communication, improved collaboration, and more successful outcomes.

    In conclusion, outsourcing product development is a strategic approach that offers numerous benefits for businesses. By accessing a wider pool of talent, reducing development costs, increasing speed to market, and improving product quality, companies can stay ahead of the competition and achieve continued success.

Outsourcing Trantor - Case StudyIf you’re considering outsourcing product development, you must partner with a trusted, experienced provider who can deliver the desired results to achieve your goals.

At Trantor, we have extensive experience serving customers across various industries, including IT, FinTech, Media, and Cyber Security. With a team of over 1000 highly skilled professionals and five global centers, we consistently deliver top-notch solutions and exceed customer expectations. Our commitment to quality is reflected in our impressive 73% NPS score and our long list of satisfied fortune 500 clients, like Google, Microsoft, Thomson Reuters, Palo Alto Networks, and more.

We understand the importance of having a dedicated and embedded team that can scale according to your needs. Our teams align with your processes, tools, and culture and co-branded with our customers to create a seamless, united global team. We offer a range of off-shore, near-shore, and on-shore capabilities to meet each customer’s unique requirements best.

Outsourcing product development to Trantor