Software as a service (SaaS) is one of the largest segments of the cloud market, with revenues expected to grow 22.2 percent and reach 45 percent of total application software spending by 2021. The industry as a whole is expected to reach $76 billion per year.
With the rising demand for SaaS solutions, competition is increasing, and SaaS companies are saturating the market. For instance, SaaS initial public offerings (IPOs) have more than doubled over the past 12 years. Some of the highest-performing SaaS companies are growing their teams at an average rate of 56 percent per year.
As the SaaS industry matures, companies in this field must achieve product-market fit rapidly if they are to survive and stay ahead of their competitors. Many SaaS companies are turning to outsourced development teams to help them meet market demands in a lean and cost-effective way.
Here are four key benefits of outsourcing SaaS development.
1. Outsourcing lowers your startup costs
SaaS companies often launch with limited budgets and resources, which can make developing their minimum viable product (MVP) a significant challenge. By working with an outsourced development firm, companies can create an MVP without spending their entire budgets, or reducing their features to the point where the value for customers drops.
A leading example of a SaaS company that outsourced its web and app development so it could begin testing its MVP as quickly as possible is Slack. Outsourcing allowed the company to roll out a prototype and test its collaboration software without significant financial risks. The strategy clearly paid off as the company now has millions of users around the world and a current valuation of $7.1 billion.
2. It adds experience and efficiency to the development process
Recruiting new talent in-house can be an expensive and slow process. Additionally, it can take even longer to build up a team that collaborates well together. A major benefit of working with an outsourcing partner during the SaaS development process is access to a range of technical expertise.
Rather than hiring a new in-house developer to take on specific aspects of the project, outsourcing provides SaaS companies a team of talent whose skills may range from product management and UX/UI design to testing and cross-platform development.
The right outsourced development team has likely worked together already on similar SaaS projects and can lead the process with helpful advice every step of the way. For example, the outsourced team can help with decisions about important SaaS features, such as email and chatbot integrations and payment systems. They can also provide guidance on which aspects of the site or software can be created with existing technology and which aspects need to be built from scratch.
3. It helps you meet market demands faster
The ability to scale quickly is vital for SaaS companies. According to McKinsey, if a software company grows only 20 percent per year, then there is a 92 percent chance it will cease to exist in the future. Even if a software company grows 60 percent per year, its chances of surpassing 1 billion in revenue are still only 50 percent.
Continuous updates are essential for SaaS companies because the market demands them. Not to mention, SaaS companies must continuously deploy new features to compete with the dozens of new players entering the market constantly. Outsourcing software development allows companies to have peace of mind that they are moving their projects along fast enough.
4. Outsourcing provides affordable talent
Not only is it time-consuming and expensive for SaaS companies to hire in-house, but it is becoming increasingly difficult to find qualified developers that possess the skills and know-how necessary to fulfill today's ever-changing technology requirements.
From security and compliance requirements to data management and automation, SaaS team members must be able to handle a variety of tasks, many of which may fall outside of the role for which they were hired.
When team members are stretched too thin for too long, it damages the company's productivity levels and decreases morale. Working with a consistent and reliable outsourcing partner allows SaaS companies to fill key roles with the appropriate talent. Not to mention, it can help keep existing employees happy and minimize employee churn.
With an outsourced development team, companies can also build more features and expand their services faster because hourly rates are lower. Outsourcing development to developers in the U.S., for instance, can cost anywhere from $80 to $150 per hour, while outsourcing to developers in Latin America can cost between $40 to $70 per hour.
The future of SaaS development
Whether it's during the MVP stage or growth stage, working with an outsourced development team provides a number of benefits for SaaS companies. According to Cisco's Global Cloud Index, 59 percent of all cloud workflows will be delivered as SaaS by the end of this year.
As the industry continues to grow, not only is it becoming more common to outsource certain aspects of the SaaS development process, but it is practically unavoidable for companies that need to save time and resources to continuously deliver value to their customers.