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From Outsourcing to Outpacing: How SaaS Companies Succeed

ByIgnacio De Marco,
business.com writer
|
Apr 19, 2019
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SaaS companies should seriously consider the benefits of outsourcing.

I wrote about the benefits of outsourcing before, and how it lowers costs and increases efficiency. For software as a service (SaaS) companies, the competition is increasing, and businesses must find a way to meet market demands. Outsourcing allows them to do this.

SaaS is quickly becoming the single most popular method of software delivery for customers around the globe. According to a report by BetterCloud, 73% of businesses say their applications will be SaaS by 2020. And with the fastest-growing SaaS companies scaling their teams by 56% each year on average, hiring the right talent is very important. But it can also be their biggest hurdle. Finding talent is a challenge. There are many statistics that explain the skills gap in technology, and this gap is only growing in emerging tech industries. Growing, however, means finding talent that can handle new technology and challenges.

In today's globalized economy, outsourcing is a common consideration for companies. Software outsourcing to Latin America, for instance, is becoming very popular for businesses in the United States because of the high rate of English proficiency and minimal time zone differences. Companies can work in real time with their outsourcing company, which is a plus for many businesses. As SaaS increases in popularity, outsourcing can indeed be an essential component in long-term success. Here are three reasons why SaaS companies should consider outsourcing as an option.

1. Rapid and enhanced growth

Software companies face particularly challenging barriers to success. One of the most pressing challenges is the rate at which they must grow to prosper.

Company growth depends on a variety of external factors, including market penetration, product adoption and engagement. It also depends on a variety of internal factors, like product development and cost analysis. For most companies, an annual growth of 20% would certainly be an exciting achievement, but if a software company only grows 20% annually, it has a 92% chance of failing in just a few short years.

Many factors play into a software company's failure to evolve quickly, including startup costs and failed marketing campaigns. Another factor that negatively affects growth, potentially underestimated, is employee motivation and satisfaction. Before that, finding qualified employees is a challenge. For SaaS companies, it can be difficult to determine whether or not a full-time employee is necessary for the project. That mistake can be costly. If a company hires and trains an employee only to not need them months later, both the cost to fire them and the cost to keep them on are quite high.

SasS companies often hire local talent to perform certain tasks, but those employees soon find themselves performing other duties that take them away from their core responsibilities. As time goes on, and when pressure for growth and development mounts, employee motivation to complete those peripheral job functions eventually decreases. When employee motivation deteriorates, so does progress.

Outsourcing jumpstarts your project's development and alleviates your hiring challenges by bringing in other teams to take on those peripheral job functions that must be completed while ensuring local employees focus on their core responsibilities. Outsourcing allows team members to focus on growing the business without getting bogged down in menial tasks. Since companies must grow to succeed, outsourcing can help.

2. Quick development and deployment

One primary responsibility for SaaS companies is to apply software updates and patches to their software effectively and efficiently. Businesses must be able to adapt and change their software as needed. But this requires quick change management, a skilled development team and successful deployment phases. If a project is dragging along or a team cannot keep up with the demands for updated software, outsourcing may be a great option.

In addition, SaaS companies may also want to consider nearshore development services for increased market agility. With nearshore outsourcing, or outsourcing to countries closer to home, companies do not need to worry about significant time zone differences or high communication costs. Outsourcing to nearshore companies can greatly assist in jump-starting new software and its updates and work to ensure that projects are completed on time. Instead of scaling up an internal team, which is quite expensive, outsourcing provides SaaS companies with an on-demand team.

3. Scalability

As a company grows, several things begin to happen. It has to start hiring more people, creating new teams, and developing new policies and procedures. It also has to begin building out its IT infrastructure. This is timely and costly.

Software companies must keep in mind that SaaS is only as effective as its pre-existing infrastructure. For instance, if a SaaS company only has enough infrastructure for 1,000 customers, revenues will eventually plateau, and company growth will stagnate. But if the company successfully increases its infrastructure by 30% or more each year, for example, the opportunity for growth can match that increase. The law of diminishing return is relevant here. Profits should not be lower than IT infrastructure investments.

For many companies, especially SaaS companies, scalability is a difficult metric to gauge. By outsourcing, remote teams can quickly build out new IT infrastructure as needed. Once it's built, they can manage and monitor new infrastructure as other teams continue to gauge growth, sales and customer engagement. The scalability that outsourcing allows is unmatched and provides companies flexibility that scaling internally doesn't afford.

From outsourcing to outpacing

SaaS companies that have a product they want to share with the world can do so successfully if they have a remarkable product. Long-term success, however, depends on many external and internal factors. Outsourcing can help companies get ahead of the competition. If a SaaS company isn't experiencing growth, its competition probably is.

Beyond the simple cost benefits of outsourcing, SaaS companies can also experience significant growth, quick development lifecycles and accurate scalability. All three of these are critical for company success, and a failure in one of them could result in significant losses. Outsourcing ensures that none of these factors are ignored. As the SaaS industry becomes more competitive, outsourcing provides an option to help with growth. For businesses in this industry, growth is an absolute necessity, because without it, success wanes and the competition overtakes the market.

Ignacio De Marco
Ignacio De Marco
See Ignacio De Marco's Profile
I am the Founder and Chief Executive Officer at BairesDev. I am responsible for implementing and ensuring the successful management of the business and setting future strategies aimed at positioning my company as the #1 software company in the region. I hold a Bachelor’s Degree in Systems Engineering as well as a Master of Business Administration. I was born and raised in Argentina and I am an eager traveler who has visited over 50 countries. I speak 4 languages and I'm currently a resident of San Francisco, CA.
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