Outsourcing SaaS Development: Guide, Costs, and Tips

Outsourcing SaaS development to an overseas team has become an increasingly popular framework for software companies looking to reduce costs.

As the global IT outsourcing industry continues to grow, valued at $92.5 billion in 2020 alone, more and more organizations are taking advantage of outsourcing to tap into the global talent pool.

The SaaS market, specifically, is booming. According to the report, it’s expected to cross $300 billion by 2026. With so much potential for growth and profit, it’s no wonder businesses want to grab a piece of the pie.

However, finding the right offshore outsourcing vendor can be a challenging process. The stakes are high when handing off core software development, so you need a partner you can trust.

That’s why we’ve created this guide on choosing an outsourcing provider for SaaS development.

As offshore teams become an increasingly integral part of the software landscape, having a foolproof plan for vetting and onboarding partners will serve you well now and in the long run.

Read on for tips and advice to help you navigate the world of SaaS outsourcing.

Looking for a Reliable Software Development Partner?

Transform your ideas into reality with our dedicated development team — contact us today to get started!

Talk to us

Main Benefits of Outsourcing SaaS Development

If you are only considering outsourcing SaaS development as of now, by the end of this section, you will be decisive.

As per Crunchbase, there are 23,750 SaaS companies in the world.

All of them serve the users with the product they feel can bring about a significant difference in their organization.

Here are two interesting insights:

• Automation in SaaS and agility-led development is fueling the market growth,
• Cyber-attacks are hindering their growth.

The growth-led SaaS outsourcing development models help create highly performant products.

These products are developed by expert teams who mean business.

So, the first benefit of outsourcing SaaS development is expert product creation.

1. Expertise

Five things will lead the future of SaaS development;

1. Artificial intelligence
2. Ability to build a Vertical SaaS
3. Giving priority to integration abilities
4. Modifications in the Pricing policy
5. Leading the industry with thought leadership

The cumulative effect of these things will be the realization of making SaaS and outsourcing a multi-billion dollar industry.

However, the addition of all these aspects means that the product has to be super-efficient.

For this to happen, you require an outsourced SaaS development team.

Your ideal team must be able to adhere to the five aspects given above and overcome the five challenges listed below.

Challenge	Its Impact on SaaS Development
Third-Party Integration	Yes, 3rd-party integration in SaaS software development outsourcing is a challenge and an opportunity. Not all types of integration are a challenge, but enterprise SaaS integration is an imminent one. Most of the SaaS developers leave it to the users whether or not to integrate. In case of an anomaly, the 3rd-party integration error is counted as a product error. This is bad for business. However, the way forward is for the companies to take cognizance and set up the integrations themselves. This will enhance the customer’s confidence and trust. But to make this possible, you need to get your hands on an expert team. A team that understands the potentialities of such additions and can deliver the same. Plus, the QA personnel of the outsourcing and SaaS development team need to carry out rigorous checks for the purpose.
Compliance Challenges	Vertical SaaS are industry-specific with niche-related features. Hence, building HIPPA or GDPR-compliant SaaS products will be a major trend in the future. The challenge for you is to understand and build a platform to serve the industry’s interest. To overcome these challenges, the SaaS and outsourcing team needs two things; Enough Reference Architectures Relevant development patterns You will find these aspects in developers who have prior experience and deep industry knowledge.
Zero-Downtime Deployment	The yearly churn rate of SMB with reference to SaaS is 58%. This means that 58% of the SMB customers do not renew their plans. One of the reasons for this behavior is downtime. In an era where retaining customers is imperative, downtime leads to losing 37% of customers and 17% of revenue. Leaving is the only thing that SMBs can do at this point. Hiring an expert SaaS development and outsourcing team is beneficial. It will help you build the software with zero downtime at deployment. A churn rate calculator can reveal valuable insights into customer satisfaction and retention strategies.
Subscription Management	In every industry, retaining customers is always better than acquiring new ones. So, under subscription management, it is imperative to sustaining a customer’s lifecycle operations. The development team must understand the importance of recurring revenue on growth. It is a challenge to maintain the customer’s lifecycle operations. Overcoming them can become easier with an appropriate product. It includes streamlining the sign-up, support, and payment system processing.
Customizing the Software	There has been a long-standing debate on the need of customizations in SaaS. Several software vendors support the cause and concur that it is essential to make a system configurable. A lot depends on the product developers and managers. The challenge posed by customizations is the situational underpinnings. Since customized systems are extended versions of the core product, they need extra time and cost. Not all the stakeholders and Saas development teams are on the same page, especially the outsourcing ones. The entire team has to work extra to provide infrastructure and additional solutions.

2. Cost Savings

Almost every new tech company has to work on a shoestring budget.

On top of this, they need the finished product to acquire money to sustain and scale.

This makes hiring a new development team for in-house next to a nightmare.

Outsourcing the SaaS development saves money.

When you start a startup, hiring an offshore agency to work on their project is one of the best options.

However, the real challenge is choosing the right kind of agency to build the product.

We will talk about aspects of hiring an ideal agency later on.

For now, it is evident that with SaaS development outsourcing, you can build a proactive product;

• With cost-optimization
• In record time.

Starting strong is critical – check out these business startup tips that offer valuable insights.

IT Staff Augmentation

Supercharge Your Team with Top IT Talent.

Hire Experts

3. Recruiting Support

The average time to hire a software engineer is 35 days.

And the cost of hiring one is around $50,000.

Spoiler alert! This is the cost over and above the salary package.

Yes, the cost can vary, but any amount of money spent on hiring a developer, if it can be diverted, should be done.

As opposed to the time and cost required, outsourcing SaaS development is quicker and more cost-effective.

Subject to the process you follow to find and recruit a team for SaaS outsourcing, you should be done with the entire process relatively quickly.

4. Faster Development

The dedicated development team involved in outsourcing SaaS development work does it almost every day.

They know the market and its challenges.

Not only this, but these guys also have an understanding of almost every industry, especially the experienced ones.

The collective impact of all these services is apparent in the fact they have ready-made development kits.

These intuitive development kits can become a decisive factor in choosing your next SaaS development outsourcing partner.

Due to this, the development work is faster, better, and pocket-friendly.

If we were to list all the benefits of IT outsourcing, then the entire time would be spent writing them only.

This is enough to convince you to choose to outsource SaaS development rather than taking on the mammoth task yourself.

It is a fact that offshore outsourcing teams are cost-effective and have expertise.

But finding the perfect team is like looking for a needle in a haystack.

That is why you need a system in place to filter out the topmost vendors.

How to Find a Trustworthy Provider

While going for SaaS-led outsourcing and development, it is essential to look in the right place.

Here, we will talk about two things;

• Places to look for hiring a vendor to outsource SaaS development,
• The process you need to follow to make a choice.

Starting with the places, make sure to include these five sources;

Source	How Does It Help?
1. Google	Google is the first place to look. You can find an excellent team here, provided you know what and how to search. Not knowing so means you will be wasting your time on endless scrolling and suffer from the multiple-tab opening syndrome. So, to make a good effort, use short search terms without any articles or conjunctions. Like type “Offshore SaaS development” or “hire remote development team,” etc. Do not use any other redundant words that can create confusion.
2. Listings	Look for SaaS developers on popular listing and aggregator websites. For instance, Crunch, Bloomberg, Good firms, Owler, etc. These aggregators have tons of recommendations and niche ranking systems. When searching for a development team to outsource SaaS, take a look; At their ranking parameters. Select the right candidate.
3. Freelance Platforms	Platforms like Upwork, Toptal, and others have a plethora of teams and freelancers working in development. The greatest benefit of using these platforms is cost-efficiency. Also, all the freelancers here have rankings based on their past work experience and client reviews. So, this gives you a headstart. Choose those development teams which have received better rankings. Using these platforms for SaaS development outsourcing is also less time-consuming. Plus, the platforms also have inbuilt communication systems (chat and call) to help you connect.
4. LinkedIn	LinkedIn is a great platform for headhunting. Already there are thousands of developers (individuals, team managers, teams, and CEOs) hustling to attract more audience. Your work here becomes easier and more streamlined. On LinkedIn, you can find an excellent team for outsourcing the SaaS work in three ways. Company Search: LinkedIn gives you the ability to search for a development team based on people, location, region, and so on. All the company profiles share their description, portfolio, and expertise to attract more clients. Groups and Pages: Like any other social media platform, LinkedIn also has groups. Search for the development teams in those groups. Check their profiles and connect if you think they can help you build your product. Send Messages: For the profiles and company pages you like, send them messages. Sending messages works best if you connect with CEOs or the high-level managers of the development team.
5. Recommendations	Last but not least, ask your network if they have worked with a remote development team before. Recommendations are a great way to receive authentic and pre-vetted team suggestions. This is one of the easiest ways to move forward with outsourcing your SaaS development.

This was all about finding your ideal development team.

From here, you must begin vetting the teams to answer the most critical questions.

Can the SaaS development to whom I am outsourcing deliver?

The deliverability of the world depends on the work process.

Any organization which cannot share their workflow should not be hired.

Not having a workflow means either they don’t have one or they don’t want to share.

So, only move forward with outsourcing your SaaS after knowing how they approach every project.

Don’t worry; we will share our workflow, which has helped us satisfy many clients until today.

Typical Outsourced Software Development Process

This is how we do it at SpdLoad.

Before sharing the workflow, we will share an example of the capabilities of our iterative process.

We received a request to build an Artificial Intelligence (AI) enabled platform to evaluate the viability of the startups, Incumato.

The purpose of the platform was to help reduce the risk of bad investments in startups.

So, we needed an extensive amount of research of and in the industry.

The research and its findings must be integrated with AI.

So, the product we were asked to make was both an intelligent aggregator platform and a startup.

After taking into consideration the scope, time, and money, we began the research by looking at any existing platforms.

Because the founder was from a non-tech background, we needed to explain everything.

And we take pride in our approach and love to explain it.

Even if the client is from a tech background, explaining the process is a must.

By following the process (discussed below), we were able to create;

• An Integration widget that can be added as an extension to the website,
• A platform to help investors check the project viability before they can put in their money.

Incumato is just one example of our expertise and the proficiency of the workflow we follow.

Here’s what we do and what every development team should do.

Before Development Begins

Before handing over the responsibility for SaaS development outsourcing, take a thorough interview of the team.

1. In the interview

• Ask them about their previous experience.
• Understand their workflow and process.
• Ask them about the challenges they face while developing.

The initial interview is about knowing the team and how they work. But on your part, make sure to prepare a detailed job description.

It shall include all the details of the job and what is expected from the developers.

Vet them by asking about their knowledge of the latest code.

What kind of software are they using?

And so on…

2. Rough Estimate

The motive of getting a rough estimate before you can move to the next round is to shortlist the teams.

Take note that you need to strike out the cheapest outsourcing teams for SaaS development teams right away.

In the true sense, hiring the cheapest teams actually means spending more than double the amount later.

Because their product won’t do you any good and you will have to spend more money on a new one.

To build a rough estimate, ask the development team to provide you with simple documentation and a UX draft.

Take this step as another measure to separate the wheat from the chaff.

3. Sign an NDA

The last step of the pre-development phase is signing a Non-Disclosure Agreement (NDA).

An NDA safeguards your interests and restricts the development team from sharing the application idea with the outside world.

This is yet another measure to scrutinize the team before SaaS outsourcing.

The team that refuses to sign an NDA is basically not planning on keeping your work confidential and may have some ulterior motives.

The companies that pass to the next stage shall go through a more rigorous process.

Development and Delivery

Well, the real development work in outsourcing the SaaS project begins here.

The earlier round was a preliminary examination to remove the non-serious teams.

If you want your product to work, grow, and scale, read the next steps carefully.

We won’t be talking about the development process here because the SaaS development needs a separate discussion.

But the next sections will focus on how to ensure that you receive the perfect product.

There are three parts to the main vetting section;

1. Discovery Workshop: A detailed analysis of the product
2. Development: The development process followed by the team
3. Marketing: Takes into account the need for product promotion and sales.

Initial Workshop

In this part of the workflow, the development team shall go through five steps;

• Detailed Interview
• Documentation
• UX Design
• Tech Solutions
• Detailed Estimate

The purpose of the discovery workshop is to build a real-life model of the product without actually writing a single line of code.

1. Detailed Interview

So, it begins with a detailed interview of the SaaS outsourcing development team.

Basically, in the detailed interviews,

• Get familiar with the entire team and what their roles are.
• Ask them the details about the approach towards product development.
• Focus on asking how they plan to solve the issues in development.
• If possible, ask for video interviews of the project manager and team lead.

Furthermore, ask about their project management practices and communication frequency.

All these matter a lot.

Note that you will be associated with the chosen company for 3 to 4 months.

And it is not likely that you can easily change the outsourcing SaaS development team promptly.

That is why the focus should be on selecting the right vendor beforehand.

Be ahead of the potential teams by knowing the aspects of hiring a software development partner.

2. Detailed Documentation

Reliable documentation is a programmer’s holy grail.

It helps them keep track of all the components of the final product and assure high quality.

For developing the product documentation, you will have to work with the developers.

Almost every step till you send the first payment is a measure to scrutinize the outsourcing team for SaaS project.

At any step, if you feel that the people you are about to hire may not be able to satisfy the requirements, take a step back.

The same goes for the documentation part.

It is a draft that includes;

• Server environments
• Rules of business
• Databases and files required.
• Troubleshooting process
• Info on application installation
• Deployment of the code
• Launch process

All these aspects are noted and explained in the documentation part.

This part of outsourcing the SaaS development is integral to the next three steps.

3. UX Design

Every UX design must be done with a single purpose to create a seamless experience for the users, especially when we talk about the SaaS design process.

The motive of the UX is to increase the product’s usability and accessibility.

While talking about the UX design with the SaaS outsourcing team, these aspects must be fulfilled.

The design creation must align.

At this juncture, you have to become a user and have the same eye for detail as a user would have.

Talk to your designing team and guide them through the interface that you want them to build.

After sharing your requirements, ask them to draft the features and interfaces with expert usability and design.

There shouldn’t be any discrepancies in the design which can hinder the end-users experience.

Because 47% of the customers expect the screen to load in less than 2 seconds.

Yes, that is your window.

Do you know what influences a UX designer? It’s the company culture.

Yes, it’s true.

That is why it is imperative to take a holistic view of the SaaS development team before outsourcing.

While the SaaS development team you are outsourcing the work to talk to them about the design;

• Ask whether they use an iterative process.
• Do they take into account the user feedback?
• Ask them how they evaluate the usability features.

Along with this, the ideal development company must work with digital tools for designing.

Pay special attention to the UX designer’s ability to work in an agile structure.

While taking into account the feedback by the quality assurance team.

4. Tech Solutions

This is the last interpretational part before we get to the development part.

The SaaS outsourcing team needs to share the tech stack under the tech solutions they will use for development.

The tech stack is super important as it helps identify the expertise.

Make it a point first to understand the nuances of a SaaS product.

Along with this, identify the ideal tools required for the development part.

5. Detailed Estimate

Until this point,

• You will have the documentation.
• Features list UX designs.
• Tech stack.

Now, you can ask for a detailed estimate from the SaaS development outsourcing team.

The preparation of a detailed estimate must take into account several aspects.

This is what we call a detailed statement of work (SOW).

It accounts for all the elements required in the project development, listing out their cost.

Creating an estimate of this scale means understanding the full-fledged scope of work.

Mostly, this includes the time required to build every aspect.

We Transform Your Ideas into Scalable SAAS Solutions

Explore our SaaS services today

Talk to us

For instance, you shall expect a complete list of all the tasks.

They must be separated into different headings, like frontend, backend, design, etc.

The SaaS development and outsourcing team you choose should be able to create a list of every part of the project while listing their time frame.

Because we took time to understand the product in the discovery workshop, it became easier to create a detailed estimate.

The last essential aspect of this exercise is development.

Software Development Begins

As we have said before, this guide is not about the development part per se.

However, our focus is to help you choose the right vendor for outsourcing the SaaS development work.

We can tell you that you always enter the market with the MVP.

The cost of MVP and the time to build one is feasible for the beginning of the startup.

Once the product has enough audience and achieves the objectives, you can scale it and add more features.

It is important to know what an ideal SaaS and outsourcing development company must do while they are developing the product?

Development Aspect	Its Importance
Agile Management	Agile project management is a vision-led technique to help build efficient software. Under this, you must expect the outsourcing SaaS development company to adapt to the existing conditions. Most importantly, as we have said in the detailed estimate, “The entire project must be divided into small modules.” Every module must be completed separately in terms of its importance. The most crucial benefit of agile project management is changing the system with the requirements. Explore the best project management software to find solutions tailored to your business needs.
Constant Communication with the Customer	This is a primary condition. Do not hire any outsourcing vendor working on your SaaS development; That is not enthusiastic about communicating. And discourage your involvement. There are two significant reasons for this; The SaaS development goes, the development team is more technically mature. So, you require constant updates on the task. Secondly, communication is imperative to solve computational and project-related problems. As the product visionary, your guidance is imperative for successful outsourcing SaaS development.
Constant Demos	Set a schedule to get updates and demos on the project regularly. This will help you keep an eye on the project development and ensure that it aligns with the documentation and vision. If possible, you must add these duties to the development team before outsourcing the SaaS work.

Once the development part is complete, launch the software and start its marketing with full vigor.

Product Marketing

The marketing efforts shall begin before the development begins.

Not all SaaS development companies and outsourcing vendors provide both development and marketing.

But, you can ask for recommendations from them.

If they do have a marketing team on board, it would be great to take their help in product promotion.

Marketing of technical software that is based on the cloud is a different angle.

The focus must be on convincing the users to work with your project and enjoy its benefits.

In this scenario, it is essential to create customer-centric campaigns.

Look for their pain points and highlight the solution in startup marketing strategy.

Outsourced SaaS Development Costs

Well, the detailed estimation of the entire project will be provided by the team you choose.

But to find out the average cost of SaaS development, we need to things:

• The number of hours required to build the software.
• The average cost per hour of the outsourcing SaaS development team.

Talking about the team first.

You need a team of five people to build the SaaS product.

1. Designer
2. Project Management
3. Backend Developer
4. Frontend Developer
5. Quality Assurance Tester

These five technical experts will comprise your SaaS outsourcing team.

Now, to get the work done, you can hire three types of teams;

• A Local US Agency
• Freelancer
• A Team from Ukraine

We will list out the average cost of development for these teams.

Type of Team	Pros, Cons, and Cost
Local US-Based Agency	Outsourcing the SaaS development work to a local US agency means onshore outsourcing. Pros: No issues with communication. Seamless meetings High product quality Easy to understand as there is no language barrier. Easy to manage as you and the team are in the same time zone. Access to the best teams in the world. Cons: The high cost of development. Not suitable for startups Cost: In the US, you will find Big business-class and mid-market-size development companies. The average hourly price of these companies ranges between $125 to $300 per hour. So, for a project that takes 1000 hours to build, you are looking to spend $125,000 to $300,000.
Freelancers	Hiring a group of professionals with no strings attached to any organization is your second option. However, for this type of SaaS development outsourcing, you need a different guy for every aspect of the job. Pros: Easy to find Cost-effective, they are ready to build the product on a shoestring budget. Cons: Difficulties in management Not a part of the SaaS development team for outsourcing. Time zone differences. Unreliable as they can leave at any time. Cost: Because many developers have less per hour development charges, the global average takes a hit. With $25 per hour as the average price, it will cost around $25,000 for a 1000 hour work. But this will be the lowest quality of the product. *Remember what was said before about cheap development products.
Ukrainian Team	The developers from Ukraine can adeptly deliver outsourcing and SaaS development work. These are the guys you can trust and rely upon to deliver performant digital interfaces at low cost and record time. Pros: High product quality. Cost efficiency. No gaps in communication. Agile project management. Cons: Time gap issues can arise. Cost: On average, software engineers in Ukraine charge $33 per hour. This means that for a 1000-hour project, the total cost will be $33,000. So, the cost of development is optimal, and you will get the highest quality of product.

This means that hiring a US agency for SaaS development outsourcing will cost an arm and a leg.

However, you will get the highest quality of the product.

But do you have that kind of budget?

Freelancers are cost-effective, but the product quality they provide is not viable.

Going ahead with SaaS outsourcing and hiring a Ukrainian will help you;

• Save money
• Get the highest quality of the product.

If you’re entering the SaaS world, these best SaaS startup ideas are worth exploring.

Looking For a Reliable Outsourcing Partner?

At SpdLoad, we’ve raised the bar as an industry leader with over ten years of proven expertise and hundreds of millions of dollars for clients.

Rather than just being a vendor, we collaborate with you as an invested partner to make your software vision a reality.

Ready to turn ideas into working software?

Let’s connect to explore how SpdLoad can become an extension of your team.

Fill out our contact form or schedule a call to discuss your app requirements. We welcome any opportunity to turn insights into prototypes and prototypes into industry-defining SaaS solutions. The next big app starts here.

And if you’re deciding between software models, this comparison of the ASP model vs SaaS model can help you choose.