Software Development for a Startup: Should You Outsource Your Project?

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Key Takeaways

• 92% of small and large businesses globally outsource operations, saving costs without sacrificing quality
• The main focus of software development for startups is creating scalable, innovative, and competitive software that aligns with the startup’s objectives and market needs.
• Outsourcing is the cost-effective choice for startup software development, but partnering with a trustworthy, experienced company is crucial.
• Over 42% of startups fail primarily due to building a solution for a minor or non-existent problem.

Software development for startups is extremely risky. 90% of emerging companies fail, and only a fraction of survivors produce a profitable exit. But don’t let that discourage you! Take it as a challenge. Our guide will show you how to improve your chances of launching your business successfully.

Recognized as a startup’s top software developer, Acropolium applies decades of tailoring solutions for growing projects requiring technical and business development expertise.

Today, we will break down what makes the software development process distinct for early businesses. With our tips and success stories, you will learn to avoid common challenges, validate your business idea, and improve time-to-market while reducing development costs. Read on to explore the advantages of outsourcing development for startups and discover how to find the optimal vendor!

What is Startup Software Development?

Startup software development refers to creating and delivering software solutions tailored to young companies’ specific challenges and objectives. It starts with idea validation and follows with product design, coding, testing, and deployment, usually including ongoing maintenance.

The core priority in software development for startups lies in building scalable, innovative, and competitive software that aligns with the startup’s goals and market demands.

In 2023, the custom software development market was valued at $35.42B. Currently, it’s expected to grow at a CAGR of 22.5% from 2024 to 2030. Such a substantial growth is forecasted due to the global need for automation of core processes and the adoption of machine learning both by startups and large enterprises.

Apart from the ultimately customized strategy and functionality, growing businesses can achieve more long-term strategic benefits with bespoke software:

• Built to scale with the startup’s growth, custom software can accommodate increased user loads, new features, and evolving business processes.
• It provides unique functionalities and innovations that differentiate the startup from competitors, helping to attract and retain customers.
• Bespoke software development for startups is easily adaptable to changing market conditions and customer feedback, allowing quick pivots and updates without significant disruptions.
• It integrates with existing tools, legacy systems, and third-party services, thus amplifying efficiency and functionality.
• Custom development focuses on creating a user-centric design, which improves user satisfaction and engagement for future customer retention.
• Today’s startup development services offer robust security measures for data protection, ensuring compliance and safeguarding user information.
• Lastly, startup owners get full control and ownership over the software, including source code and intellectual property.

What Makes Startup Software Development Unique?

Startups and emerging companies seek to validate their idea, capture an audience, and create a profitable revenue model. Their goals are often reflected in their IT infrastructure, management, and software development process.

Let’s go through the main differences between software development for startups and established companies.

Focus on innovation

According to a Tata and AWS survey, over two-thirds of enterprises are still tied with legacy infrastructures like EMR and ERP systems, meaning they must refactor their systems to implement the newest technologies. On the other hand, startups can pick a modern architecture that integrates with current technologies, like AI-powered analytics and machine learning.

Easier to scale

Unlike larger companies stuck with on-premises infrastructure, most startups choose cloud-based infrastructures. For example, by using Amazon Web Services (AWS) and Microsoft Azure for cloud migration and setup, one can automatically adjust storage, servers, and computing resources. Actually, the Cloud Security Alliance report states that 98% of companies choose cloud platforms for operational scalability.

Flexible development

Decision-making and change management are much faster in startups because they have fewer stakeholders. Smaller teams are also prone to using flexible methodologies that focus on teamwork, automation, and iterative development.

Time-sensitivity

Startups fail because they miss their window of opportunity. You have a limited time to capture the market fit because other companies can capitalize on your idea and build their product faster. In fact, a lack of proper product-market fit causes 34% of small business failures.

Smaller scope

Startup and enterprise software usually aims at different audiences. Smaller businesses are trying to fix a specific problem and fill niche market gaps. Enterprises have a broader focus and often target other companies, which is why their software has more features.

Dependence on research

Startups must determine their audience, identify a significant problem, devise a solution, and build a business model that solves it. This makes research and market study critical parts of the software development process and clearly defines development costs. After all, enterprises have more resources to experiment with and promote their solutions.

Our guide would be incomplete if we didn’t mention the challenges startups face during development.

Benefits of Software Development Outsourcing for Startups

Are you still wondering if you should hire an outside company or rely on your team? Let’s figure out the benefits of outsourcing your project to a reputable company.

• Global talent pool. Manpower Group’s 2024 survey on global shortage reveals that 69% of employers worldwide are having difficulty finding qualified candidates. However, outsourcing helps you reach beyond your local talent pool to experienced engineers, designers, testers, and project managers.
• Scalable team. Software projects often change their scope over the lifecycle. Choosing a flexible outsourcing company means you won’t need to overpay your team, fire people, or search for new employees since vendors can easily change the team size based on your needs.
• Easier management. It’s up to the vendor to keep the project to the agreed schedule and budget after you approve the plan. An outsourcing company provides a project manager who’ll oversee the software development lifecycle and be your main point of contact with the team. You can also access advanced tracking tools to observe the progress, communicate with developers directly, and approve changes.
• Focus on core objectives. A savvy software development company for startups will take over your bottlenecks and technical complexities. This allows you to prioritize core business activities like innovation and market expansion. By turning to an outsourcing team, startups ensure efficient software development aligned with high standards. As a result, you will be focusing on strategic growth initiatives without being burdened by the challenges of internal managing the development.
• Security focus. Experienced providers integrate the latest security, data privacy, and risk mitigation techniques into your software development process. Some companies can help you improve your code quality and cybersecurity with efficient DevSecOps practices like automated testing, compliance checks, and security scans.
• Agile practices. Outsourcing companies can apply iterative methodologies that enhance software development for startups. Choosing a company that uses Agile practices improves time-to-market (64%), software quality (45%), and team productivity (60%). Plus, a developer with DevOps mastery can release code twice as fast with a three times lower failure rate.
• Cost saving. Efficient development practices, access to an advanced technical stack, team scalability, and effective management help you stick to your budget. You also don’t need to invest in onboarding and training your employees since you pay only for the time and resources spent on your project. By the way, 92% of businesses worldwide outsource segments of their operations without compromising on quality, achieving cost savings in the process.

Challenges of Outsourcing Custom Software Development for Startups

Here are some limitations and problems you should be ready for during the software development lifecycle.

Unrealistic estimation.

Software projects often run over budget and take longer than expected because companies underestimate the impact of technological complexities, scope changes, and other risks. You should also have enough resources to support your startup after launch, which requires a long-term plan with post-release goals, milestones, and an allocated budget.

Tunnel vision.

About 14% of startups fail because they’re too focused on the initial research and ignore their customer’s input. You should be ready to pivot based on your audience’s reaction to your product, features, and business model.

Insufficient security focus.

According to Statista, unauthorized access (35%), compliance (37%), and insider data threats (38%) are the main challenges for IT professionals. Even a single major data leak or data privacy law infringement can cause devastating consequences to your startup.

Wrong methodology

Development can go off the rails without effective software development practices and tools. Speaking plainly, your team should be familiar with iterative methodologies if you want to maximize productivity, establish quality assurance criteria, and control your expenses.

Lack of expertise

Finding competent full-time engineers with relevant expertise is difficult for emerging businesses. You also need experienced project managers to plan, track, and schedule the development. You might need to augment your in-house team with third-party talent or outsource parts of your project.

But don’t think you can relax even if you hire an agency to do the hard work. You still need to plan out the production and post-release support before launching your project.

How to Prepare for Startup Software Development: 7 Steps

Preparation is critical for testing your business idea with limited resources and time. So, here are the steps you should follow to minimize risks when planning for custom software development for startups.

Step 1: Identify the target audience

Building a solution for a minor or nonexistent problem is cited as the main reason for the failure of over 42% of startups.You must create a detailed target audience profile before launching your startup. It should have the following information:

• Who is your ideal customer?
• Where are your customers located?
• What devices do they use?
• What problems and desires do they have?
• Are there any existing solutions for that?
• How do they solve their problems or satisfy their desires now?
• Why do you think the existing solutions don’t meet their expectations?
• How often do your clients face these problems?

Focus on one essential pain of your audience instead of trying to solve everything at once. You should also evaluate its significance by surveying people who match your customer profile and researching potential competitors.

Step 2: Study the market

Dissect other companies’ software, development process, and revenue model: look through review platforms and social networks to see their audience’s feedback. It’s equally important to learn from unsuccessful startups in the same niche.

Visiting technology startup forums, hackathons, and meetups is another excellent way to discover success stories and failures. Doing so helps you avoid rookie mistakes during custom software development.

Finally, you need to know about regulations for your industry. For example, healthcare and health-tech companies should follow HIPAA, GDPR, PCI DSS, and other local laws to get licensed and avoid fines.

Step 3: Document requirements

The development team must define the SOW (statement of work), decide on the technical stack, and document all specifications. If you want to outsource the project, you should work out these questions with your software development services provider.

Some of the things you should document at this stage include:

• Programming languages, frameworks, APIs, and middleware
• UI/UX design specifications, application logic, and key features
• Type of architecture (monolith, microservices, containerized, or hybrid mode) and tenancy isolation
• Authentication, authorization, data breach prevention, encryption, and access control tools
• Risk mitigation strategies and backup solutions
• Ability to scale the daily load, latency, and other KPIs.

Startups shouldn’t shy away from open-source toolkits and frameworks to speed up development. For example, low-code platforms provide ready-made templates and graphical interfaces to reduce hand coding and involve non-technical staff in production. In a recent survey by Forrester, 87% of enterprise developers are now utilizing low-code development platforms for some of their projects.

Step 4: Build a roadmap

A roadmap lays out the software development lifecycle into steps with goals, progress metrics, deadlines, and success criteria, helping you allocate the budget. It would help to create a separate roadmap for the stakeholders, developers, marketers, and IT operations teams to prioritize the core tasks. Startups can also build an external map for customers to motivate them to wait for new features in future updates.

You need to calculate one-time purchases for each development stage. Next, determine the recurring costs for cloud hosting, subscriptions, fees, taxes, and other services throughout the lifecycle.

Step 5: Design a business model

Based on market research, identify the suitable payment model and pricing for your product. You also need to ensure your strategy can scale as your business expands.

Most startups pick the subscription-based model like SaaS. Or, you can take free mobile applications that make money from in-app ads but also allow users to upgrade to an ad-free subscription. You can also introduce several tiers of prices based on available features, concurrent users, or consumption metrics.

Step 6: Validate your idea with an MVP

Before investing in full-scale development, you should validate your business. That’s when you need a minimum viable product (MVP)—a simplified version of your product with bare-bones functionality.

An MVP will let you introduce your product to customers faster and with less investment. It helps you validate the demand for your solution, get feedback from users for further iterations, and attract investors.

During the development, concentrate on the features that solve the audience’s core problem. You can even spare resources on a scalable architecture and use third-party integrations.

Step 7: Establish a feedback loop

You must promote your startup before launching an MVP or a prototype. An effective feedback loop is critical for capturing your customers’ feedback and keeping them invested.

You can create online forums, build communities on social media, and incentivize users to participate in surveys. Companies in niche industries, like health-tech, should also be ready to back up their solution with peer reviews, scientific research, and consumer metrics.

Software projects are never easy, especially for enthusiastic startups with little experience. So, it wouldn’t hurt to get help from professional outsourcing firms.

What to Look Out for in a Software Development Company?

Did you know that 60% of companies outsource their development (at least partially)? Let’s just hope that all of them have found nice vendors because the wrong company can waste your money and time or expose your confidential data. So, carefully evaluate your outsourcing destination and potential companies based on the following criteria:

• Outsourcing location. The choice of outsourcing location impacts pricing rates and developers’ skills. So, you should choose a market with a large talent pool, reasonable rates, and exceptional developers’ programming skills.
• Time zone. Your vendor’s business hours should overlap with yours to avoid communication gaps. It would also help if your outsourcing company had branches and offices worldwide so you could reach them outside the main offices’ business hours.
• English proficiency. The language skills of the developer’s team ensure your project won’t suffer from misunderstandings. So, picking a market with a high English proficiency gives you a better chance of avoiding communication problems.
• Certifications. It’s a nice bonus if the company has certifications according to international standards. For example, the ISO 9001:2015 standard means the company follows consistent quality standards across all projects.
• Track record. Make sure the vendor has experience with similar projects and technologies. You should also check their pages on popular review platforms (like Clutch) and inspect their portfolio.
• Payment model. Find a software development company with a suitable pricing model for your startup. This could be time and material (you pay for the development and additional expenses), dedicated team (each member has an hourly rate), or Software Development as a Service (when you pay a fixed monthly fee for all kinds of software development activities).

If you’ve shortlisted many companies, you can vet them faster by sending RFIs (requests for information). In this document, you can inquire about their software development services for startups, team size, experience, and pricing. It makes it easier to filter out those that don’t meet your requirements and compare those that do.

Acropolium’s Expertise

Acropolium has helped companies from different industries grow with the power of cutting-edge tech approaches and expert consultations. Here are some of our client’s recent success stories, where outsourcing software development resulted in tangible business benefits.

Car Navigation Software

When developing a car navigation solution for a GPS software company, we had to create real-time features for traffic updates, accident alerts, and road closure notifications.

Solution

Aiming at improving safety and convenience while reducing travel time and minimizing risks, Acropolium developers crafted a navigation system with the following processes:

• We designed a user-friendly interface with high-contrast colors and large fonts.
• The system uses real-time traffic data to update routes and connects seamlessly with the car’s technology.
• Users can set route preferences, use voice commands, and enjoy safety features like night mode and HUD.
• Its modular design allows for easy updates and new features.

Results

• Improved customer retention by 25% with reliable navigation features.
• Reduced downtime by 10%.
• Increased productivity by 18% with efficient route planning.

Supply Chain Data Analytics Software

A logistics leader engaged Acropolium for data analytics to optimize inventory management and transport routes for enhanced customer satisfaction and operational efficiency.

Solution

Our developers employed predictive analytics and machine learning to enhance demand forecasting and inventory accuracy by analyzing historical and real-time data:

• We provided intuitive dashboards and reports for real-time supply chain monitoring and decision-making, with robust data security measures ensuring GDPR compliance.
• Our software featured advanced analytics for both historical and real-time data, centralized management of diverse supply chain sources, and user-friendly dashboards for easy access and decision-making.

Results

• Operational efficiency improved by 27%, while system downtime decreased by 20%.
• Inventory costs were reduced by 15%.
• Enhanced service quality and personalized engagement led to a 22% increase in customer retention rates.

Conclusion

Following our guide can improve your chances of launching a successful startup. Of course, that doesn’t mean there’s no risk that your business won’t take off. But even in that case, the practices we shared will help you spend as few resources as possible on idea validation.

Outsourcing remains the most cost-effective way of custom software development for startups. First, however, you need to make sure you’re working with a trustworthy company with relevant experience.

Over the past two decades, Acropolium has delivered 170+ projects: from mobile applications to complex enterprise software for various industries (healthcare, fintech, HoReCa, automotive, and more).

We offer a wide range of services, including consulting, turnkey and subscription-based software development that cover all your technical needs. Just contact us, and let’s talk business.

Sources of Information

• The Global Startup Ecosystem Report, 2024
• Top Custom Software Development Companies — Clutch
• Custom Software Development Market Report 2024 — Grand View Research
• Top 20 Reasons Why Startups Fail — CB Insights