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Why SaaS companies should consider outsourcing

(Image credit: Image Credit: Wright Studio / Shutterstock)

Software as a Service (SaaS) is quickly becoming the single most popular method of software delivery for customers around the globe. According to a report by BetterCloud, 73 per cent of businesses say their applications will be SaaS by 2020. And with the fastest growing SaaS companies scaling their teams by 56 per cent 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 globalised world economy, outsourcing is often 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. And as SaaS increases in popularity, outsourcing can indeed be an essential component for long term success. Here are three reasons why SaaS companies should consider outsourcing as an option.

1. Rapid and enhanced growth

Software companies are faced with particularly challenging barriers to success. One of the most pressing challenges they face 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 per cent would certainly be an exciting achievement, but if a software company only grows 20 per cent annually, it has a 92 per cent 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, the cost to fire them and the cost to keep them on is 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. And 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 help make sure 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 will begin to happen. They will have to start hiring more people, creating new teams, and developing new policies and procedures. Also, they will have to begin building out their IT infrastructure. Doing this is timely and costly.

Software companies must keep in mind that SaaS is only as effective as it’s 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 per cent 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 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 not afforded when scaling internally.

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 a variety of external and internal factors. Outsourcing can help companies get ahead of the competition. If a SaaS company isn’t experiencing growth, their competition probably is.

Beyond the simple cost benefits of outsourcing, SaaS companies can also experience significant growth, quick development life-cycles, 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 is ignored. As the SaaS industry becomes more competitive, outsourcing provides an option to help with growth. And for businesses in this industry, growth is an absolute necessity, because without it, success wanes and the competition overtakes the market.

Nacho De Marco, CEO, BairesDev (opens in new tab)
Image Credit: Wright Studio / Shutterstock

Nacho De Marco is the CEO of BairesDev, a technology services company that specializes in software development, software outsourcing, testing and staff augmentation solutions.