Outsource work vs work in a product company: what to choose?

Buster Bonney

Programmers understand how different IT companies invite them to work. It can be a company with many years of work experience or a startup, international or local business, outsourcing, or working in a product company. The latter comparison is often used because it speaks of pronounced differences and similarities.

Wantao Limited decided to share its opinion about product and outsourcing companies, as we have learned their features very well. After reading this article, you can better see the difference between product development and project execution and understand which is best for you.

Let’s refresh the basic concepts

Outsourcing IT company sells custom software development services and sells diverse products for customers. Customers pay for the finished result, performed within the framework of the TOR.

A product company develops a proprietary IT product or a group of products (applications, websites, antiviruses) and makes a profit from them. As a rule, the products are owned by the company, at least 51%. The product uses one set or a line of technologies for a long time.

Wantao Limited emphasizes that speaking about outsourcing and product companies, they contrast projects and products and approaches to work that arise on this basis. Let’s look at the similarities and differences between the two types of companies.

What is typical for outsourcing

• Are there any similarities in working on projects and products?

• Yes, and there are many more of them than meets the eye. Software is developed using similar processes and concepts.

So, the proven Agile approach can be used in both types of companies. On projects, it will come with a stricter limit on hours and budget than on product development.

Both outsourcing and product companies consider the wishes of customers and strive to establish long-term cooperation.

Outsourced developers can create projects for a regular customer for years, treating them as carefully as their colleagues from the product company to their products. So, we have been cooperating with Effective Coverage for more than 10 years, helping partners maintain an online insurance system.

What’s the difference?

1. Timing of tasks and related to time

In outsourcing, the terms of tasks are determined by the terms of the agreement with the client. The customer pays for the final result and is not ready to change the release date and budget for no reason. Developers often track their working hours hourly.

In the product company, the deadlines for completing tasks also play a role, but they are not as stringent as outsourcing. Of course, delays in bringing a product to market or updating it will be bad for business. The management of the companies exposes KPIs tied to the terms to managers and/or the team and monitors its implementation.

The time frame of tasks is not determined by external obligations, but rather by internal tasks (promotion plan, market research, efficiency requirements).

It is widely believed that outsourced developers lose their salaries due to downtime when the team has few orders. No one is immune from such moments, but not all companies pay for this time.

2. Degree of business dependence on specific products

Processes in a product company are tailored to the solutions produced and depend on their success in the market. If a key product fails, the company will lose its main source of profit, and if it “shoots,” it will go down in history. Often such a business is focused on one industry, for example, banking. The situation in the core market directly affects the company’s revenue.

Outsourcing is less dependent on the success of a particular application. He cooperates with clients from various industries, he can also take on government orders. A long-term partnership is appreciated, but not a prerequisite. If one market sags, you can pay more attention to finding other orders. For example, our company works with clients from telecom, logistics, healthcare, the financial industry, education, and art.

3. Corporate culture and employee interests

If a company produces products for the music market, its employees must be deeply immersed in its processes. Specialization leaves a noticeable imprint on the interests of people and the general corporate culture.

In outsourcing, culture is formed without reference to one of the projects. Team members may have non-overlapping interests and hobbies. Clients from around the world allow you to get acquainted with numerous cultures, ways of interaction, communication styles.

Now is your turn to choose!