Software as a service (SaaS) is one of the largest segments of the cloud market, with revenues expected to grow 22.2 percent and reach 45 percent of total application software spending by 2021. The industry as a whole is expected to reach $76 billion per year.
With the rising demand for SaaS solutions, competition is increasing, and SaaS companies are saturating the market. For instance, SaaS initial public offerings (IPOs) have more than doubled over the past 12 years. Some of the highest-performing SaaS companies are growing their teams at an average rate of 56 percent per year.
As the SaaS industry matures, companies in this field must achieve product-market fit rapidly if they are to survive and stay ahead of their competitors. Many SaaS companies are turning to outsourced development teams to help them meet market demands in a lean and cost-effective way.
Here are four key benefits of outsourcing SaaS development.
1. Outsourcing lowers your startup costs
SaaS companies often launch with limited budgets and resources, which can make developing their minimum viable product (MVP) a significant challenge. By working with an outsourced development firm, companies can create an MVP without spending their entire budgets, or reducing their features to the point where the value for customers drops.
A leading example of a SaaS company that outsourced its web and app development so it could begin testing its MVP as quickly as possible is Slack. Outsourcing allowed the company to roll out a prototype and test its collaboration software without significant financial risks. The strategy clearly paid off as the company now has millions of users around the world and a current valuation of $7.1 billion.
2. It adds experience and efficiency to the development process
Recruiting new talent in-house can be an expensive and slow process. Additionally, it can take even longer to build up a team that collaborates well together. A major benefit of working with an outsourcing partner during the SaaS development process is access to a range of technical expertise.
Rather than hiring a new in-house developer to take on specific aspects of the project, outsourcing provides SaaS companies a team of talent whose skills may range from product management and UX/UI design to testing and cross-platform development.
The right outsourced development team has likely worked together already on similar SaaS projects and can lead the process with helpful advice every step of the way. For example, the outsourced team can help with decisions about important SaaS features, such as email and chatbot integrations and payment systems. They can also provide guidance on which aspects of the site or software can be created with existing technology and which aspects need to be built from scratch.
3. It helps you meet market demands faster
The ability to scale quickly is vital for SaaS companies. According to McKinsey, if a software company grows only 20 percent per year, then there is a 92 percent chance it will cease to exist in the future. Even if a software company grows 60 percent per year, its chances of surpassing 1 billion in revenue are still only 50 percent.
Continuous updates are essential for SaaS companies because the market demands them. Not to mention, SaaS companies must continuously deploy new features to compete with the dozens of new players entering the market constantly. Outsourcing software development allows companies to have peace of mind that they are moving their projects along fast enough.
4. Outsourcing provides affordable talent
Not only is it time-consuming and expensive for SaaS companies to hire in-house, but it is becoming increasingly difficult to find qualified developers that possess the skills and know-how necessary to fulfill today's ever-changing technology requirements.
From security and compliance requirements to data management and automation, SaaS team members must be able to handle a variety of tasks, many of which may fall outside of the role for which they were hired.
When team members are stretched too thin for too long, it damages the company's productivity levels and decreases morale. Working with a consistent and reliable outsourcing partner allows SaaS companies to fill key roles with the appropriate talent. Not to mention, it can help keep existing employees happy and minimize employee churn.
With an outsourced development team, companies can also build more features and expand their services faster because hourly rates are lower. Outsourcing development to developers in the U.S., for instance, can cost anywhere from $80 to $150 per hour, while outsourcing to developers in Latin America can cost between $40 to $70 per hour.
The future of SaaS development
Whether it's during the MVP stage or growth stage, working with an outsourced development team provides a number of benefits for SaaS companies. According to Cisco's Global Cloud Index, 59 percent of all cloud workflows will be delivered as SaaS by the end of this year.
As the industry continues to grow, not only is it becoming more common to outsource certain aspects of the SaaS development process, but it is practically unavoidable for companies that need to save time and resources to continuously deliver value to their customers.
These intense work styles are often celebrated as the only way to get to the top and be a super-productive leader. Indeed, surveys show that managers and executives describe the “ideal worker” as someone with no personal life or caregiving responsibilities. And a majority of leaders themselves — the ones who set the tone for organizations and model behavior for everyone else — think work-life balance is “at best an elusive ideal and at worst a complete myth.” In an interview, three CEOs rated as top performers by HBR said the job was 24/7 and admitted they weren’t great role models.
But does it have to be that way?
That’s a question Jessica DeGroot sought to answer nearly 20 years ago when she started the nonprofit ThirdPath Institute, an organization dedicated to helping people find time for work, family, and life. She formed a group of about two dozen men and women in senior management at law firms, public and financial service entities, small businesses, and Fortune 500 companies like Booz Allen Hamilton, Eli Lilly, Marriott, IBM, and Ford who wanted to challenge the notion that work-life balance is impossible for leaders. “We all wanted to do work and life differently,” DeGroot told me. “But weren’t sure how.” They had no role models. And few people she talked to, she added, thought they could.
In regular phone calls and meetings for nearly two decades, as well as a biennial Pioneering Leaders summit, the group has been helping each other figure out how to work more effectively so they could have time for their lives, sharing successful strategies and learning from failures. During one of their monthly webinars I observed, the group began by sharing photographs of their families and talking about their lives outside of work. Then the group launched into an intensive discussion of boundaries, episodic and chronic overwork, and how they’re managing their work-life balance in the face of work or life emergencies — and sometimes both. One man, juggling work with caring for a sick child, said he’s now reaping the benefits of all the years he’s communicated and modeled how work-life balance is one of his core values. “It’s enabled me to have a bond with my daughter now that’s really amazing,” he said.
It is part shared confessional with peers and part trading research, strategies, tips and lifehacks that DeGroot collects and analyzes for best practices. For instance, DeGroot noticed that a handful of the pioneering leaders were really good about taking vacation, being able to turn off work, connecting with their families and friends, and returning refreshed. Their strategies have since become the “Vacation Checklist” DeGroot shares with others at the nonprofit. Some of the most effective strategies, they’ve discovered include planning vacations, where possible, around the seasonality of work; delegating and reviewing essential team work two weeks before leaving; creating a “what can wait” list one week before vacation; and avoiding scheduling meetings and phone calls one day before and one day after vacation to concentrate on essential priorities.
She’s done the same for strategies to create concentrated quiet time to focus on priorities at work rather than be in constant firefighting mode of responding to e-mails, meetings and emergencies, for managing email overload, for setting priorities and other thorny issues. “We kept trying. We kept tweaking,” DeGroot said. “Then we started to see, ‘Oh, this is not only a better way for me to work, this is a better way for everybody to work.’ And when you get leaders to behave differently, it sends a signal to the rest of the organization that they can behave differently, too.”
For leaders to stand up to status quo pressures and make work-life balance a priority, DeGroot discovered, these pioneers had to cultivate skills around three relationships: learning to work differently with their teams at work, making a plan with their families to put home and family first, and shifting their own mindsets to not only believe change is truly possible, but to give themselves permission to try, and speak up about it. The stories of three leaders exemplify how this can be done.
Learning to Work Differently. Like many men of his generation, Ivan Axelrod, 72, a managing director of a financial management firm in LA, spent most of his life climbing the corporate ladder as a work-focused primary breadwinner. It wasn’t until he became a grandfather that he decided to change. His own parents had died when his children were young and never knew them. He wanted something different for his own grandchildren. “I wanted them to know their grandfather.”
So, when his daughter began lining up child care and preparing to go back to work after a three-month leave, the two grandmothers offered to take two days a week each. Axelrod volunteered to be the caregiver for the fifth day. He had to sell the idea to both his family and the other managers at work. “I said, ‘I have good people here. I’m going to push more responsibility onto them, which should help them develop faster. I believe it’s going to work,’” Axelrod said. “Reluctantly, they said OK to me. That was in 2008. And I’ve been doing it ever since.”
As a result, Axelrod has worked to create a culture where everyone can have time for work and life, promoting flexible and remote work and opening an office closer to where people live to cut down on commutes – efforts which have reduced turnover and recruiting and training costs, and increased employee morale and productivity. “If you have a structure that allows people some flexibility, they will produce better results for the organization. I see it all the time,” He said. “The bottom line increases when you make these changes.”
On Mondays, Axelrod takes his two grandchildren, now 11 and 9 years old, to school, works at home, picks them up afterwards and takes them to activities like swimming lessons. “I’m heavily involved in their lives. It has been huge for me, and terrific for them,” he said. “When I’m gone, they’re going to have a lot to remember.”
Believing in Your Plan and Speaking up. With few role models, and cultural expectations arrayed against them, someone like Axelrod had to first imagine something new: how he really wanted to combine work and life. Then he had to believe that not only was it important enough to try, but also — through a series of trials and errors — actually possible to sustain over the long-term.
This was also true for Michelle Hickox. In 2004, Hickox was a certified public accountant in Texas and at a crossroads in her career. She loved her work and wanted to make partner, but the only role models she had were men with at-home wives, and one woman with round-the-clock nannies, all of whom worked all the time and rarely saw their families. “I didn’t want that,” she told me.
When her eldest daughter turned five, the transition from year-round child care to the traditional nine-month kindergarten schedule forced Hickox to think hard not only about how to manage child care in the summer months, but what she really wanted out of work and life. Her own parents had been teachers, and she loved the summers the family spent together. So she imagined something no one else had: taking summers off and staying on the partner track. She negotiated an 80% schedule and took 11 summers off in a row while her daughters were growing up, and still made partner. “I’m not sure when I first asked if I thought it would be successful,” said Hickox, now CFO of Independent Bank in McKinney Texas. “I learned I needed to speak up. That just because something didn’t exist meant maybe nobody had ever thought about it.”
None of this is easy. Like all leaders, Hickox has hit a wall. A few years ago, when her work had been intense and she was feeling completely out of balance, she almost didn’t come to the pioneering leaders summit I attended and first interviewed her for this piece. “I had such guilt. I thought, ‘Wow, I’m supposed to be one of these pioneering leaders and I have totally sucked this past year. I shouldn’t even be at this conference,” Hickox said. “But that’s when you need this stuff the most.” What she has found – and behavioral science research reinforces — is that having a supportive, like-minded network of peers via the summit and their regular conference calls makes it more likely for behavior changes to stick.
Hickox, now 51, has since become the kind of role model she was looking for. Flexible work, remote work, paying attention to performance, rather than when people come and go in the office have become the norm. When she discovered the bank didn’t have a paid family leave policy, a word to the CEO changed that. “The culture in the bank’s accounting and finance team has changed totally since I got here,” she said. “I don’t think you have to work like a crazy person to get ahead. I just think, in the time you are working, you have to learn to be effective.”
Making a Plan to Put Family First. Imagining a different way to work and live also means adopting a mindset that recognized both work and family were important. Will Rowe, 59, a principal at Booz Allen Hamilton in Washington, D.C., and his wife Teresa, a pediatrician, began their marriage with vows promising to be equal partners and to put family, faith, friendships and flexibility first. They both wanted important, but not overwhelming careers. Rowe’s parents were workaholics, he said, who rarely saw each other and wound up divorced. So once Rowe and his wife started a family of their own, the couple committed to spending as much time with family as possible. Will worked four days a week, Teresa an alternate three, and a neighbor cared for their two children one day a week.
The flexible schedule has allowed him to be active in his neighborhood and faith community, and gave him the courage to ask his boss for a six-month sabbatical to travel the country with his family. As his kids grew and he rose through the leadership ranks, Rowe continued to work a flexible schedule, deftly juggling conference calls in the school pick up line, and “time shifting” his work to accommodate both his clients and his family. Being clear on family priorities, routinely talking them through and planning together as a family have been keys to making his work and family life work. “I sit down every week and color code my calendar. Family events and activities are in green. If I find it competes with my work, I will cancel, delegate or move work around,” Rowe said. “Some things in life are more important than work.”
Perhaps the more we hear stories of leaders like these, the more the majority of us who tell surveyors that we want both time to do great work and live a great life, people may start believing it’s possible.
The furious reaction from China to the arrest of Huawei’s chief financial officer, Meng Wanzhou, in Canada at Washington’s request immediately raises the prospect of like-for-like retaliation against executives from North American companies, a fear reinforced by the arrests of a former Canadian diplomat-turned-NGO-researcher and a Canadian businessman.
Western business people are ensnared in low-level court proceedings in China far more regularly than is reported in the West, the risk remains low of a retaliatory move against a Western executive of similar status to Meng. It would undercut the high-ground that Beijing has occupied as self-appointed defender of “the rules-based international order.”
However, there are other ways for Chinese authorities to take reprisals against Western multinationals operating in China should they so choose. Day-to-day business operations can readily be interrupted through inspections, audits, and other tourniquets of red tape, and by the selective application of the letter of Chinese civil, administrative and criminal law. There’s also the possibility of travel bans on executives (including on those under unresolved court proceedings), and good, old-fashioned intimidation.
Add to this the current trade tensions between the U.S. and China and Western multinationals — such as the big U.S. technology companies — that use China as a source of assembly, semi-manufactures or components have an additional vulnerability: their value chain.
For every such company, especially those critically reliant on Chinese sub-contractors, their value chain is now actively at increased political risk. Local suppliers and their sub-contractors are susceptible to pressure to behave “patriotically” when authorities convey the message, however tacitly, that lack of cooperation with foreign multinationals is in the national interest. Something similar has occurred when Chinese consumers have on earlier occasions read the signals for when they were meant to boycott Japanese and South Korean products.
There are many ways to apply informal pressure along the value chain from delaying delivery to the easing of quality standards. Suppliers and subcontractors could find themselves suffering sudden and “unexpected” shortages of inputs and disruptions from labour.
Companies need to take urgent steps to measure their potential exposure. Doubling up value chains, including alternatives outside China, would mitigate the risk of political and regulatory disruption. (It would also have the added benefit of providing insurance against ever-more-frequent natural disasters.) In our analysis and consulting work, we have come across some forward-looking companies that have started to reconfigure their value chains where possible – particularly those who are vulnerable to U.S. national security concerns because they incorporate Chinese technology into their end products.
Doing so is neither necessarily easy nor cheap. China has accumulated a vast manufacturing ecosystem servicing foreign companies, encompassing everything from hard infrastructure to soft skills. Its growth has accelerated in recent years as China has embraced automation as way to offset rising wages that could make it less competitive as an offshoring center.
For that reason, building up a parallel value chain is not simply about shifting to another low-wage country. Both the quality and quantity of China’s manufacturing skills, particularly in the areas of automation and robotics, deter companies from relocating from China to elsewhere in South or Southeast Asia. Lower-wage countries like Vietnam and Cambodia have little spare production or skilled human capacity left, even in relatively low-skilled sectors like textiles and garments, let alone the advanced precision tooling, materials handling, and process engineering and development skills that a U.S. technology company needs. Nor do those countries have the resources to develop them rapidly.
Tim Cook, chief executive of Apple, a company so committed to manufacturing in China that it labels many of its products, “Designed in California. Assembled in China” recently noted that if he called a meeting of all the tooling engineers in the U.S., he wouldn’t fill a room, whereas in China he could fill multiple football fields.
Regardless of these impediments, and even before the heightened trade tensions between China and the U.S., there was business logic to the case for value-chain diversification — and a parallel process of value-chain reconfiguration already underway in some sectors with a regional focus. Production of end-products and components — ranging from bicycle parts to computer hard drives — has started to relocate, with low-tech production shifting from China to Indonesia, Cambodia, Bangladesh, and India, and higher-tech ones moving to South Korea, Taiwan, Singapore, and Malaysia. Vietnam straddles the two.
Burgeoning middle-classes in South and Southeast Asia provide a growing market for China’s consumer and industrial goods, especially for non-luxury goods that do not need the cache of a U.S. or European brand. Countries such as India, Indonesia, Malaysia, the Philippines, and Thailand are all forecast to be among the 20-25 largest economies during the second quarter of this century. Moving production nearer to those markets makes sense.
At the same time, for other Asian nations, China is starting to look like the “market of last resort” for selling what they manufacture. The U.S. has been that market been since the Second World War. But the Trump administration’s “America First” policy, with its emphasis on domestically produced goods, seems to put that in doubt.
Chinese companies, too, will be compelled to seek alternatives to the U.S. in response to Trump’s tariffs, especially those that have become U.S.-reliant, further accelerating the changes to regional trade and the value chains that support it.
The overall effect will be that more value chains will begin and end in China rather than beginning in China and ending in the U.S. There will be fewer global value chains and more regional ones.
Regional value chains do have an advantage: they are shorter than global ones. As global value chains have gotten longer and leaner, they have also grown more fragile, just as the pressures on them are increasing from technological change — particularly AI, robotics and big data, shifting relative labor costs, environmental concerns, such as carbon footprints, and reputational exposures.
The Trump administration’s trade policies will provide new impetus to the developing patterns of multiple, shorter regional value chains, but the transformation will not happen overnight. Value chains cannot be reconfigured any more quickly than a manufacturing plant can be rapidly rebuilt. Companies will hesitate to jump into new developing markets where investment laws can be unclear or nascent — like Myanmar, Cambodia, or Vietnam — and where labor and environmental standards lax. Nor will it be easy to replicate established relationships with factories, suppliers, and governments.
Complicated electronics value chains, in particular, are so entrenched in China, it is unlikely that all business will shift away from the country as a result of the new tariffs alone. For its part, China itself is still dependent on specific imported technologies such as chipsets and sensors. This constraint will ease as China develops, with some urgency, local capacities in these technologies, not least because the U.S. is set on preventing the export of crucial U.S. technologies and blocking Chinese companies from gaining access to them through inward foreign direct investment.
One scenario is that the current U.S. counter to China’s “strategic competition” — tariffs and technology export and investment controls — will further fracture value chains as it will lead to a dual global technology world with one part running U.S. technology on U.S. technical standards and another running Chinese technology on Chinese standards.
There would be no certainty that the hardware, software, and services of these two worlds would be interoperable, and, once a market is locked into one or other of the systems, it would be difficult for users to switch. This would add complexity to value chains, making it more likely they would default to specializing regionally.