The latest 2024 research data measures the outcome of opting for an MVP development company:
- The average revenue is $1.2 million for the startups that outsource while it is $0.8 million for those who don’t;
- Profitability is twice higher ($0.4 million versus $0.2 million) for the outsourced startups;
- Outsourcing upped the chances of startup survival after 5 years to 65% from 55%;
- #1 reason to outsource is to cut costs;
- #2 reason to outsource is to focus on core activities.
Overall, outsourcing to an MVP development company produces positive outcomes across various areas and metrics.
Yet, this research didn’t look into social and environmental impact or other more generic fields. Moreover, the speed-to-market with outsourced versus non-outsourced startups often differs considerably.
With outsourcing, it measures in weeks and up to 12 months in very complex MVP cases. Without outsourcing, it starts with measures in months and up to years.
The numbers are just the results averaged for a lot of startups. In this article, we’ll discuss why it is so crucial for your startup to choose an MVP development company.
What Is An MVP Development Company?
First and foremost, an MVP development company specializes in working with startups.
Its services are centered on MVP product development while it might offer a range of other MVP development services for startups.
Startup services might include developing prototypes, packages for attracting investors, and so on.
Let’s discuss how an MVP development is different from simply developing an application.
MVP Is For The Early Adopters
MVP stands for a minimum viable product. One way to understand it is to think about the customers it targets. MVP is developed for the early adopters and not the entire customer base for the product.
For example, imagine building a productivity app for freelancers. If you consider the entire customer base, you might draw up a 5-6-item list of big-ticket items. For instance,
- time tracking,
- task management,
- invoicing,
- project tracking, and
- client communication.
However, if you consider the early adopters only you focus on time tracking only. Maybe, you can add analytics around it.
But the key is that early adopters opt for products that solve their immediate critical needs. Your full-fledged product will include eventually the entire list of functionality. Yet, it will occur only after MVP is successful.
MVP Focuses On Value-bearing Functionality
MVP is developed fast and lean. It means the company develops only the features that represent the product value for the early adopters.
For instance, imagine developing an e-commerce shop for eco-friendly shopping. The value-bearing features are:
- product listing,
- eco-friendly-related labeling, and
- all the purchase functionality.
All the extras like loyalty programs and personalizations are extras from the MVP point of view. Of course, there are exceptions like social media integrations.
They are cost-efficient and represent value from a marketing standpoint. And when we talk about MLP (minimum lovable product), they become key functionality.
All in all, these are key specializations that determine an MVP development company. The expertise and experience in these primary fields are what guarantees success in a timely fashion.
Why Can An MVP Development Company Ensure Success Better Than An In-house Team?
1. Launch Speed
If you do things without outsourcing, it means you hire people in-house. If you have a tech background, you are likely to know which developers you need. However, if you are a tech startup, you are more likely to outsource according to stats:
- Non-tech startups choose to outsource 62% of the time while tech startups do that 74%;
That is already saying a lot in favor of outsourcing. But let’s break down why. So if you hire people in-house, you are likely to:
- Start with CTO (Chief Technology Officer) or senior role. You’ll need someone who understands the software development MVP process. Hiring will take a few weeks with interviewing, reviewing works, following up on some references, negotiation, etc.
- Then, the CTO will take time to design an architecture and come up with specifications for HR to initiate another hiring process.
- Each new developer takes time to go through the hiring process and onboarding. It might take a few weeks if your startup HR person works well.
- Then, you end up with a newly assembled team. Whether it is a blessing or a curse is left to chance. Some developers might clash. Being hired for a project on a permanent basis heightens the sense of ownership for some. Others might be more focused on speeding up things following the MVP development process.
So, it is not only about time to assemble your in-house team, it is about friction as the team starts to work together.
- In MVP development company, teams have been working for some time together.
- Processes are well-oiled even if there is a need to bring in an extra person.
- They know that outsourcing has a project-oriented and result-oriented basis.
It is a qualitatively different approach.
2. MVP Software Development Cost
The in-house team often means office space, equipment, employees on payroll, and such. You might get a remote team, but hiring people in-house often is done so that you can work together in one office.
Of course, there is a lot of variability based on location. However, the average cost of an MVP product in-house often starts at 40k-60k US dollars.
Whereas the outsourced average cost ranges between $5k and $20k. Yet, the numbers are mainly true for the scenario of the USA-based startup outsourcing offshore.
3. Developer Expertise
This point is often contingent upon off-shore outsourcing. If you are a USA-based startup, outsourcing nearshore or onshore might not be this impactful in terms of cost or developer expertise.
In terms of cost, it might be somewhat lower due to plain economies of scale. After all, trained developers work on multiple projects within a time limit. In terms of expertise, top talent is expensive either way.
However, when you consider the situation more globally, things take a different turn. There are 4 primary outsourcing hubs:
- Mexico,
- India,
- China, and
- Eastern Europe.
If you look at the situation at large, you can spot the driving force behind the rise of outsourcing in each of these areas.
- For India, it is the price of the talent.
- In Mexico, it is in relative proximity to the USA.
- In China, it is due to the rise of technology levels within mainland China.
- In Eastern Europe, it is due to the rise of expertise.
So, naturally, it is the most true about Eastern Europe that you can get great developer expertise for a fraction of the cost.
Of course, there is a valid concern about the time zones, cultural differences, work practices, and legal issues.
However, most successful MVP development companies from these areas have USA-based contact offices to deliver MVP development services in the USA.
4. Startup MVP Development Expertise
A good MVP development company launches MVP startups from a couple of times per month to a couple of times per quarter. On a regular basis. This means:
- they follow the latest practices;
- they receive the latest feedback;
- they work with the latest environment updates – consider browsers and app stores;
- they are faced with the latest security issues and cloud service changes.
Whatever in-house team you find, there is no way they can match this. This point is hard to quantify because it impacts a lot: development time, cost, unsatisfied customers, and downtime to name a few.
Lastly, a good MVP development company has centralized expertise in all aspects of a startup launch. It includes testing, documentation, scaling, analytics, marketing, and others.
5. Internal Resource Allocation
With an in-house tech team, one way or another your other teams will be involved in tech processes.
If you all work together, would not it be rational for sales, marketing, or product development to consider technical capabilities and limitations?
Tech people are right there to advise, discuss, or explain. It is just a matter of time before tech issues will become a significant consideration for the entire team.
These things might be helpful after the MVP stage. Yet, for now, it puts breaks on processes, limits the respective creativity of each team, and overcomplicates things. After all, the #2 reason for outsourcing is to improve focus.
Here is the final breakdown of why choosing an MVP development company is crucial for startup success
| Success factor | With Outsourcing | Without outsourcing |
| Launch time | Short-list MVP development agency, meeting – 1-3 weeks+ Development at least 2-4 weeks and more Total: starting with 3-7 weeks | 3-4 weeks – CTO 3-4 weeks – developers~2 weeks – integrate+ Development at least 6 months and moreTotal: starting with 8-14.5 months |
| MVP cost | Average $5k-$20k | Average $40k-$60k |
| Developer expertise | Highly qualified developers for a fraction of the cost | The same level of expertise is comparatively substantially costly |
| Development expertise | No unnecessary loss of development time, cost, customers, or downtime | Often experience development delays, increased cost, loss of customers, and increased downtime |
| Internal Resource Allocation | Productive: independent operations efficiently sharing the essential info to boost productivity | Unproductive: teams become intertwined, lose focus |
