Hiring a Product Development Company vs. Building an In-House Team

Businesses have two main options when they decide to develop a product - they can either build an in-house product development team or outsource by hiring a product development company (although a mix of the two could also be an option depending on circumstances). Both options have benefits and disadvantages. We’ll be as impartial as we can when discussing why outsourcing your product development might be the right choice for you.

Benefits of hiring a product development company:

Product development services save time and have no hidden costs

Setting up an internal product development team won’t cost you just the monthly salary of the employees. It also has hidden expenses like equipment, software, taxes, holidays etc and requires a significant time investment.

For example, the initial hiring steps such as interviewing and screening take the most time in the whole hiring process. If the candidate doesn’t take your offer, you might have to go through the process again unless you have another suitable candidate already waiting.

You also need to think about the costs and time associated with the onboarding process to get them up and running.

However, when you use a product development company, you will have no hidden costs - just the agreed fee.

You will also save time from setting up and training - the agency will give you an instant workforce that is ready to go.

Their comprehensive product development services include end-to-end solutions such as product design, prototyping, and manufacturing preparation, ensuring innovation, quality, and customer satisfaction.

Product development companies provide flexibility

Product development companies are also usually quite flexible and can react to the changing needs quicker. You can use them as a sole resource and scale their workload up or down or as an addition to your in-house team when you need to shorten timelines or get new viewpoints.

With short-term product development projects, for example, time is of the essence and therefore they normally require a quick start. It would be very tricky to either build from scratch or scale up an in-house product development team all of a sudden so choosing the right product development company is the best solution in this case.

Using a product development company is more convenient

Using a product development company is also a convenient solution. You can free up your own time by delegating the development project to an experienced external team and setting a contact frequency that you feel comfortable with.

The product development company will be running the project and will raise any issues that might arise with potential solutions. You, as a project leader, simply check their work and make sure that the project goes according to plan.

Another option is to have someone from the product development agency act as a project manager as well. They will handle the schedule, timeliness, and other factors that impact the development of your physical products. A convenient solution, right?

Engineers in product development companies can have wide experience and knowledge

One of the most important benefits of using product development companies is their extensive knowledge, technical expertise and experience in the field of product development. They might have also worked with other businesses in the same industry. This experience could be a valuable asset.

Product development agencies usually have a good partner network

Some product development companies can also help you find partners for the different stages of the product development process. At Raab, we work with partners who are experts in areas like aluminum extrusion, die-casting, plastics injection molding, sheet metal processing and so on. This can save you the hassle of searching and contacting hundreds or thousands of businesses.

You can also expect these contacts to be reputable and deliver quality service within the timelines because a good product development company wouldn’t suggest someone they don’t trust - it is their reputation on the line too. By leveraging our network, we provide innovative solutions that combine robust technical skills with extensive business expertise.

External product development companies bring a fresh perspective

Bringing an external product development company in as an addition to your in-house team could help bring “fresh air” into the business and your internal team. It is a touchy subject but we are going there - sometimes businesses that have been doing the same thing for a while get stuck in the old ways. Or businesses that have their own machinery might limit their production options to just use that equipment.

An external product development company won’t know the history of the business or what is normally done there and thus will look at everything with no bias or preference and might therefore suggest a completely different solution igniting innovation and inspiring the internal development team and stakeholders with new innovative ideas as well.

For example, sometimes it might be useful to go from using sheet metal to plastics but the business might have not considered this kind of strategic innovation due to the equipment they already have. This new viewpoint could end up saving a lot of money for the business and/or guarantee the sustainability of the business.

Potential drawbacks of using a product development company:

We did promise to stay unbiased so let’s discuss some of the potential pitfalls of working with an agency as well. Product development agencies are different in size, processes and expertise areas, and therefore some will suit your needs whilst others won’t.

The quoted price from product development company seems too cheap? Beware.

Some agencies might under-quote for the initial work in the hopes of building a longer term relationship.

To be fair, it is tricky to provide an accurate pricing upfront as you can never take into account every change or challenge that might arise once you start the development process but the agencies should make their best guess and you need to think carefully about what you will get in a fixed price model exactly.

Another option is to look for a product development company that can provide flexibility in costing. This way you can have control over some features, timelines and costs. For example, you can agree to shorter timelines during which certain criteria needs to be met by the agency.

You might not have expertise in-house if you only use a product development company

If you are a startup, you are most likely developing something that is unique, innovative and doesn’t exist yet. It makes total sense that you want to have the expertise in your product or service internally over time. We absolutely support this, it is natural that no one else has more expertise in your product solution than your business. It just comes back to the balance between speed and cost. Plus, specific expertise, such as CAD drawings or FEM analysis might be missing in-house.

IPR Policies & non-disclosure agreement

Protecting your intellectual property and confidentiality with agreements like IPR and NDA is crucial for both you and your investors. Make sure that any product development company you work with has a clear and clean policy on IPR ownership. This will limit your risks and ensure that your stakeholders are happy.

You should also sign an NDA with the product development agency so that your innovations and products don't get leaked before you can even launch them. A reputable agency shouldn't have any issues with this. For example, we always sign an NDA with our clients before our product development team starts the project.

Transparency could be an issue with some product development companies

Using a product development agency shouldn’t mean that you don’t know who is working on your project or where it is at. The difficult truth about product development is that things usually don’t go exactly as expected. Transparency is critical to ensure that your product development project is going as smoothly as possible and issues get resolved quickly.

In a good partnership, both parties should communicate openly. A good external agency should be willing to give and receive honest feedback, be it positive or negative.

What happens if the project needs to be cancelled suddenly?

No one wants to think about this scenario of course but let's be honest, sometimes you might start the product development process and for one or another reason you might decide that it isn't worth continuing past a certain point. Either someone already releases the same product whilst you are still working on developing it or the estimated cost versus value doesn't make it worthwhile.

Make sure that the contract covers what happens in this situation as well - do you still have to pay the full product development fee or are there any early exit fees you need to be aware of?

Is hiring a product development company worth it?

It depends on your specific case obviously, but generally working with an external product development company can be very beneficial! Many product developers that work for the agencies already have years of experience and proven skills. You can find real experts who can increase the value of your product with their amazing work.

Ready to hire a product development company?

To create products that people can’t live without, you need a great product development team on your side. Don’t have the know-how in-house? Not to worry, we can help you - we are experienced in supporting both mass production and smaller, more technical projects. Get in touch and lets turn your ideas into successful products!