Growing your business from a startup phase to an established company takes time and effort. As your company starts to expand, the need to scale your organization infrastructure in line with growing production needs or market demands often results in unpredicted expenses and overheads. While your top-line revenue may increase, at the end of the day business expansion may cost your company dearly. To stay afloat, many businesses are currently leveraging white label solutions outsourcing to improve bottom-line growth while launching new products and services.
In this article, we will define what white-label software development is and how you can use it to your company’s advantage.
What Is White Labeling?
White labeling is a marketing term describing the practice of selling goods or services produced by one company under the brand name of another. In other words, your partner builds a product under a white (i.e., blank) label, while you put your brand on it and sell it as if it is yours. For example, when you are using paid subscriptions to custom website builders such as Wix or Tilda, you are using white labeling to build a website that will bear your company brand name after the launch.
Admittedly, this resembles another frequently applied business practice called private labeling. What sets white labeling apart from it is that private labeling implies a particular product has been manufactured exclusively to be sold under your brand. You can modify, customize, or add features to it to make it unique, while, if you’re using white labeling, you may resell a product ‘as is’ without introducing any changes.
Moreover, nowadays, private label products are associated with physical objects such as clothes, food and other consumer goods, while white labeling typically applies to software development, web services or digital marketing solutions.
How does this concept apply in real life? For example, your company has expertise in manufacturing IoT sensors and beacons, but your client wants you to deliver a fully-functional custom-made solution equipped with data analytics software and user interface. You could partner with a third-party company to fully develop software and UI for this solution without the client even knowing it because the entire product will ultimately go under your brand.
Why Do Companies Use White Labeling?
Companies use white labeling when the market demand to increase their product or service offerings comes into conflict with the resources they have at hand. Hiring new people, improving existing IT infrastructure, and acquiring unique expertise usually takes more time and investments than it’s justified from an economic standpoint. From this perspective, white labeling and IT outsourcing have a lot in common, and white label software outsourcing is quickly becoming a trend. As of today, companies across industries are using it to increase their range of offerings and stay competitive.
Traditionally, white labeling has been used by digital marketers, bloggers, and website owners who have little or no expertise but can draw a lot of traffic.
Recently, however, companies from other business categories have jumped on the bandwagon, and namely:
- Consumer goods and electronics manufacturers;
- Website hosting and development service companies;
- FinTech companies and small banks (aka nanobanks) that provide white-label credit cards of larger banks to reduce production expenses;
- Marketing agencies that provide white label third-party services and offer them to clients under their brand;
- Software development companies.
When Is It Best To Use White Label Software Development
So how do you know white labeling applies to your specific situation? Below are some examples of when white labeling could help you retain clients and improve their loyalty.
Your customers demand very specialized services
Let’s say, you run an advertising agency and your client wants you to provide a solution that will calculate the exact screen time that their product appears in a video ad. To build such a service, you need deep learning experts that could create an artificial neural network for image recognition. You don’t have these experts on your team since you are specializing in other fields. Hiring them to build your solutions would be costly and time-consuming. Alternatively, you could white-label image recognition software development from a third party company and offer this service to your client under your unique branding.
You need to expand your range of services to stay in business
As an SMB company, the only way you can compete with market tycoons is offering a wider range of services. Such diversification will require investments and expenses if you choose to hire new specialists and expand your business using your in-house expertise. You can achieve the desired level of expansion by partnering with white label solution providers and launching a range of unique services under your brand.
You want to explore new business areas
Today, companies have to quickly test new approaches and be ready to give them up if they prove unprofitable. Not every company, though, has the in-house expertise to develop an MVP solution fast to test it with users and see how it works. White labeling it, on the other hand, will be quick and cost-effective.
You want to streamline your basic operations
Sometimes it will be more effective to trust your routine ongoing projects to white label solutions provider so that your expert team could focus on more urgent and potentially profitable tasks. In this case, while labeling could help you fully concentrate on your high-value clients.
You want to ensure staff scalability
In a dynamic and fast-changing business environment, your company needs for expert knowledge and resources may also frequently fluctuate. At times, you are left with only the most loyal customers, while next month the influx of new clients may leave you struggling with a multitude of tasks and deadlines. You may use white labeling to help you scale up and down when necessary.
You aim to reduce expenses
Sometimes, using white labeling can be more cost-effective than handling the same processes and operations on your own. White labeling may help you reduce expenses and overhead costs and maintain competitive pricing.
You’re struggling to meet tight deadlines
Specifically, in software development, large projects often suffer from unexpected pitfalls. Parts of your project may require knowledge and expertise that your software team currently lacks. White labeling software development, in this case, may save time, help you to meet deadlines and reduce the budget.
These are some of the most frequent applications of white labeling. Ultimately, white labeling is becoming mainstream because it offers companies a range of tangible benefits.
Benefits of White Label Software Development
Apart from helping businesses expand their service offerings, here are some of the white labeling advantages:
Ensuring quality
Not having appropriate expertise to deliver a solution or a product doesn’t make you any less trustworthy. Partnering with a white label software outsourcing company is a responsible means of ensuring quality relieving you from anxiety and stress.
Saving time
Developing, testing, and making iterative changes to a product is resource-intensive; moreover, it takes time. When you white label a solution, you can cater to your client’s needs much faster than you would, if you developed it in-house.
Maintaining focus
White label software outsourcing helps your existing team maintain focus on their core competencies and processes, while you can trust less critical aspects of your business to your white label outsourcing partner.
NDA (non-disclosure agreement)
Your clients don’t have to know part of your solution (or an entire solution) was white-labeled. At the same time, branding your product gives you a real sense of ownership.
Improving bottom-line growth
White labeling involves some administrative hassle, but, all in all, helps you offer your clients high-quality products and services with fewer expenses and investments. Ultimately, it accounts not only for increased revenues but also for bottom-line growth.
Downsides of White-Label Solution Development
Every quick and effective solution comes at a price, though. Below are some challenging aspects of white-label software development that you should be aware of.
Support and maintenance
If you’re not proficient in building a particular software solution, you will have to turn to a white label software provider each time it needs support and maintenance. This should involve long-term partnership and ongoing cooperation.
Miscommunication
As a primary brand owner, you are responsible for communicating your client’s expectations to a third party company. All the software specs should be clearly outlined, unless you are ready for constant problems and setbacks. For example, failing to communicate which features a client wants in a product may result in failing to meet deadlines and compromising quality.
Reputational risks
A sense of ownership for the product or solution comes with increased responsibility. As a primary brand owner, you are fully responsible for the functionality and quality of a white label solution you are offering to your client. For your reassurance, your white label outsourcing partner should be highly-experienced and trustworthy; ideally – with a proven track record of successfully delivered projects and ready to offer you complete transparency about the critical aspects of your cooperation (developers on a team and their experience, the tech stack, whatever you need to know), to alleviate your concerns.
Last but not least, white labeling your software outsourcing can be more or less cost-effective depending on a geographical location. There are regions in the world, like Eastern Europe, which, unlike most developed economies, do not experience the tech talent shortage and have thousands of tech graduates joining the workforce each year. The price for white-label software development in Ukraine will be significantly lower than the rate for similar services in the USA, Germany, Israel, and the UK without sacrificing quality. Moreover, your white label software outsourcing partner in the US may turn out to have augmented teams for white label development enhanced with Ukrainian devs.
White labeling can be a great way of giving high-quality software your brand name without having to go through a time-consuming and resource-intensive development process. However, it shouldn’t be used without careful consideration and planning. Calculating risks and evaluating the pros and cons will help you decide if you could use it to your benefit.
