Should your start-up outsource tech?

The benefits of outsourcing are many but it depends on what needs to be outsourced. The benefits of outsourcing a product / service would usually include reduced costs, reduced investment on infrastructure, faster deployment of the product/service etc.

 

Here is a look at a few scenarios when you need to be considering the outsourcing option:

 

 

1.  

   1. Clarity on Business Objectives: Whether your objective is to introduce a fresh new product into the market or an existing enhanced product should be clear. In the case of a new product you need to have concept validation and product/market fit in place, but there is a high risk of doing it yourself and the best option would be to outsource. While in the case of an existing product the risks are much lower as the product has already been launched in the market and has gained acceptance. So now it is the question of your ability to sell the enhanced product to customers and iterate on product development.

2.  

   2. Faster time to market: The trend so far suggests that the time to market is always as soon as it may be possible. In all such cases, outsourcing product development is the most preferred option because building the right product which has to get to the market quickly requires a specialized team of analysts, designers, developers and test engineers to bring such products to fruition whose time to market is crucial. Such a specialized team may not necessarily be readily available in the organization and to get the in-house team ready it may take longer than six months.

3.  

   3. Limited or Fixed Budget: Do you have the funds to build the product in-house or will outsourcing be a much inexpensive option? Obviously outsourcing, if it is an initial version of your product and needs to get into the market quickly and at a lesser cost, until you can find customer demand for your product. It is a known fact that most of today’s popular products were outsourced in their early days.

4.  

   4. Equity dilution: If you are handling the business single headedly then you have the choice of outsourcing the technical part in the early stages of your start-up without any equity dilution. Once your product has achieved the product/market fit, you can bring in a team to continue building the product in-house. With this you will be able to find out if you can manage the technical side during the early phase of your product development.

5.  

   5. Lack of Expertise: You can outsource to avail the benefit of the right talent from the market if you lack the expertise. Some enterprises may take the time consuming and more expensive route of training their in-house talent and building up the team to develop the product. Outsourcing with a proven market leader in software development services provides your business with the most feasible way to get the project going.

6.  

   6. Lack of Bandwidth: Bringing on an agency or part time contractor can provide the required bandwidth to accomplish what you need to with the added benefit of bringing on additional insight and expertise. The blending of both in house and outsourced teams could present entirely new and innovative ideas that will boost your presence in the market.

 

A look at the cases when Outsourcing does not really make sense

1.  

   1. Direct Customer Communication: When you are an enterprise that develops products you need a deep understanding of customer requirements and transparent communication with them. If your research & development team and business analysts are located away from your client then it makes it difficult for you to interact face to face with them which in turn limits your ability to develop innovative products which meet current market needs. Outsourcing does not really help in such cases as the requirement gathering is the most important initial step on which to develop the product.

2.  

   1. Direct Customer Communication: When you are an enterprise that develops products you need a deep understanding of customer requirements and transparent communication with them. If your research & development team and business analysts are located away from your client then it makes it difficult for you to interact face to face with them which in turn limits your ability to develop innovative products which meet current market needs. Outsourcing does not really help in such cases as the requirement gathering is the most important initial step on which to develop the product.

3.  

   2. Availability of Advanced Integration Tools: As far as the development process is concerned a lot of advanced tools are available today. With distributed team members modern development tools and frameworks have made it increasingly possible for the most complex products to be built by distributed teams.  Hence outsourcing may not be considered by such enterprises which have tools and expertise to integrate in-house.

4.  

   3. Risk of IP Protection: One of the biggest risks that enterprises are facing is the high risk of protecting intellectual property when it is outsourced. It is tough to protect your IP until you have a trusted relationship with your outsourcing partner. You need personnel such as a competent IT manager and an in house project manager to monitor transactions and an accountant to audit the financials and a security person to stop security breaches.

 

Conclusion:

Outsourcing is a gamble. It works wonders if you outsource the right things and do the rest yourself. It may be cheaper to outsource, but if you want direct interaction with your customers, there will surely be a level of customer satisfaction when you do it. Select other areas that can be outsourced and reap those benefits as well.