You've secured seed funding for your business idea, but your technical co-founder needs some help to build out a minimum viable product (MVP). You could spend more than half of your budget—along with a chunk of equity—on a full-time software engineer, but you're not even sure if the MVP will achieve product-market fit.
There's also the challenge of hiring a great software engineer. According to McKinsey, 87% of organizations are experiencing a software development talent shortage. There's also a high cost of hiring a lousy engineer in the early stages of a business since they represent a high cost and could write code full of errors and technical debt.
Let's look at how outsourcing can solve these problems and how to work with outside development teams.
In-House vs. Outsourcing
Many startups must decide between hiring in-house developers or outsourcing development to third parties. While communication is more straightforward with in-house development teams, outsourcing is significantly less expensive and more flexible. These pros and cons can mean the difference between success and failure.
In other cases, you may have both an in-house and an external development team. For instance, you may have a B2B web application and outsource the development of companion mobile apps. That way, you can focus your internal efforts on the web-based platform but still offer users a convenient mobile app to add value.
The benefits of an in-house team include:
Communication: Face-to-face communication is invaluable for many startups, particularly given the constant state of change. For example, you can stop by someone’s desk anytime to ask a question or make a comment.
Dedication: The total commitment of employees means that you don't have to worry about conflicting schedules or priorities. In some cases, outsourced teams may have to deal with the deadlines of other clients on their roster.
Flexibility: In-house developers can wear many different hats, ranging from feature development to customer support. While it’s not a good idea to switch contexts too frequently, flexibility is essential in many small startups.
Feedback: The feedback loop is tighter for in-house employees, translating to more agility and faster development cycles. For example, you can call ad-hoc meetings to get insights or make changes on the fly.
The benefits of outsourcing include:
Cost: Outsourcing development is significantly cheaper than hiring full-time employees, meaning your dollars could go further. You also save a lot of time that you would spend interviewing candidates and managing things like vacation time.
Commitment: Startups can adjust labor resources practically on-demand when outsourcing development. If you only need help with one thing, like a mobile app, you can hire a team for that purpose and end the contract when it’s done.
Talent Pool: Outsourcing opens the door to a larger talent pool, both in number and breadth of skill sets. For example, the same outside development firm may have mobile, embedded, and database experience, eliminating the need for three hires.
Scalability: Startups can quickly scale the number of developers working on their projects. If you need more resources for a sprint, you can hire a large team of developers without the ongoing commitment to payroll.
The right decision depends on your startup's short-term priorities and long-term objectives. For instance, outsourcing may be the best option if you want to launch as quickly as possible, whereas in-house developers will be better if culture and team fit are essential. You may also be limited to one option based on your funding or other factors.
Preparing to Outsource
Startups that decide to outsource development should start by preparing some basic materials for potential partners. That way, you don't have to spend a lot of time in meetings gathering basic details. In particular, these materials should provide the context for the technical development and ensure that everyone is on the same page with tech and budget.
The three most critical elements include:
Business Goals: Start by defining your startup's business goals. In other words, what problem are you solving with your MVP? How does the goal break down into smaller milestones? Who are the primary users and customers?
Technology Stack: Identify the technologies that you will use along with the human expertise you need. For example, you may prefer to use a MEAN stack and need both software developments and quality assurance engineers.
Budget: Define the budget for the project. In particular, define how much you have available to spend to reach certain milestones, such as an MVP or a specific milestone. Make it clear when these budgets are set in stone.
When searching for the right partner, the best source of leads is referrals from people you already know. You may also look for partners that have experience working with other companies in your industry or attend conferences or meetups to find leads. There are also many freelancer and agency portals for remote workers that have verified reviews.
When evaluating partners, it's equally important to consider their culture. For example, a partner that typically uses a waterfall development approach may not be the right fit for an agile team. You should try to find a partner that mirrors your approach to business rather than seeking partners based purely on price or expertise.
Outsourcing has a mixed reputation in the tech community. Startups seeking the cheapest possible option are often disappointed by the results. On the other hand, finding the right partner and effectively managing the relationship can significantly lower costs and cut down on time-to-market without compromising quality.
Tools like Jira make it easy to keep everyone on the same page. Source: Atlassian
The most effective ways to manage the relationship include:
Appropriate Context: Software development is more than just writing code. By providing context, you can help developers understand and meet business goals, which helps when designing UIs or certain pieces of functionality.
Clear Requirements: A clear scope of work simplifies life for startups and outsourcing firms. Start each project with a clear set of requirements that leaves little room for ambiguity and makes estimation a lot easier.
Regular Meetings: Outsourced development teams should be involved in daily standups, weekly meetings, and other ad-hoc meetings to identify potential issues early on and ensure everyone is on the same page.
Management Tools: Use Agile development tools, like Jira, to ensure asynchronous communication and update outsourced team members on the status of features and projects. These tools are especially important with off-shore teams.
In most cases, communication is the most critical component to success when outsourcing development. Synchronous communication is typically the best option to ensure everyone is on the same page. Asynchronous communication may also be necessary when using off-shore developers located in different time zones.
The Bottom Line
Many startups outsource software development, but without the right approach, it's easy to get derailed. In addition to coming prepared, outsourcing development requires clear communication through regular meetings, a well-defined scope, and management tools to ensure that in-house and external developers are working well together.
Intent specializes in helping startups develop high-profile products at the intersection of physical and digital if you're interested in working with an expert partner. Since 2008, we’ve worked with some of the biggest brands and the most innovative startups out there, including Oura, Nike, and Samsung, from pre-development research to long-term maintenance.