So you’ve decided to take the plunge and find an agency or freelancer to develop the technology for your startup’s digital product or service? Welcome to the beginning of a journey that hopefully will see your startup launch into the world quickly, within budget and with as few teething problems as possible.
But no two developers are created equal and working with agencies or freelancers requires a strong alignment of expectations so that you end up with the product you thought you were getting. Finding and selecting the outsourcing partner that is right for your business is by no means straightforward.
At Altar.io we have worked with a number of early-stage businesses and have learned many lessons on how founders tackle such a momentous decision (including why they decide to work with us!). In this article – the second of a series we are publishing on outsourcing and in-house developer selection – we set out a structured approach to help founders decide on an outsourced approach that is right for their startup.
Getting down to brass tacks: Why are you outsourcing?
As discussed in our previous article Should a startup outsource its software development?, technology outsourcing should be considered by a business when:
- It does not offer technology as its core proposition;
- The target consumers are not technology people; and
- The underlying technology is not proprietary or unique in its implementation.
Beyond these business-level criteria, founders may look to outsource technology when they have:
- Zero or inadequate in-house resources to develop and test new digital products or services; and
- An imperative to get to market quickly in order to prove the product concept.
Unless a founder has technical skills or already has a partner within the business who can develop an MVP, then finding a CTO for the business can be challenging and time-consuming. Developers can be expensive and if you’re in the very early stages of your business then the chances are that money is tight. You could get lucky and find a CTO who is happy to be remunerated with equity, but then again you could be diluting your shares and forming a permanent corporate bond with someone you don’t know very well.
Similarly, many founders are keen to get to market quickly to prove the business case and can be unable or unwilling to invest in their own technical resources until they know they have a business worth pursuing. Alexander Jarvis, startup mentor and the founder of 50 Folds, points to two key benefits of outsourcing tech: “Firstly it’s about speed: third parties get the work done and it’s guaranteed to work. Secondly, it’s about prioritisation: a business can have a huge backlog of ‘to-dos’ internally so nothing gets done on a timely basis. Just paying a third party guarantees the project is done.”
But whatever the reason for outsourcing, what should you look for in a prospective partner?
Identifying the right software development partner
There are many things to consider when shortlisting a partner, but the main areas to look at include:
Track record and experience
It can be reassuring to see that a prospective partner has successfully delivered projects that are similar to your own. And it’s relatively easy to validate that success: if they have case studies on their site then you can get in touch with other clients to see how it all went. If you want to use freelancers then sites like Upwork have ratings and reviews on each listed developer. For tech agencies, Clutch.co can be a great source of verified reviews.
But it’s key that a prospective partner can demonstrate experience of working on a project like yours (e.g. building an MVP in the FinTech space) and also experience of working with a client like you (e.g. a founder who is bootstrapping the project from his or her own funds).
Technology stack and infrastructure
This can be harder for non-tech founders to evaluate, but the technology being used by the outsourcer – and how they propose to build the infrastructure for your solution – can have a huge impact on whether the solution will be aligned with your business objectives and be “future-proof” and capable of scaling-up if it becomes successful after launch.
If, like most non-developers, you don’t know your Node.js from your MongoDB (and isn’t that why you wanted to outsource in the first place?) then the developer track record is where you will find assurance. Building a social marketplace? Then the developer should be able to point to the tech stack they are using and how others have used it to scale viable businesses in the marketplace space.
Another area to evaluate – and to demand from your prospective outsourcer – is the “portability” of the solution they will build for you. If you end up with a solution that runs on an entirely proprietary system without proper documentation, then the chances are you won’t be able to bring it in-house and neither will you be able to find anyone else to run it for you. Which means you’re stuck with the original developer.
Signs to look for in the project plan that indicates the developer is not going to lock you in for life include: storing databases on “elastic” solutions that scale such as Amazon AWS, using GitHub for storing and documenting the code, or building a solution that APIs into already-made solutions from third parties (e.g. for chat functionality or for video hosting).
Culture and communication
Even on a relatively short project such as creating an MVP, the communication between the founder and the outsourcer is critical. Many things can get lost in translation – which is why it helps to have a developer who speaks the same language as you – and as long as the scope of the project and the expected business benefits are properly understood then the partner should create the right solution. Also, projects evolve along the way, with the need to discuss and agree on changes to the scope, which again requires strong communication and a common understanding of what is required.
Case Study: Outsourcing to a country you’ve never even visited
London-based Creadoor is a marketplace that brings together “personal brands”, such as Instagram influencers, with local creatives who can help them make a great photo or video content for their social streams. After a false start with an in-house CTO who didn’t work out, and with the launch window rapidly narrowing, Creadoor founder Reade Owen went on the hunt for an outsourcing partner that could help him build his MVP quickly and within a defined budget.
“When we started , I would never have guessed I’d be working with a team so far away”
Reade Owen, founder Creadoor.co.uk
The selected agency just happens to be based in Ukraine. “When we started, I would never have guessed I’d be working with a team-based so far away. But they are in a city with good universities and a growing tech scene and I can’t fault the technical skills of the team. Everyone speaks pretty good English and the project day-rates for the Ukrainian team are at least 30% lower than if I’d used a team based in London.”
“Good shops will run a process, and you should typically expect a product on a fixed timeline.”
The development of a new product or service requires an array of skills, from back-end development through to front-end UI and testing. And the people providing these skills need to be managed to make sure all the elements come together harmoniously. So look for a partner that brings all the required skills and a capable management team that understand your vision and will manage resources to ensure it is delivered on time and to high-quality standards. Alexander Jarvis notes: “Good shops will run a process, and you should typically expect a product on a fixed timeline. If you are burning money, having a product to sell matters.”
If you are working with a team of freelancers then to a certain extent you may end up being the project manager yourself. If project management isn’t your bag, then it’s probably best to use an agency.
Case study: Outsourcing to get to market quickly
Teezler.com is a startup the team at Altar.io has worked with the founder to create. It’s a social marketplace where participants can request – and give – advice on beauty products, earning credits to receive product samples along the way. Says founder Yoko Uchida: “A key benefit of outsourcing the product design and development work to a specialist outfit such as Altar.io is speed to market, which is everything when you’re trialing a new idea. Also, working with the right outsourced team I can save all the energy, time and money associated with trying to build the best team myself.”
Speed is everything when you’re trialling a new idea”
Yoko Uchida, founder Teezler.com
As described earlier, it is best to avoid “developer lock-in”, whereby your technology partner creates a solution that only they understand. Look for partners that include handover protocols in the contract, ensuring the solution is properly documented and allowing for knowledge transfer to you of how the solution works under the bonnet. And don’t forget to ensure that the contract specifies that the intellectual property rights of the solution are yours. Paul O’Brien, founder of MediaTech Ventures, and Director for Texas of the global startup incubator Founder Institute notes: “Outsourcing your software build should not be at the expense of losing your understanding, control, or ownership of what you’re doing.”
“It is in the interest of the best outsourcing companies to do a great job to stay in business.”
For many, price would be the first consideration, as most founders have a limited budget to get the MVP off the ground. However, taking the other factors discussed here into consideration, it’s more important to focus on value for money rather than just cost. And don’t forget that by outsourcing you are pretty much “locking in” the expense, as well as the outcome, rather than managing uncertainty. Says Judy Robinett, startup expert and best-selling author of Crack The Funding Code: “Whilst an MVP can typically cost between $50K to $250K, outsourcing the development allows you to control your burn rate whilst focusing on your core business. Keep in mind, it is in the interest of the best outsourcing companies to do a great job to stay in business.”
And if you are based in an area where developers are expensive (e.g. London or New York) then with a limited budget it can be worth exploring overseas development shops, where resources are much cheaper but developer skills are still high and the command of the English language is good.
The right tech partner for your startup
As we have seen, there are a number of factors to consider when shortlisting and selecting a tech partner. By taking a structured approach to identifying what is important to your business and applying the criteria we have discussed to the selection process, you can be confident of a successful outcome.
It’s reassuring to know that many successful companies have been built on the back of an outsourced beginning – Slack, Skype, WhatsApp, BaseCamp and Github, to name just a few. The ability to focus on business growth and marketing rather than tech development no doubt helped them on the journey. As Ryan Khan, founder of The Hired Group, once said: “Master your strengths, outsource your weaknesses.”