To Be or Not to Be - Should Startups Outsource

August 3, 2016 12:53 pm | Updated 2 months ago.

Startups Outsourcing

In the opening phrase of a soliloquy of William Shakespeare’s play The Hamlet, the despondent Prince Hamlet cries out “To be or not to be is the Question”. Stuck between a rock and a hard place, the Prince questions the unfairness of life and the futility of the alternate (which is death).

The modern day startup entrepreneurs are well in Hamlet’s shoes as they contemplate how to bring their ideas to life. They work on shoe string budgets and tight deadlines, while continually worrying that their idea might get mainstreamed by someone else.  The Hamletian predicament of the startups is that on one hand, they do not have the wherewithal to shop for talent on-shore and alternatively find it difficult to take the leap of faith for the cheaper offshore outsource development work given imagined risks and loss of control.

How do you circumvent the predicament?

Many startups follow either / or of the following two approach to maximize their limited resource.

  1. Going Lean Startup Approach: This is basically “get out of the building” approach called customer development to test the Startup idea. Startups go out and ask potential users, purchasers, and partners for feedback on all elements, then come back and work on the suggestions and again go back to the market with the improved product for validation. This loop continues till the product is perfected.
  2. Outsourced development: Getting the development done offshore to cut on costs. The answer lies in making the two approaches work in concurrence. This would mean supporting the Lean Startup approach (which is done on shore) by getting development done offshore which are difficult to manage internally irrespective of the core or non-core activities.

This suggested combination has worked well for a number of successful startups who went out in the market to get their idea validated and subsequently achieve product market fit through a number of iteration, while the implementation was carried on concurrently offshore.

John Rampton, the online marketing guru, startup enthusiast and founder of the online invoicing company Due in his blog has listed out some of the successful startups who went the outsourcing route. We reproduce his list here.

Successful startups who went the offshore outsourcing route:-

  1. Cloudmunch: This Platform-as-a-Service (PaaS) company utilized an Indian outsource company to cull talent it needed to start up its operations.
  2. Solix: Even technology outsources companies have used outsourced talent to create its infrastructure as Solix has done.
  3. Axeda: The company relied on developers to create the software and platform to offer its cloud-based solution.
  4. Pingar: The company helps organizations with data analytics. While establishing itself in its industry it called on outsourced talent to develop its business.
  5. Opera: This web browser company relied on developers in other countries to create and implement its platform.
  6. MYSQL:From the start, the company believed and proved the success of a growth strategy that included using a mostly outsourced staff in various countries to ramp up operations in each location.
  7. AlertBoot:The company decided to outsource infrastructure-as-a-Service (IaaS) and cloud hosting to speed those areas of development.
  8. Basecamp:The same practice of outsourcing worked for Basecamp as it developed itself into a technology leader.
  9. Github:The company has used numerous people who completed development work virtually from home.
  10. Branch outThis app was created entirely with outsourced development.
  11. Fab:This large startup partnered with developers in India to maximize funding while scaling up when their business showed signs of growth.
  12. Slack: Now valued at nearly $3 billion, this company used outsourcing to developing its solution in its earliest days.
  13. Skype:They used a team of developers in Estonia to help them build out their business.
  14. Klout: To get its technology in the right place before launch, Klout relied on many outsourced developers.
  15. AppSumo: The company has used many freelancers in various fields, including marketing, content and IT to grow its business.
  16. Serving as a company that offers outsourced talent and freelancers for other organizations, utilized the same model to grow from a start-up into a globally successful business.
  17. SeatGeek:This company found a considerable cost benefit to outsourcing specific tasks to talent in other countries. That helped them build their infrastructure quicker at less cost than hiring in-house staff.
  18. Squawker:This company partnered with an outsource provider to build its platform solution.
  19. developers built their technology and infrastructure. They used people in India, China, and Israel for quality assurance, engineering, and hardware. It helped to have the outsourcing in place to handle growth. They eventually sold the company to Securus Technology.
  20. Splunk: This company, known for search and analysis of data, has used outsource agencies to find the talent that rapidly developed their infrastructure and solution.
  21. Gliffy: This web-based diagramming tools company has turned to outsourcing for specific aspects of its technology development.
  22. Net2Text: The company outsourced the development of its mobile payment platform.
  23. Proximate Global Inc.: This company used an outsource service provider to create a location-based service for smartphones called Face2Face.
  24. MailburnThis iPhone email client solution developed thanks to a partnership with an outsource service provider that helped with many of the technical aspects of the solution.
  25. Mindspark: This mobile app development company has used outsource providers to create its business and many of its current apps.

In the suggested scheme of things, the offshore outsourcing partner should not be treated as a group of warm bodies who do what they are told. Startups should not hire a Yes Sir ! Offshore outsourcing development team. The development team should be a technical consultant providing ideas and cautions.  The offshore outsourced agency should be part of the core think tank, who shares the same energy, passion, and application as the core startup team in achieving product success.

The maturity of any outsourced agency depends on maturity in their technological and work processes while a Startup’s maturity depends on the development processes (mostly agile methodology). Both the criteria require close evaluation.

The primary driver is that outsourcing costs startups much less than an in-house team. It also keeps the promoter’s focused on fine tuning the design , functionality, and market outreach functions, which are the essentials of Going Lean Startup Approach. On the other hand, the Outsourcers come with technical skills already in place and this brings down training time and cost.  The low costs and knowledgeable talent mean the product is launched sooner.

The big ticket for the Startup’s to aim for a long term relation with short-term clear objectives with its Offshore Outsourcing partner.