10 Successful Tech Founders On Outsourcing Product Development

Not everyone who conceives a tech product idea has a technical background. What should you do if you’re one of them – build a team internally or turn to outsourced product development?

If you are the non-tech founder, you pretty much have the following four options:

  • Find a tech co-founder (akin to finding a life-partner)
  • Hire in-house tech team (a longer learning curve and high investments)
  • Outsource product development (preferred by many non-tech founders for MVP stage)
  • Learn to code yourself (can spend years to become a full-stack developer)

Each option has its pros and cons and you choose depending on what stage you’re at.

Being an outsourced product development company that’s worked with over 100 non-technical and some technical founders, we strongly feel outsourcing your product development is a viable option for building the first version of your product. Billion-dollar Skype did it. Billion-dollar Slack did it. A few more examples are Fab.com, Klout, AppSumo, GitHub, Basecamp and Opera, among others.

But, we want you to take an informed decision with an unbiased view. So, we asked 10 successful founders who have built and scaled tech products the quintessential question – outsourcing product development is the way to go or not?

Here are their replies:

#1 Find a technical co-founder or teach yourself some skills to build the first version

outsourced product development vs in house team

Deepinder Goyal, Founder, Zomato

We didn’t outsource the first version of the product, in fact, we still don’t outsource building any aspect of the product.

When we launched Zomato (then FoodieBay), I ended up putting together a basic version of the product, and we hired a student from IIT as an intern (Gunjan, now our CTO), to work on the first version of the product.

To my mind, a tech startup should try to avoid outsourcing the first version of their product. You don’t need a magnum opus, you need to craft a small, but right product and feature set that can help you get your first committed users. Folks who love your product enough to tell others to use it. Do what you need to find a technical co-founder, an eager intern or teach yourself some skills to build the first version. It will pay off, because you will be able to give form to your vision, and you will be able to build out a much stronger technical and product team as you grow.

#2 Outsource for early prototyping of an MVP

outsourced product development

Andrea Barrett, Co-Founder and VP of Product at UrbanSitter

There is a time and place for outsourcing development. Outsourced development teams are most effective when there is a high degree of clarity with regard to the design, interaction, and requirements for the product. The talent is typically cheaper and more flexible to scale up or down quickly than in-house developers.

Outsourcing can be good for early prototyping of an MVP you plan to scrap, supplemental development capacity when your team is fairly established, or client-side development when your platform is well-architected. If you do move forward with a 100% outsourced team, make sure you have a strong, committed technical leader to oversee development and make key architectural decisions.

If the outsourced talent is not invested in the long-term success of the company, they may cut corners that will be costly later. In the absence of in-house leadership, find an objective technical consultant–someone who has a great track record of building scalable products.

We hired an outsourced team to build the first prototype of UrbanSitter with a technical co-founder to oversee the development. Much of the architecture put in place early on worked when we launched, but was not built to scale to the size we are today.

After hiring an in-house team of developers and designating a lead architect, we were able to address tech debt issues and embarked on re-engineering our platform to support its current scale. There were certainly tradeoffs that had to be made along the way to support our change in platform, but they’ve paid off in the full as we now have full flexibility to scale.

#3 Involve the outsourcing team more for better results

Outsourced product development companies

Daniel Pavlyuchkov, Founder and CEO at Mailburn

Outsourcing product development is tricky. It’s possible to benefit from such scheme but only when you keep key competencies in-house. If you do that, you can use out staffing to increase manpower and speed up things.

Try to make these external developers feel like they are actually a real part of your team. Do daily stand-ups together, ask their opinion when you design new features, let them beta-test your product and use it in their daily life. The more they are engaged the better results will be because they will start to care about your product, not only billable hours.

At Mailburn, we did it exactly that. Our iOS lead and product manager were part of Mailburn team, and remote outsource developers strengthened our iOS development. We communicated on a daily basis in Slack, involved them in product decisions and did daily stand-ups and weekly plannings together. The external team is so engaged they work during the evenings and make a real difference for Mailburn product, and not just coding.

#4 Pre-coding, product development shouldn’t be outsourced

tech startups outsource product development

James Beshara, Co-founder and CEO at Tilt

The highest priority part of the product development process is our users — we constantly ask ourselves if it will improve their product experience. Pre-coding, product development shouldn’t be outsourced.

The internal team talks to our tilters daily — sometimes they even text and Snapchat back and forth — they have the most intimate understanding of our users’ problems and needs. This deep understanding and relationship with our users is irreplaceable. That being said, there can be some advantages to outsourcing work.

For example, putting together a simple, static landing page for the marketing team is something a contract developer can easily do and you can probably hire one for pennies on the dollar compared to an in-house development person. From time to time we outsource usability testing for designs or smaller tasks that can require a lot of time.

Outsourcing can let you keep your team focused on the really difficult problems that in-house heads are best positioned to solve, and you can continue moving on the projects that need full attention.

#5 Strictly define your product to the outsourcing team

outsourcing vs inhouse team

Bram Kanstein, Co-founder, We Are Off The Record

If you can outline your product specifications and make sure you oversee development operations, outsourcing the first version of your product can definitely pay off.

Successful companies that have used outsourcing to build the first version of their platform are Slack and Skype. In the end, it’s all about communication, when building your startup you have to strictly define the first version of your product, who it’s for and how you’re going to market.

When you’ve figured out how (and if) your first product improves your users’ life, then you can start thinking about whether or not you want to continue outsourcing your tech or build an in-house development team.

#6 Relationships – the most valuable asset when building a product

How To Outsource Product Development

Jamie Wong, Founder and CEO at Vayable

The purpose of a startup is to learn and grow as quickly as possible. It’s a tango between your customers and your product, each responding to the other at a fast clip, until you are perfectly in sync and achieve product market fit. For us, there were many times when it was tempting to outsource some of the development work thinking it would speed things up, but this is rarely the case because you may be building something faster, but it’s likely the wrong thing.

Relationships are one of the most valuable assets you can have when building a product: your relationships with your team, your customers and your investors. I first invested in building strong relationships with the early members of our community. We’ve grown together through Vayable and we share an incredible mix of trust, respect and gratitude that allows us all to drive the product and business forward.

I also brought a very clear vision of what I wanted Vayable to be, even before we had a product or customer base, and we’ve stayed on course with that vision, which is why I believe we are still growing today. We’ve had to respond to market shifts and learnings along the way, of course, but the WHY we are doing this had always remained the same.

#7 Product team should allow you to progress at a faster pace

How to effectively outsource new-product development

Greg Hong, Founder and CEO at Reserve

At Reserve, having our product team in-house has meant that we are able to very rapidly incorporate learnings from partners and potential clients into our product design.

With both our dining concierge apps and our table management software for restaurants, we’ve invested a lot in having a product that is beautiful to look at and easy to use – we want to build technology that people love.

Our product development team has been able to quickly make updates, incorporate feedback from alpha testers and work closely with our design and UX and user research teams to allow us to progress at a faster pace.

#8 Development is 10% building and 90% fixing

Should Tech Startups Outsource Product Development?

Liam Martin, Co-Founder of Staff.com

In my opinion, you should never outsource product development. We have over 60 employees and have never even considered outsourcing product development as we define it as a core component of the business.

Outsourcing places the onus of a deliverable on a party who wants get paid for their deliverable as quickly and cost efficiently as possible, development is 10% building and 90% fixing what’s built so the relationship at it’s core is a problematic one.

Instead, we have remote full-time employees, we pay them a base salary and make long-term commitments to their success which in turn provides us with a workforce that’s aligned with the company’s goals. I.E. Outsourcing is not the same as hiring remote employees.

#9 Outsourcing technology is unfairly stigmatized

outsourced product development services

Ellie Cachette, a mobile app developer and a technical project manager, works with Golkonda

Ellie has shared her insights with us from her Forbes post. In the post, she expressed her views on’ Why Are We So Afraid Of Outsourcing Technology?’

The true issue is that each phase of a company’s growth requires different skill sets. These can change faster than any group of people can adapt and learn. Yet so often “outsourcing technology” is seen as a turnoff for investors. When a founder is trying to raise money, especially on the West Coast, the first question is often, “Who is your technical co-founder?”

In an industry where innovation is worshipped, innovation can often stalled by niche product expertise without launching expertise or launching expertise without product expertise. Or marketing expertise without product expertise.

There are so many important things to know and learn, and in the earliest stages of a startup, technology should not be the variable. Sometimes the winner is who can get their product mastered first. In this case, development agencies can be helpful to budding founders or those with experimental ideas.

While it’s often only talked about in hushed voices, many successful startups leverage outside development agencies, and until your business has high-security needs, this might work for mid-term company growth as well as short term. When time and “Go To Market” are your most important focus, development firm can help all founders.

Do you agree that outsourcing technology is unfairly stigmatized?

#10 Ability to quickly adapt are key to long-term success

Pros and Cons of Outsourcing Tech

Michael Schneider, Founder and CEO at Service

While outsourcing may be a quicker or easier way in the beginning, startups should not outsource their product development. In the beginning, everything is so fragile, and the learnings and ability to quickly adapt and change are key to long-term success.

Nidhi Shah
 

Nidhi is the head of content marketing at Arkenea, a mobile app consultancy building experience rich apps for startups and businesses.