Software Outsourcing for Startups: a Guide to Fail-proof Partnerships

16.10.2018
7 min.
title

Technology is a lucrative business. Statista estimates the global IT spending is to peak at $2.3 trillion by 2020, while Gartner says it’ll reach over $3.7 trillion already this year. Driven by the proliferation of IoT, artificial intelligence, and blockchain, the market offers opportunities for every budding tech entrepreneur with an innovative idea in mind.

Startup founders keep shooting for disrupting the status quo—or at least settling on a juicy acquisition deal. The good thing about the tech startup business is that you don’t have to do it all alone: nine times out of ten, technology is merely an enabler while the true value proposition is in the underlying idea. The question is then how tech visionaries turn such ideas into competitive products, and here is where the question of software development outsourcing for startups comes into play.

Outsourcing product development to third-party vendors is nothing new to startups. An array of world-famous companies, from Skype to GitHub and Slack, outsourced at some point to make their way up in the market. Itransition too has a long record of providing custom software development for startups. It creates room for analyzing why tech business newcomers actually turn to outsourcing vendors.

This article will look at the type and scope of tasks that are typically outsourced, organizing them into categories. As a takeaway, each of them will highlight the criteria that startups need to watch for in their partners-to-be.

The Old Good "Build Me Another Uber" Story

Sometimes, tweaking an existing idea may be not that bad, and the startup scene shows this tendency is not going away any time soon. Despite startup founders’ reputation as audacious innovators, it’s not all about groundbreaking business models and futuristic vision. Once the next big thing pops up, everybody wants a piece of this pie, and the market gets flooded with a plethora of similar products, most of which become surprisingly successful.

Take the example of Uber. It’s on-demand, disintermediated service model alone has brought to life hundreds of businesses, from its whole-nine-yards rivals to “Uber for private jets,” “Uber for janitors,” or “Uber for logistics” variations. Although, as pointed by Wired in their review of Y Combinator’s 2018 class of startups, the idea to outdo Uber and similar staples of the digital world is shrinking today, it still remains enticing. And as long as such endeavors will continue to take off and show satisfactory growth dynamics all along the way, the trend is not going down.

Skimming some past few years of our company’s practice of app development outsourcing for startups shows that just about every third request from startups boils down to:

We want something similar to <insert any popular online service here> with some minor changes to the concept.

The Startup

If kick-starting your way into the lives and hearts of an already heated audience is something you were thinking about, look for a technology partner who offers:

  • Broad tech expertise. Given the wide variety of web and mobile development technologies, don’t let your partner’s specific technological focus determine the choice of your stack. At this point, you’re likely to have just a sketch of your “next Uber” app, so it’s better to have multiple options than squeeze it all into a programming language that may turn out to be poorly scalable or inadequate to your required processing speed.
  • Mature maintenance and support services. As you’re up for releasing a product to enjoy a long-standing success (hopefully), make sure your partner can support it post-launch. That said assuring a productive application life full of timely and useful updates should be a priority on your business development plan. So pick up a software vendor that would cover both pre- and post‑deployment needs of your project.

The Right Hand for Domain-savvy Innovators

Apparently, the world’s top high-tech innovators include not only the so-called unicorns drawing millions of dollars in venture capital. Some of them are companies that target rather niche markets, with their solutions rooted in the immediate demands of non-ICT industries.

As shown in the winter 2017 issue of the R&D Magazine, companies are spending quite a deal on R&D to stay competitive and efficient in the long term. Driven by this craving for innovation, they are ready to invest in the software that could help them hit exactly these goals.

Immersed in the day-to-day reality of a certain industry, domain-savvy startup founders are driven by the passion to meet this demand, backed by their profound knowledge of the area. When it comes to software outsourcing for startups of this kind, such innovators typically request all-round support for the technical implementation of their concept and a fully featured team to handle all the aspects of the application delivery. They can get it, but only with a truly experienced technology partner.

And they know it, for their go-to requirement is this:

I need a team of software developers I can trust.

Customer

If you are one of the startups that recognize a gap in automating and streamlining previously untapped processes and workflows within your industry, look for a vendor with:

  • A solid IP rights management policy. The surest way to secure your patent-pending designs or any other sensitive intellectual property assets is to avoid exposing them to anyone. Make sure your vendor has not only a standard NDA to sign but also a comprehensive multi-level IPR management and protection policy in place. This needs to include measures for assuring the physical security of organizational infrastructure, production-related IP protection, and insurance coverage.
  • Prototyping services. It’s up to you to make the decision about how far software development outsourcing is going to take you (whether you look for a production-ready application or just a minimum viable product to draw investments or check your product vitality). But even if you are not looking for app prototyping services, it’s still advisable to search for the vendors who have this as a standalone service in their portfolio. This would indicate they tailor their delivery models specifically to startups and therefore have solid experience or at least interest in this market.
  • Strong expertise in frontline tech. Favor the vendors who have a track record of working with frontline technologies. These mean the ones with a huge consumer potential and as such drawing sizable investments. As of today, the latest and hottest tech includes artificial intelligence, IoT, big data, virtual and augmented reality.

Searching for Dedicated Tech Talent

The success of every startup is defined not only with the vitality of the core idea but also with how well-knit and like-minded its team is. When asked to pick top reasons for startup failures, 14 international startup accelerators came up with “team incompatibility” as the second most cited problem. No big surprise, right? A team with diversified skill sets is critical to the success of a starting-out company, but all too often startups fall short of bringing all the required professionals on board. This is where outsourcing takes the deus ex machina role. That’s why, deciding in favor of the software outsourcing for startup route, those who raise capital and start expanding, pitch to their potential software development partners as follows:

We are a rapidly growing, well-funded startup, and we need to develop technology faster than we can hire engineers.

Startup Company

Another option such fast-growing startups may be exploring is turning to an external partner for balancing. It’s like doing sanity checks for the technology decisions made by startup founders themselves:

In a nutshell, I’m really not quite sure how the POS system would communicate with the server/app, and am looking for advice here.

Startup Company

If you are currently looking for a quick-and-easy access to highly qualified developers to augment your startup team, make sure to:

  • Never compromise on the quality of the dedicated team members. One great developer can often outperform several mediocre ones. Ask for each candidate’s CV to assess to what extent they are capable of getting into the project details on the fly and start contributing to it right away. Cooperation and communication patterns are important, but even the most fine‑tuned processes could never compensate for the lack of subject‑matter experience in your team members.
  • Don’t be afraid to delegate. Newcomers to the business world frequently make the mistake of trying to do everything on their own. It usually drains resources and money, leaving them frustrated by a lack of progress. Meanwhile, there is a well-shaped network of technology partners on the market who can take some burden off your shoulders. Get them involved from the start and don’t be afraid to ask for help.

Know What You Are Looking For

Software outsourcing for startups may be a well-established practice, but it still can go awry if startups fail to find the right vendor to partner with.

From the ubiquitous “Uber for X” products to those solving everyday challenges of a specialized Oil&Gas enterprise, each idea should find the right match to bring it to life. This article pinpointed three broad categories of startups typically looking for expert help from software development vendors, and highlighted the criteria of choice that are likely to make cooperation a success.

If you find it helpful, feel free to read more of Itransition’s original articles in our IT Outsourcing 101 series.