10 Tips for Startups Considering Software Development Outsourcing

March 10, 2020 0 Comments

There are many cases of successful startups having outsourced software development talent. Slack, in its earliest phases outsourced talent to build its business. Skype incorporated a team of Estonian software developers before its launch in 2003. The assumed benefits of outsourcing can be alluring:  a steep reduction in labour costs, breakneck speed to market, a wider access to expertise, and the ability to focus more on core business operations. This is highly relevant considering the rather grey talent landscape in the Nordics. By 2022, there will be a shortage of 70,000 skilled workers in the IT and Telecoms industry, according to Whitelane Research. Startups looking for the highest quality talent will need to explore elsewhere to find suitable candidates when competing with the giants in the tech industry. But what about the often poorly executed code, the technical inexperience and the mountain of language and cultural barriers of offshore talent? Overlooking a few drawbacks in favour of the supposed benefits of outsourcing can get startups lost in a technical, financial, and, at times, legal backwater. To help your startup have a roadmap for your innovation journey here are 10 tips when considering selecting software development outsourcing partners:

1. Have clear communication from the beginning.

A study done by Ngyuen and Abrahamsson in 2017, from the University of South-Eastern Norway and the University of Jyväskylä, found that a lack of communication is a number one failure for the startups they investigated. It’s important to communicate early on your expectations and fears with your potential outsourcing partners. Geographical distances can be large. A regular communication channel through online platforms and yearly visits to the outsourcing locations can improve interpersonal relationships, increase trust and reduce problems in your processes.

2. Make early investments for the evaluations of outsourcing services.

There are multiple reasons why you might feel investing solely in your prototype or in-house team to push ahead your MVP is a good investment. But when considering outsourcing talent, there can be a price tag on getting quotes, travelling to distant locations to set up dedicated development teams, as well as legal fees. Be prepared to finance these initial costs to expand your access to a wider pool of expertise.

3. Contact a boundary spanner (a knowledgeable intermediary)

A boundary spanner is an individual who understands the differences spanning across cultural and language barriers and the processes and mindsets of both startups and outsourcing partners. It is important to have one to link your startup with external information and reach full scale.

4. Analyse your long-term strategic development plan with theirs.

Research information provided by Inside Magazine advises that you make an assessment of your outsourcing partner’s strategic development plan. Outsourcing partners down the road might feel inclined to realign their strategic goals and opt to work on other projects other than yours. A full assessment will help you judge whether the long-term road map of your product aligns with their ability to support your venture.

5. Check their level of expertise and current/previous clients.

One of the main reasons for outsourcing is to gain a level of expertise not currently available within your in-house team. It is advisable to assess how much experience they have and their relationships with their clients. This way you’ll get a birds-eye view of their actual service offerings in action.

6. Know how flexible they are with pricing and growing on demand.

Ngyuen and Abrahamsson claim that startups are dynamic and at times rather contradictory in their business processes. Some outsourcing partners might not be flexible enough to deal with the fast pace demands in innovation and the changes in the quantity of output. Check the flexibility of their pricing model and the capacity to grow on demand.

7. They should be prepared for compliance and security issues.

According to Inside Magazine, handing over part of your business’ processes to partners can make compliance a vital factor to protect sensitive data. Ensure that they are knowledgeable and ready to implement incoming regulations into their current processes.

8. Evaluate their technologies and risks for disruption.

Your partnership might last over a span of many years, and the technology and capability of your partners need to match the evolution in innovation. They should have a development plan to increase their current technologies and be on the constant lookout for potential disruptors on the marketplace horizon.

9. Location is key when considering current regulations in a country.

Regulations can be the straw that broke the startups’ back. You should be aware of your outsourcing partners’ location and their in-depth knowledge of the regulatory obligations in both your country and theirs. Regardless of your business’ size, stakeholders should always be kept in mind to ensure sustainable operations in the long run.

10. Focus more on intellectual capital and less on cost.

Research done on why Scandinavian startups fail by Moe, Smite, Hanssen and Barney in 2013 found that optimising current processes needs to weighed against making fundamental changes. This can be important when deciding whether to outsource or stick with insourcing. Cost should never be more important than access and retention of quality human and intellectual capital. Company culture, strong communication, employee motivation and values, and minimal cultural distances are a plus for making a startup have a one-up on competitors on the innovation landscape. The need for an expanded access to global expertise is stronger than ever. A startup can benefit in numerous ways from outsourcing partners’ close connections to local talent. It is advisable although to keep an updated map of the technology, financial and regulatory terrain to avoid the hurdles and make use of the expansive opportunities.

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