Startups! Do you Need an In-House Dev Team?

5 Questions to Answer

Successful Outsourcing

In-House or Outsource Your Dev Team?• This is an important decision for a startup – as it should beThere is one camp that will tell

you to get a technical co-founder and a dev team right away!

• There are alternate points of view that will tell you that in early stages of the startup lifecycle, you don’t need (or want):• The distraction of dev team recruitment, team

development and maintenance• The cash drain from developing an in-house

team and salaries for top engineers in competitive startup markets

• Issues that take you away from product focus and fit into costly distractions and risk

There’s No Easy Answer• Each startup has its own

unique concerns, market and the needs can be different in every stage of the startup lifecycle• But – there are a few

guidelines you can think about as you work through your strategy• Consider these 5

questions:

1. Is the core of your business & startup primarily a technology play?• There are few “pure

technology” startups – not because there are no new ideas…• But rather because there are

few ideas that are defensibly free of existing technical platorms and concepts

• Most apps today are highly configurable, flexible and commoditized. • Ideas that are cobbled

together from several existing platforms and apps are relatively easy to develop and for a “fast follower” to bring to market.

• For these situations, do you really need a full, in-house team?

1. Is the core of your business & startup primarily a technology play?• Are your business operations

& customer-facing service based on software? • Is it going to be truly unique,

ground-breaking, technology?• (It’s ok to say, “I don’t know.”)

• If you are aware of the Lean Startup Movement, you will understand, until your service/product is validated, you can’t really know…

1. Is the core of your business & startup primarily a technology play?• If you (honestly) have a validated idea for a very unique technical offering with demand that can scale to a very large number of willing, paying buyers – you may indeed have a “unicorn”• There aren’t really that many• You probably need a top-notch,

internal core development team• You will need to have investment,

compensate your team highly, and push to market robustly

1. Is the core of your business & startup primarily a technology play?• Do you really have a unicorn?

Hard question to answer. • Entrepreneurs who need

investment want to be able to sell their concepts as unicorns to get strong funding• But – If you are realistic – you

also realize there are routes to market that don’t carry as much risk and can be developed incrementally

Not a Unicorn? Need less investment? Want less risk?But you haven’t

validated your market

• Consider building a Minimum Viable Product (MVP)

• Consider the application a “throw-away” to allow customers to experience the concept but with less “bells & whistles”

• Perhaps run some services manually

• Consider using an outsourcing vendor as a partner to take cost and weight off your shoulders

• Bank the learning from your MVP for your next stage

You have a validated MVP, but no dev…

• Consider the cost and focus needed to “go to market.”

• Not a trivial exercise. Critical lifecycle step. Need to find a repeatable, sustainable way to reach new customers and become invested in their needs to ensure they remain customers

• Need full implementation of agile to respond quickly to customer needs

• Probably need continuous releases in incremental cycle - DevOps

• Consider outsourcing to Dedicated Team

Not a Unicorn? Need less investment? Want less risk?• Your service/product has many technical aspects but is not

• Based on unique technology• Entirely software driven

• Perhaps you shouldn’t spend your time and cash on finding a technical co-founder and development team• Consider focusing on becoming a learning team and managing the

build, measure, learn cycle rather than the nuts and bolts of technology• Keep your core start up team light & agile

• Use an outsourcing partner and integrate them into your team• It will take time to find the right partner, but – it can free up the startup core

team and control costs with a lower absolute cost and a more transparent process of scoping and costing work.

2. Can you (really) do the work required to build & maintain a tech team over the long haul?• If you have successfully started and ramped out more

than one startup with significant software assets – you already know the answer• You are battle-tested, you know the risks. Failures along the

way are ok. • If your batting average is moving toward very few points

scored or assists – this is a very good question to ask• Every venture has its own risks, special aspects that

require strategy and thought to get through

2. Can you (really) do the work required to build & maintain a tech team over the long haul?• Scaling a team is

difficult in the beginning. In your core team, every member counts.• Their attitude,

willingness to collaborate and assist in decisions and live with consequences is critical

• If a significant component of your operations is/will be custom apps and you are in the Bay Area or one of the startup centers – you can count on a longer recruitment cycle and the total costs (recruitment, salary, benefits, perks) to be more than you expected• Built-in cost of being a

startup in a place where access to resources and funding are the best.

2. Can you (really) do the work required to build & maintain a tech team over the long haul?• Scaling a team is difficult in the beginning. In your core team,

every member counts.• An outsourced dev team can provide a stable pool of resources,

dedicated to the tasks at hand. But, you should not base your selection on the lowest initial bid for a set of requirements because you can end up with:• A low hour cost per resource, but a poor total cost of engagement• A skilled team, but one that is located in an opposite day segment. Communication

cycles can take hours or days by the time a decision is made• A team that is separated by language & culture, requiring intermediaries and

resulting in loss of fidelity and redo’s, communication loops and delays• Long cycles for managing documentation, functionality clarification, and rework of

work that should be completed• When travel is needed, long round-trips with less than optimal productivity. Travel

by the outsourced team may be nearly impossible because of costs and visa issues

2. Can you (really) do the work required to build & maintain a tech team over the long haul?• With any development team, building a sense of ownership is key• If you are limited by the cost and availability of resources in a

competitive market, it can be very difficult to maintain a stable and productive internal team with a clear sense of ownership• Using individual contractors to “fill in” for needed resources can make it

even harder to maintain a positive, productive atmosphere. Saddling your team with resources that can come or go at a moment’s notice doesn’t promote stability• You can however, build a sense of ownership within a

dedicated, nearshore development team.• They can work and communicate in real-time as full members of the team. They can

travel (in most cases) with reasonable travel times and few restrictions. Working in real-time, without intermediaries, as team members makes a big difference

2. Can you (really) do the work required to build & maintain a tech team over the long haul?• If you are a startup founder, but not primarily experienced

& skilled in technical leadership, building & maintaining a dev team can be very distracting. How will you:• Pick the right resources for the long run?• Maintain team commitment and productivity?• Ensure their skills and interests remain aligned with your goals?

• The issues of recruiting & maintaining a tightly integrated technical team can require a lot of focus and effort• An outsourced partner can have problems too – but as a partner

you have a natural ally who will work actively to prevent issues and take care of them when they do come up.

3. What is more important to your startup – product management or technology?• Running a startup is

all about making the right decisions for the situations you face• For a long time, the

advice was to start with business and technical co-founders. To that end, many gatherings in startup communities were/are dedicated to “finding a match”

• With the rise of startup accelerators and The Lean Startup Movement, the focus is more on product management and customer engagement. Methodologies have cycles, but if you can’t show a clear, methodical customer focus and cycle of virtuous learning – it can be hard to be taken seriously

3. What is more important to your startup – product management or technology?• When there is a need for strong technical

leadership in a startup, it doesn’t necessarily mean there is a need for an in-house development team too• There needs to be a balance between the

ownership principle necessary for a committed team and a technical focus that sucks up all the air in the room – leaving no space for product management or customer development

• If a service-based startup has a technical team much larger than operations, sales, and product teams, it can create some distracting conflicts

3. What is more important to your startup – product management or technology?• Using an outsourced team for at least

some of the work can create a separation between work that is fulfilling a customer functional need and a technical issue that is largely transparent to customers• Both problems can be very important to

success, but if a large percentage of the team becomes involved and loses customer focus - problems can cascade that become hard to correct

• A partner-level outsourcing relationship offers a way to separate issues and maintain a consistent, productive cycle of new functionality flowing to users

4. Even if you can – Should you grow your team quickly or shift team composition when you need to?• Adding new team members

requires time, consideration and training – many steps that won’t always end successfully for the new hire or the team• It has been shown that hiring at a

pace of more than one new team member per month can cause serious productivity issues in startups• Cutting members and reallocating

team resources to other teams can create deep divisions

4. Even if you can – Should you grow your team quickly or shift team composition when you need to?• On-going feature development may not be a core service,

but it is critical to maintaining customer engagement • Outsourcing application development can help create a division

between having needed resources and customer-focused operations• Development team cohesion is critical but.. It is also part of the

contractual arrangement with the outsourcing vendor.• Integration of the outsourced team with the core startup team is

critical, but a partner-level vendor must take part of the weight for the project to be successful• Shifting resources, adding or removing members from the

outsourced team is still not transparent, but the outsourcing vendor should have the experience necessary to deal with issues and is focused on success

5. Should this be an “all or nothing” discussion? Can you manage a situation with the best of both worlds?• This may not be a discussion for an early stage startup but –

it is worth consideration. Let’s be clear, you can have both an in-house dev team and an outsourced team• Conditions for success• Clear, contractual roles with full involvement of the outsourced

team• If the outsourced team is simply dictated to by the in-house team and not

respected or consulted for input – it will be very hard to gain full value from the outsourced team

• Real-time collaboration & communication between individuals on both teams without intermediaries. If the two teams are prevented from collaborating by barriers, real or imagined, productivity & quality will suffer

5. Should this be an “all or nothing” discussion? Can you manage a situation with the best of both worlds?• Conditions for success

• Clear, product-level responsibilities for the outsourced team. If the outsourced team is reduced to filling low-level, repetitive tasks they won’t become truly involved and committed to the product or have a sense of ownership

• Management-level commitment to the continuity of the in-house team and the involvement of the outsourced team. If the in-house team feels threatened or the outsourced team does not feel valued, productivity and quality will drop dramatically

• An outsourcing vendor who is willing to be fully involved, experienced in the startup environment and what is necessary to have a strong, successful relationship

• Be constantly aware of documentation, code quality and technical fit. Your internal team must lead these areas and involve the outsourced team to ensure these issues are a constant part of discussions

Are there more Questions to Consider?• Of course. Every startup has key areas that must be

addressed to be successful.• But, if the questions around how much of an internal team

versus an outsourced team you need for your startup can be generalized – these are some of the key issues• For every startup – a successful company that is agile and

competitive in the market is the end goal. There are many steps in that process.

We’re Scio• Scio is a provider of nearshore,

outsourced software development services for our customers in North America• We serve startups, established

businesses and enterprise customers in a range of verticals with teams of skilled, experienced developers

• Can we help your startup be successful? • Contact us. Let’s discuss the

challenges you face and the issues you are dealing with. We would be happy to help you find answers.