Should a startup outsource product development?

Photo by Epic Bets

Let’s say you have an idea; there are several ways to execute the product development:

1. Build it yourself

You are a developer with $30,000 in the bank, you can probably pay your bill for a year at $2500/month before tax. You can do 100 hours of coding per month and that will give you 1200 hours of time to build and launch a product. During one year you can perhaps build a product that either brings in some revenue or gains enough traction to inspire investors to give you more funds.

2. Build a design and development team

Hire developers and designers to perform 1200 hours of work for you at the rate of $40/hour, then you will need about $50,000 in the bank assuming that you have an existing source of income to pay your own bills.

3. Outsource it to a software development company

Hire a company to perform 1200 hours of work and build your product for you at the rate of minimum $150/hour, then you will need $180,000 in the bank, again assuming that you have an existing source of income for yourself.

The 3rd kind

So $30k, $50k, and $180K and that is only for the first stable release of a product. It doesn’t include the upcoming iterations and release cycles and as we have mentioned before, an app needs to go through many iterations until it becomes a product that everybody wants to use.

We get a lot of inquiries from the 3rd kind. They are often startups with no technical expertise who don’t wish to have their own in-house development teams or even if they did, they wouldn’t know how to lead one. They also tend to be the most paranoid group fearing that we might be tempted to steal their ideas and use them to build on our own billion dollar company!

Our experience with startup clients

In several cases we delivered what our startup clients wanted, but the project never gained traction and the customer didn’t want to invest additional resources to refine the app and market it. So we decided to take a different approach. This time we decided to offer an alpha release version of the product to our client with the condition that they hired their own team and took care of the first launch and future releases. We even helped them hire team members and continued working with them as their consultants. They successfully launched and have been releasing new version of their app since then. We just heard that they closed their first major deal and brought it some revenue. We consider that a success story.

However picking the right startup client isn’t a simple process. Startups are high risk by nature. Our applicants are required to convince us that they have done their research, secured funds, need help with more than just the labour design and development work, and they are committed to listen to our advice throughout the project. Most applicants fail that test.

In the end we believe that if the core of your business is software delivered as an app or service, you are better off building your team and technology yourself. If you can’t do that, then you are in the wrong business. However if you aren’t in the software business and you are only using technology to gain an unfair advantage over your competition or improve your user experience, then seeking outside help makes complete sense.

Either way your product becomes your brand and the core of your company’s value. It is an interconnected system. Instead of hiring consultants just for the product design and development, hire consultants who can help you build a company. Dedicate your time and focus throughout the process to learn about software design, team building, idea validation, and delivering a great user experience. Learn how to build a product that isn’t bloated and solves a few key problem very well in several release cycles. It may not guarantee your success, but sure will improve the odds in your favour.