Should a Startup Outsource Product Development?

Posted by Davzo Inc

Posted in Startup


So, you have an idea. It's an idea that will revolutionize the world. You want to develop your product and sell it. How are you going to do it?

  • Build it yourself. You're going the solo route. Say you have $30,000 in funds saved up that you can dedicate to development. So your budget per month for one year is $2500 and let's say you can do 100 hours of coding per month for 12 months. The outcome: you've invested 1200 hours of coding into your product and by the end of that 12-month period, you've built a product that is stable enough to either be profitable, or get the investor's attention.

  • Build a team. Hire coders to do it for you. If the project needs 1200 hours of work and you're charging $40/hour, then you're going to need $48,000 in the bank. And that's $48,000 dedicated solely to paying the team; how you pay the bills is a separate income.

  • Hire a team. Let the pros handle it! You figure the best way to get your product into the hands of the consumer is to let the experts handle it. If you're paying $150/hour for 1200 hours, you're going to need $180,000 saved up – and again, that's assuming you have a secondary income.

So, you'll need either $30K, $48,000, or $180,000 just to get your product developed, and that's just the capital. And that just represents the initial release. That says nothing of the funds that go into future iterations and release cycles – which every piece of software has to go through while it matures. So: should you spend the extra money to outsource?

Working with Startups – A Consultative Perspective

In the past we've conducted a lot of quid-pro-quot transactions. Startups approached us, we developed their product, we gave it back to them. This worked well for startups who were not software-centric and just wanted an effective technological tool.

What about the start-ups that were developing apps or software? We found that in many cases, the product failed to gain momentum. When that happened, the start-up didn't want to invest more resources into additional release cycles and marketing. Their product went nowhere.

We wanted to try something new. We wanted to see more of our clients succeed, so we tried a more integrated approach. First we picked a startup. Then we offered an alpha release of the product while the startup assembled its own team to handle release cycles and marketing. To make it easier for the startup, we even helped them hire!

We laid the ground work and the startup built on it

The result? The launch was a resounding success. The startup has been released new versions since the alpha and then closed a major deal.

The project was profitable. The project was integrated. The project was a complete success!

How did we pick them? Our attitude on working with start-ups is straightforward: startups are risky. That's just the nature of the beast. We do have some criteria though. Has the start-up done its research? Does the start-up have the funds necessary to see the project through from beginning to end? Does the start-up need help with more than designing and developing the project? Is the start-up 100% committed to taking our advice? This last one is important – we're a multi-billion dollar company. We're experts in our field. We know what we're talking about.


What it all boils down to is this: when it comes to straight outsourcing, if the core of your business is an app or service, you're better off building your own team and your own technology. If you're looking to strengthen infrastructure while developing product, you do want to outsource. If you're not in the software business and you're just using technology to get the edge on the competition or because you want to provide a better user experience, then you definitely want to outsource. That will save you time and effort, and you have a better chance of getting a quality product.

In short

If you're a startup and the core of your business is apps and software and you're looking to only outsource product development, keep it in-house.

If the core of your business is apps and software and you're looking to outsource product development with infrastructure construction, DO outsource. This will work wonders in the long term.

If the core of your business is not apps and software, and you're just looking to integrate technology, DO outsource product development. This will save you time and effort.

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