When starting a business, the decision is made about investing in creating their product or outsourcing software development to another company. We decided to develop our Artificial Intelligence program in my venture at Hitch, a talent-tech SaaS. Here’s why.
One, time is money. You can’t waste too much time building a Minimum Viable Product (MVP). According to the old saying, “Grow fast or die young,” we believe hiring outside experts to help us create that product is the most efficient and cost-effective way to go. This would also save us the effort of recruiting an internal team. However, technology shouldn’t be the top quality of a startup.
Both options have their pros and cons. The answer will depend on cultural and commercial factors, product type, and the founding team’s vision.
Hitch was apparent in stating that technology was part and parcel of the core product’s value proposition, not just a means to meet a corporate need.
One of the benefits of creating an internal team for technology is that people are more likely to be aligned with its culture and how it works.
Our biggest problem was how difficult it is to find competent developers. Although Hitch was not yet an option, the platform we created aims to solve that problem.
However, outsourcing could help us to find specialists more quickly and at a lower cost. But, teams might not be 100% dedicated to the project, and the agency may also have other projects. This can make it challenging to align with the product or culture of the startup. It is possible to negotiate copyright for the final product. Therefore, contracts should be drafted to protect you as a company.
Finally, we were forced to ask Hitch if he needed a “secret recipe” technological that would make him unique.
Hitch is not aimed at technology specialists but HR specialists. The underlying technology and implementation must be unique to add value.
To summarise, I think outsourcing software development is not advised when:
- The main selling point of business is technology.
- The technology is unique in its implementation, and it is sought after a nonreplicable model.
- Organizational culture is crucial for product development.
As Michael Seibel, partner at the accelerator and venture capital Y Combinator, says: “When reading startup applications to YC, I see too many founders raising a little seed capital and outsourcing engineering to cut costs. This common misconception can be a red flag to future investors. It often proves more costly than having a co-founder who is also a technical expert. “This statement confirms our belief in the importance of building internal technology infrastructure.
Agency programmers work in an “unknown problem, known resolution” environment. This means that both the problem as well as the solution are known to them. Tech startups can operate in an “unknown issue, unknown solution” environment. However, no one can determine if the answer is right until the product is tested. Hitch believes it is essential to be able, iterate and grow as you create your SaaS. While it is not an easy route, we think it is the best for our long-term financial success. These questions are essential to ask when you start your own company.