Outsourcing is definitely one of the ways companies embrace to scale down their costs. Past case studies have mostly been dominated by companies that have already been on practice. Companies have embraced outsourcing when they have cash flow problems with their business.
However, pass success of embracing outsourcing for established companies doesn’t mean that outsourcing is meant for established companies. Entrepreneur.com lists top 25 successful companies that outsourced their startups. Examples of the listed companies are Slack, MYSQL, Skype, Squawker, Github, Opera and many more. A thorough analysis of the success of the companies and the motive behind their outsourcing has led us to arrive at the below 5 reasons why you should outsource the development of your startup.
When a certain technological solution hits your mind doesn’t mean that that idea is supposed to fade away if you are not a techie person. The same happens to IT experts, if they come across an idea that is not IT related they shouldn’t let the idea fade away just because they are not competent of that non-IT field. Having a startup idea that can be implemented by another party is a reason enough for choosing to outsource.
A competent vendor will always document your ideas in a workflow diagram and will implement your ideas in a manner that you will feel part of the development. This will give you room to focus on other activities that might be core to your business such as marketing.
Outsourcing will give you the main focus of the business which is the customer. Drawing you attention to the customer is essential to the business since the customer to a greater extent has a big influence to your business. The Information Age, points out that business that outsource allow their managers to have their priorities clear.
Many startups face the challenge of lying nice IT ideas in development stage for extended period. IT projects shouldn’t take 2 years to develop unless it is something similar to Elon Musk project X. Always remember no matter how excellent an idea is there is a possibility of someone working on the same idea. Therefore, leverage in this case is speed.
Outsourcing is the answer to speed, by outsourcing your reap benefits from the aforementioned factors and speed being one of them. Outsourcing will make you kick off your project from scratch and reach to the peak while working with a pool of talented teams who are good at their specialized skills. Geographical set up always reveal different talents therefore making you face challenges on accessing the right talent on your local market.
For example, Ukraine developers are best known for quality software development that are within budget. Philippines are preferred for data entry tasks and virtual assistant jobs. Therefore, execute your project on time, have no laxity with your project just because you are skeptical of outsourcing.
Startup that are not well funded may face the need to invest a lot of money in recruiting. Some of the resources that you have on board you might not be sure with them. It is a daunting task and your startup might start to feel the drain of capital from the wage expenses and other human capital overheads. It even becomes worse when there is a requirement for additional experts to your team. Scalability in this case becomes an issue.
Outsourcing becomes a viable option here. Scaling up or down become easy since those are things that you can always address in the contract/SLA. Scalability allows your startup only to pay for services that they use.
For example outsourcing an IT firm during the development of your startup might save you other costs such as project management. While you will be paying only for the contracted service, be rest assured you will have saved yourself project management costs since the vendor will definitely take care on how the project is run.
Your startup can rise to unimaginable levels when outsourcing. It can take you to levels of already existing business since your vendor has an already experienced team that matches industry standard.
Cost is a serious issue to consider during the seed stage of your company. If you get it wrong with cost, then your startup becomes a shell. There are companies that are lucky enough to get some Kickstarter funding, however, not all are that lucky to have the required capital for running their ideas during start up. Getting it wrong at this stage has many implication, you might lack funds for awareness campaign or other budgetary needs.
Outsourcing some of your functions may lower your start up budget and avoid over-absorption of budget. According to Mark Growth 46% of starts fail because they run out of cash. Other researches show that 27% of companies outsource to save on costs and companies benefit to a tune of 60% overhead drawdown whenever they outsource.
Assembling a team for the first time can’t be compared to working with a team of already established outsourced team. Working with an already established team means that there is synergy and harmony. This will translate to efficient communication and teamwork based on the previous experience of the team.
Assembling a team on contrary would mean trying to establish the organization hierarchy, who reports to who, meeting times, and other bureaucracies of organization workflow. Your efforts could be further be frustrated if an essential member of your startup e.g. an engineer abandons your company. This would be a huge downfall since you will need to go back to the drawing board and start recruiting. This could mean that you pause with your project.
On the other hand if you are dealing with a startup there is a likely possibility of them having a couple of people who have similar skills and they have a wide pool of database of experienced staff in different fields.