For a startup, outsourcing product development is not easy. In contrast, large companies routinely establish outsource development operations because they have greater time, scale, resources and brand recognition to attract and maintain engineering talent. Even without size or leverage, outsourced product development is the only realistic option for early stage technology companies. So how do you ensure proper partner selection and good management to outsource successfully? Read on!

1. What Should I Outsource?

Over the past few years, outsourcing has evolved to embrace outsourcing products early in their development cycle and outsourcing products that are highly innovative. Neubloc recently sourced Proximetry’s management and development teams in Poland to work on their innovative wireless industry product. After establishing the right communication structure to keep the development and management teams in touch on the changes, Proximetry delivered their product to market on time for a third of the cost and experienced zero attrition in the first three years of development!

The key to this success is the hybrid development approach: an onshore presence to the outsource supplier. The purpose of the onshore presence is to work on a design.

Neubloc also designates a team lead onsite for 4 – 8 weeks to:

1. Learn requirements

2. Design

3. Find client team stakeholders

If the team is large and cost is not an issue, the lead can stay indefinitely onsite.

2. How do I Select a Vendor?

Selecting a vendor is based on choosing between two client engagement models employed by software development firms: staff augmentation and project management. If the product is fully specified, either model works, but most startups are better off using the project management model because the project output is the core product. Staff augment provides labor at the lowest to ‘augment’ an existing engineering team. Project and team management is provided by the product company rather than the outsource firm.

Cons to using staff augmentation include:

1. Difficulty communicating culturally and logistically

2. Changing specifications that cause discontinuous communication

3. Difficulties measuring achievements/productivity of offshore team members

The project management model uses the technical team lead offshore as the single point of contact. This model enables measureable team productivity and project achievement.

It is also critical to understand the outsource firm’s principal focus. Grow the development team overtime instead of using offshore startups or organizations too small to meet the requirements of fifty or more engineers.

3. Where Should I Base my Development?

Although most US companies outsource firms to India, they experience backlash from:

1. Decreased productivity due to high attrition

2. Higher risk of IP threat

3. Lower quality work due to communication/cultural pitfalls

Alternatively, Eastern Europe is more attractive for software development, especially countries within the European Union. Pros to choosing Eastern Europe include:

1. A high level of education

2. An innovative spirit

3. Low attrition

4. Low associated cost

Regardless of company size, with proper partner selection and management, outsourcing is often the best way a founding team, along with their investors, can realize a positive exit for their company.