6 Reasons why outsourcing development sucks for Startups

There’s a reason that the concept of  “Hackers and Founders” is entrenched as a concept – burned in the mind of all entrepreneurs in the tech space – it’s because not having a tech co-founder often drives the founder to outsource development. Here’s 6 reasons why outsourcing development sucks for startups :

1. No passion 

Startups are all about being MASSIVELY PASSIONATE about a problem you’re solving. You can never expect an outsourced firm to be passionate about the same problem. They’re passionate about 2 things: Geting more clients and the bottom line. They can never share your passion or understanding of the problem to creatively address the issues beyond the functional spec you create. This is probably the biggest issue at the heart of why outsourcing development sucks for startups

2. Employees and the 9to5

Outsourced development firms are filled with 9to5er’s – people who earn a salary and want to leave asap. The company sometimes charges overtime (MORE EXPENSE!) for them to stay later. They rarely have a share in the profits or share options of the company they work for. As soon as they can, they leave these companies and start competitive ones of their own or their own startups.

Most importantly – they don’t give a shit about your problem you’re passionate about. They are removed by 2 to 3 degrees from you as a client.

3. No focus

The focus of an employee at an outsourced development firm is on the work the company has – NOT YOUR PROJECT.

This often means that they could be working on other projects at the same time or be distracted by the dev company’s own agendas.

4. No camaraderie 

They’re not in the trenches with you. When you’re in the trenches, feeling the burn of deadlines looming – only people with whom you’ve developed true camaraderie, perform and go above and beyond. That’s because you’re in it together. One focus. One vision. United passion.

Outsourced firms can never share in that.

The founder should have a type of Steve Jobs-esque Reality Distortion Field ™  where they unite everyone within a new reality that they share so intensely – that they bring it forth into being. Anyone who cames in the range of the field, gets sucked in and their reality is altered.

How can you possibly do that with a team you almost never see?

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5. The code is most likely junk

Although you are assured that the engineers working on your project are competent… If you’re not a great engineer – how do you know? Moreover, how do you know who is actually working on your code?

Often you will be told that a specific engineer is working on the code, but in reality it’s actually some noob bozo with almost no experience bumbling his way through and being supervised at an arms length by that more senior engineer that you thought was working on your code.

Anyways – that senior engineer managing/ overseeing the development is never really focused enough to truly vet the code or ensure it’s awesome first time round. That means mistakes. That means time wasted. For you that means: FRUSTRATION. POOR DELIVERY. OPPORTUNITY COSTS. YOUR TIME WASTED. Think what you’re team’s time is worth, and factor that into your costs when they don’t deliver on time or well.

6. The code is in their sticky fingers

If you have a fallout with the firm, they technically have you over a barrel. A very uncomfortable position to be in.

They can steal your code, take your site down, sabotage it, shut you out… Use your imagination.

Now don’t get me wrong – outsourcing development can be awesome for a company that is not in the startup cycle or where there is technical expertise to manageand vet the coding process. Generally speaking there are too many reasons why outsourcing development sucks for startups. Sometimes it’s a must, but I advise avoiding.

My suggestion: You need a TechStar CoFounder. Find a technical cofounder who is awesome and shares your passion and can bear the burden of running the startup with you. It’s a lonely road – especially when there are areas that are not your forte.

Every Steve must haz a Woz.

Be the JobWoz (or J-Woz)

steve-jobs-and-woz-back-in-the

 PSST: now check out my OTHER post – 12 tips to make it COOL to outsource your development.

Eran Eyal
Eran Eyal
Eran is the founder of StartupHat, Springleap, Evly (acquired), iDea (acquired), eSquared (acquired).

10 Comments

  1. Edward Lusive says:

    Sadly, the real world burns those of us who are outsourced and work “extremely” hard. When your company thrives and succeeds due to the rapid deployment of skilled staff, the outsourced staff are often overlooked in the rewards, growth, recognition and development.
    In being constructive, which cities and which companies have you outsourced your development to, that have left such a bitter taste?

    • eraneyal says:

      Hi Edward – thanks for contributing. Some absolutely spot-on comments. Just goes to show that even when you outsource – go look at the team and see what their company’s culture is like.

      I’ve spent years outsourcing to SOuth Africa, India, Russia, Ukraine, USA and now a bit to Canada.

      I don’t think it’s appropriate for Startups with no technical co-founder (or hard as nails CEO with a good understanding of dev and deep experience) to outsource their dev. They’re going to get screwed every time.

      Have you read my followup blog to this? Ie – 12 top tips on how to make outsourcing cool?

  2. I just posted some lengthy notes on your other blog about 12 tips on making outsourcing cool.

    Here, I want to add my comments to your first post. You make some great points, but you have to remember that people may find your post (like I did) and not be so fortunate to be in Silicon Valley.

    My opinions inserted under your writing:
    1. No passion
    Startups are all about being MASSIVELY PASSIONATE about a problem you’re solving. You can never expect an outsourced firm to be passionate about the same problem. They’re passionate about 2 things: Geting more clients and the bottom line. They can never share your passion or understanding of the problem to creatively address the issues beyond the functional spec you create. This is probably the biggest issue at the heart of why outsourcing development sucks for startups
    >>You should differentiate types of outsource companies. There are definitely large code shops that are more like factories. It is true that they won’t have the passion for your personal project. That’s not what they do. Don’t go to WalMart and be surprised that they sell cheap stuff.
    >>For startups, you do better if you find small outsource companies that understand startups, because they are often starting small themselves. Also, boutique shops are not factories. They are teams, just like yours. They actually can and will share your passion, especially if you include them in your process. If you treat people like factory workers, yes, they will act that way.

    2. Employees and the 9to5
    Outsourced development firms are filled with 9to5er’s – people who earn a salary and want to leave asap. The company sometimes charges overtime (MORE EXPENSE!) for them to stay later. They rarely have a share in the profits or share options of the company they work for. As soon as they can, they leave these companies and start competitive ones of their own or their own startups.
    >>This is really an unfair remark. There are many small shops to which this does not apply and is simply incorrect. I don’t deny that there are such problems. It is one reason I have gone to nearshoring. I find certain locations and cultures much more workable than others. I can only guess at the places where you’ve had trouble, but please, don’t write off the entire planet and industry. It isn’t always bad.

    Most importantly – they don’t give a shit about your problem you’re passionate about. They are removed by 2 to 3 degrees from you as a client.
    >>If you pick smaller companies, they are not removed by 2 or 3 degrees – unless you let them. The teams I work with are very passionate about their clients, and often work with no pay just to make sure things go right. Like I say, go shopping and WalMart, and don’t be surprised at what you get. Go shopping at a small store where the owner is there, you have a different experience.

    3. No focus
    The focus of an employee at an outsourced development firm is on the work the company has – NOT YOUR PROJECT.
    >>Just not true. Again, if you work with boutique shops, your project may be the only project, or one of only a couple. They are very focused.

    This often means that they could be working on other projects at the same time or be distracted by the dev company’s own agendas.

    4. No camaraderie
    They’re not in the trenches with you. When you’re in the trenches, feeling the burn of deadlines looming – only people with whom you’ve developed true camaraderie, perform and go above and beyond. That’s because you’re in it together. One focus. One vision. United passion.

    Outsourced firms can never share in that.
    >>So many absolute terms you use. You use that word “never” frequently. I think it is unfair to criticize an entire world and industry.

    The founder should have a type of Steve Jobs-esque Reality Distortion Field ™ where they unite everyone within a new reality that they share so intensely – that they bring it forth into being. Anyone who cames in the range of the field, gets sucked in and their reality is altered.

    How can you possibly do that with a team you almost never see?
    >>Who said you can never see the team? That’s a function of who you work with and how you prioritize your own day. If you toss something over the wall to a company and expect them to create and then deliver without your input, then you will have problems for sure. But why pick a company where you aren’t allowed to talk directly and frequently with the people doing the work. I agree, not good for startups.

    5. The code is most likely junk
    Although you are assured that the engineers working on your project are competent… If you’re not a great engineer – how do you know? Moreover, how do you know who is actually working on your code?
    >>And how do you know the guy you just hired here for $125,000/year is competent?

    Often you will be told that a specific engineer is working on the code, but in reality it’s actually some noob bozo with almost no experience bumbling his way through and being supervised at an arms length by that more senior engineer that you thought was working on your code.
    >>Yep, this happens. Like a broken record, I’d say for a startup company, you need to pick the smaller outsource teams so you don’t get farmed out to beginners. This doesn’t happen much with boutique shops. Everyone is much closer to the project.

    Anyways – that senior engineer managing/ overseeing the development is never really focused enough to truly vet the code or ensure it’s awesome first time round. That means mistakes. That means time wasted. For you that means: FRUSTRATION. POOR DELIVERY. OPPORTUNITY COSTS. YOUR TIME WASTED. Think what you’re team’s time is worth, and factor that into your costs when they don’t deliver on time or well.
    >>It is a good idea to consider the costs. Definitely. Re-working code is a very expensive problem. I’ve seen a number of projects that have been outsourced to multiple shops, and not surprisingly, the code is a mess. It’s like baking a cake in multiple kitchens. Pretty hard to do it well.
    >>At the same time, it is very hard to hire in Silicon Valley unless you have a ton of money. Startups often don’t have the ability to pay the $100K and up salaries. And not everybody lives in Silicon Valley.
    >>The reason a startup should consider quality outsourcing is because (if you pick a good team) you can quickly build an MVP (Minimum Viable Product) without having to hire your own full time team. This is a big cost consideration as well, because lots of great ideas don’t make great businesses. So it’s often good and practical to get help before building a team. That is just as much an opportunity cost and time savings.

    6. The code is in their sticky fingers
    If you have a fallout with the firm, they technically have you over a barrel. A very uncomfortable position to be in.

    They can steal your code, take your site down, sabotage it, shut you out… Use your imagination.
    >>Wow, you must have really worked with some nasty people!
    >>In my own experience, we see more entrepreneurs not paying the bill than we see outsource companies stealing code. With proper procedures up front, both you and your outsource company should have access to the code being created. There can definitely be disputes about whether something has been properly delivered or not. I recommend sticking to the Agile style of doing things in two-week increments. That way, in the case of a total fallout, you only have that two-week portion at stake.

    Now don’t get me wrong – outsourcing development can be awesome for a company that is not in the startup cycle or where there is technical expertise to manageand vet the coding process. Generally speaking there are too many reasons why outsourcing development sucks for startups. Sometimes it’s a must, but I advise avoiding.
    >>Gee. “don’t get me wrong” ? That would be hard to miss. Since just explained that outsourcers are unfocused thieves and noobs and bozos who don’t care and will steal your code and rip you off. Ouch!

    My suggestion: You need a TechStar CoFounder. Find a technical cofounder who is awesome and shares your passion and can bear the burden of running the startup with you. It’s a lonely road – especially when there are areas that are not your forte.
    >>Good boutique outsource shops can also help with things that are not your forte. Don’t give up on good ideas just because you don’t have resources. That’s the whole point of outsourcing.

    Every Steve must haz a Woz.
    >>Wouldn’t we all like to be Steve Jobs and have a Wozniak? It’s a good idea to have a smart partner, but Jobs and Wozniaks aren’t always so easy to find. A good outsource shop that deals with startups can be a great partner, even if not as marvelous as Wozniak.

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