Should Startups Outsource Product Development?

A brilliant idea has suddenly popped up in our mind. We start dreaming of building a business, raise funding, and becomes a millionaire. We all might have been through this situation multiple times. Ok, Leave funding and the possibility of becoming a millionaire, what is the plan to develop the product? If you are a developer, just build it. Done! But what if you’re not a developer? Should you outsource product development? Or should you hire a technical co-founder? This article tries to discuss several advantages and disadvantages of outsourcing to a product development company (like Logidots).

Don’t worry. Even though you’re reading this article on the blog of a product development company, I will make sure the article is not inclined towards outsourcing and I will try my best to make it neutral. So, let’s start.

Are you Selling Technology? Or Do you use Technology to Sell Something else?

This is a tricky question and can be difficult to answer. At the first sight, even if you think you are a tech company are you really a tech company? Well, any company can be branded as a Tech company if they use technology as a core part of their business offering. Let’s make it more clear. Are you an e-commerce business that sells custom-made Fashion products? Then you are using technology to sell physical products. You’re not selling technology.

Are you an e-learning app that sells educational content? Then your core offering is the educational content, and you are using technology to optimize the delivery.

But if your product is an API or an SDK that provides e-commerce technology to people (Something like Snipcart), then you are selling technology.

Hope you’ve understood the business. If you are reading this article with an idea in your mind, I believe it is most likely an idea that uses technology to sell something else, such as an e-learning app.

My product is technology. Should I Outsource Product Development?

You can, but only if it’s absolutely necessary, and make sure you really really have control over the outsourced team. Your product itself is technology such as a proprietary algorithm or an SDK and you are outsourcing the development to a product development company.

One of the most important things to look at here is to evaluate the tech expertise of the firm that will be developing your product. Since you are outsourcing your core product, it will send a negative signal to investors and customers. Because you are going to sell something that you don’t know about.

If you’re a founder who plans to build an SDK or an API, then most probably you’re a technical person. It is always better to experiment with the product development yourself (at least the early-stage MVP), and then find the right team to outsource.

I’m not stating that the approach wouldn’t work. It will work if you find the right product development team.

Outsourcing Product Development for Tech Enabled Startups

Are you planning to build an e-learning app to help primary students learn a new language through video courses and interactive exercises? Then you are using technology to deliver education. Definitely, technology is a very integral part of your business, but you have another important area to focus on – the quality of educational content. If you as a founder has the subject expertise in the educational industry, then you should spend most of your time creating high-quality educational content because that is what is going to make your product go viral.

We have worked with multiple startups to help with e-learning app development. The most important benefit they gained from the engagement was to worry less about the technology and focus more on creating valuable content, finding content creators, and focus on developing the business.

So yes, if you are a tech-enabled startup, then focus on the core area of your business and find a product development team to outsource technology. This approach can help you launch your product faster, reduce costs and leverage the vast tech experience of the partner company you are associating with.

Pitfalls to Avoid While Outsourcing Product Development

It doesn’t matter if you’re a core tech company, or a tech-enabled company, outsourcing product development always comes at a risk. But it’s something that can be mitigated with proper approaches and an experienced team. Examples are available within our own case studies. An e-learning startup we’ve associated with has raised funding because they focussed on their core area and outsourced the technology.

So, always make sure to avoid the following pitfalls when you outsource development of your product.

• Choosing the wrong team. Always make sure the team is experienced in your target industry.
• Not knowing what you want to achieve. You should always have a clear expectation about the product that you want to get from the product development company.
• Not tracking the project properly. Don’t just hide after granting the contract. The project is likely to fail if you do not involve in every step of the project. Comeon, it’s your product!

The success of an outsourced product development approach completely depends on the partner team, your ability to clearly demonstrate your requirements and expectations, and the mode of engagement of the project. If you have a plan to outsource the product development, always make sure. to make a list of at least 5 companies who are experienced in your target industry and study them well before awarding the project!