Tech Startups: How to Outsource

Posted on Posted in Project Management Tips, Stories, Tech Startups

Tech Startups: How to Outsource

Many tech startups are averse to outsourcing the development of their products because they do not fully grasp the dynamics of working with third-party providers.

What if you have the killer idea but do not have the technical capability to produce it? Is it possible to outsource the technical development of your product? The short answer is yes, specially if you have limited budget and resources. But you’ll need to consider some important factors beforehand. Below are some of them:

1.) Determine the minimum viable product (MVP). The MVP is a core component of Lean Startup that aims to simplify your solution to the problem and allows you to deliver your product quickly. MVP is a strategy to ensure that you do not build features that your customers do not want. First, develop the core functionality of your product. Second, release your product and test the market. Finally, get feedback and evolve.

Do not start outsourcing your development efforts without a clear MVP – you will find your development team working on unnecessary features. Given that you have limited resources, clearly it is a waste to work on the non-essentials.

2.) Ensure IP protection. Make sure that proper protection clauses for the intellectual property are clearly specified in the contract. That is, all IP resulting from the outsourcing arrangement belongs to you. Also, make sure that you are aware of all third-party libraries used and their license agreements.

3.) Start with a prototype. Consider working on user experience from the very beginning. Most, if not all, of modern applications are user-centered. Starting your work with a prototype not only allows you to validate your design, it also ensures that your outsourcing partner understands the requirements correctly and is capable of delivering on the job.

4.) Keep R&D. If you are trying to solve a problem where the solution is non-existent or if you are trying to develop advanced algorithms, do not expect your vendor to develop the solution for you. Keep research and development work with your internal team.

4.) Find the right technology partner. Ensure that your provider has the right skills and experience for the project. If you are developing multi-tenant applications, check their background and experience in working with multi-tenancy. If you are developing mobile applications, then check their related work, if available. Ensure that your vendor understands the startup environment, its technologies, opportunities and challenges.

5.) Adopt the agile methodology. You want your product to evolve quickly and your team to adjust quickly. To this end, ensure that your team is capable of delivering product features within weeks and not months. Check that your provider has the right tools such as agile-compatible tracking systems, continuous integration tools, as well as experience with automated and unit test practices.

6.) No fixed cost contract. Since your requirements will evolve, only engage on a time and material billing arrangement. Fixed cost contracts will not work for dynamically changing requirements. Either you end up paying more, or the vendor suffers from scope creep. Either way, it is not going to be a long-term relationship.

7.) Drive the product but share the “sense of ownership”.  Even when you solely own the product, you can still make the team feel like they’re part of the product and its success. Ensure that you are driving the requirements but also make sure that the team is aware of the problems you are trying to solve. Explain the situation and ask for their opinions.

Ideyatech is a Java development firm that has successfully developed several startup projects like Stalkthis, Skedly and more. Feel free to contact us at

Related article: Success Factors in Outsourcing

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