Software Outsourcing to Boost Startups and MVPs

Quick Summary - Founders of lean startups with tech-related MVPs deciding to outsource software development immediately make points with investors. All investors crave remarkable returns on investment. Performing due diligence in outsourcing software development shows investors that you’re focused on optimizing team capabilities, execution capacity, and funding runway.

Software Outsourcing to Boost Startups and MVPs | PerceptionBox

With a lean startup and MVP approach, you’re doing almost everything you can to guarantee success. Maintaining this focus will keep your startup from going off the rails as yet another failed vanity project. Here’s how:

4 mins read

Lean startups in a nutshell

It can take months to write a proper business plan, during which time someone else has come up with a similar idea and already taken it to market. A Lean Startup assimilates the creation of a business plan into the process of developing a business. It’s asking a lot of hard questions along the way, with the toughest one being, “Should I build this business?” It’s not a question of whether you want to or whether you can, but a more pragmatic matter of whether it’s likely to be profitable.

The Lean Startup approach is essentially a three-step process:

  1. Find the (Right) Business Idea – Determine if a specific problem is shared by enough people who would be willing to pay for your solution. This can lead you to a startup incubator or to testing your idea with a crowdfunding project, with the aim of generating some seed money.
  2. Execution of the Business Idea – Here, you have two objectives. One is to get traction with early adopters and receive more feedback on product-market fit. The second is securing additional seed money or angel funding en route to your Series A. Use your seed money to start on the development of your Minimum Viable Product.
  3. Validate the Business Idea – Taking your MVP to market with one of two approaches – to rapidly achieve sustainable profitability and/or secure additional rounds of funding (usually to help rapidly grow market share or finance exotic new features).

Of all reasons for startup failure, not finding the “Right Business Idea” ranks #1. There’s a risk of being too broad (Amazon might sell everything today, but it started out selling books online). The greater risk is being too narrow, like an app to sell only Nivḥeret Yisra’el Football Cards. Maybe that could work, but why cut yourself off from the rest of the football/soccer card market?

Understanding Minimum Viable Products

For practical purposes, a Minimum Viable Product or MVP is that version of a product with the 1) barest features that an 2) early adopter 3) would buy that 4) maximizes user feedback with the 5) least effort. Take away any of the five points and you’re left with something other than an MVP. MVP’s are not necessarily the simplest, cheapest, or fastest product to develop, per se. While the focus is on producing a product, an MVP can and should be considered as part of a process and strategy, well-suited to Lean Startups.

“Fail fast and frequently,” is practically a Silicon Valley Mantra, but to make it practical requires adding – Painlessly. With this in mind, it’s worth doubling down on finding the right product-market fit before you start investing too heavily into the development of your MVP. Avoiding time and money on features users may not want also helps to maximize feedback on your core feature – instead of everything but.

Indeed, while a Crowdfunding Project is not an MVP – the objectives are perfectly suited to one. We’ll discuss Crowdfunding Projects separately, suffice that they’re a great way to generate feedback on your core product idea and see how much people are willing to pay for it. It’s also an option for startups wishing to avoid the stress associated with interacting with investors. This is not to say crowdfunding is easier.

How does outsourcing software development fit?

Lean startups seek to optimize team capabilities and the impact-value of the funds they raise. Outsourcing software development achieves both objectives. As we recently showed, for the expense of one employee you can have up to four outsourced developers working on your project. By outsourcing software development, you could have a software engineer, one or two software developers, and a UI/UX designer for the cost of a single employee.

This variation weighs heavily upon the developer’s location – not their skill levels.Using Numbeo for some quick comparisons, it costs 20% more to live in Tel Aviv than it does in Haifa.

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Cost of Living Comparison

Making $5600 in Tel Aviv is like making $8300 in San Francisco.
The chart below shows wages of software developers across the United States – San Francisco averaging $141k and Chicago $102k. San Francisco’s cost of living and wage differential is roughly 140% greater than Chicago.

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Courtesy US Bureau of Labor Statistics

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Pros and cons of outsourcing software development

The cost benefit of outsourcing software development is remarkable, but not the only reason to outsource. Expanding upon the Lean Startup approach, you can depend on the technical requirements of your software being addressed while you remain focused on developing your core business. You forego huge administrative costs by keeping a small team of executives – CEO, CMO and other CxO’s. Let them focus on what they do best — executing the rest of your business plan.

Type

Advantages of Outsourcing

Disadvantages of Outsourcing

Pros & cons

  • Nearly all of the advantages of an employee without the overhead.
  • More technical skills and higher productivity per dollar.
  • Same or better technical qualifications.
  • You retain control of QA standards, project management software, and reporting requirements.
  • Access to a larger talent pool.
  • Faster onboarding of team members.
  • Reduced office space and overhead requirements
  • No Federal/State taxes.
  • Health Insurance not required.
  • Not local to your office.
  • Can’t tell them to wear a uniform.
  • Can’t dictate regular work hours.
  • Collaboration can be more difficult, but can be offset by VR/AR Tech.

Advantages of Outsourcing Disadvantages of Outsourcing

Pros & cons

Advantages of Outsourcing

  • Nearly all of the advantages of an employee without the overhead.
  • More technical skills and higher productivity per dollar.
  • Same or better technical qualifications.
  • You retain control of QA standards, project management software, and reporting requirements.
  • Access to a larger talent pool.
  • Faster onboarding of team members.
  • Reduced office space and overhead requirements
  • No Federal/State taxes.
  • Health Insurance not required.

Disadvantages of Outsourcing

  • Not local to your office.
  • Can’t tell them to wear a uniform.
  • Can’t dictate regular work hours.
  • Collaboration can be more difficult, but can be offset by VR/AR Tech.

Driving home the funds with VC and angel investors

Again, every investor is different, but they all want to see a return on their investments. You don’t need to have some brilliant new technology or the Next Big Thing to attract angel, venture capital or private investor funding. They want to see a business idea that has a really good chance of being profitable. The more traction you are able to show with early adopters, the more they’ll see you’re focused on product-market fit.

You’ll need to show them that you have a team capable of delivering the product AND developing your business. If you’ve done your due diligence to find the best software outsourcing agency for your product – your MVP and its continuous development is practically in hand. If you’re able to accomplish this much, many incubators and investment firms will be happy to help you beef up the rest of your core team with co-founders and executive-level staff.

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