Ask an Investor: Should I outsource product development?

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Welcome to a BetaKit weekly series designed to help startups and entrepreneurs. Each week, investors Roger Chabra and Katherine Hague tackle the tough questions facing founders today. Have a question you would like answered? Tweet them with the #askaninvestor hashtag, or email them here.


This week on Ask an Investor, we cover a question on outsourcing your product development roadmap.

Conventional wisdom states that companies should outsource anything that is not truly strategic to their business. Startups are no different. In fact, it is even more important for startups who are more time and cash-strapped than larger companies to think hard about handing over non-core functions to outside experts. This could include areas such as payroll, manufacturing, technology hosting, HR, PR, and content marketing. Of course, what is core and non-core varies based on the type of business you are building and the stage you are at.

Startups could look to outside help as a way to experiment with a new technology. – Farhan Thawar, CTO of Helpful.com

However, what about your product development activities? Most venture-backed startups are technology-based and, hence, technology development can be considered core to operations. Surely, all technology development should be staffed up to and serviced in-house, right? After all, we all hear stories about how such and such’s company’s development team are “rockstars” and that’s why they are winning, or how that company was acquired for hundreds of millions because of their in-house team.

I think it’s important to challenge this thinking. More and more, we are faced with an environment where speed is critical, and outflanking global competitors is getting harder and harder. Importantly, in many sectors, technology has become less of a differentiator. Rather, a startup’s success is contingent on the commercial traction they produce from their technology.

To update our thinking on this issue, we called upon Farhan Thawar, who is currently the CTO and founder of Helpful.com. Farhan is well situated to opine on this topic given his current role and his previous experience as VP Engineering of Xtreme Labs, a large mobile development services firm that was acquired by Pivotal Software in 2013.

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Basically, the calculus comes down to a time versus money tradeoff. As a startup, life is all about speed to market and bringing in outside experts can be a key way to accelerate this.

Put simply, working with experts is all about you as a company having a core competency, whether that is existing data or an existing offering on a platform such as web, and wanting to expand rapidly to an area where you don’t have expertise. When you have identified an area of opportunity for your product, but you have little time to learn a new technology/platform or little time to onboard specific skill sets on your team full-time, it’s time to think about bringing in outside specialists to help.

By outside specialists, I mean either contractors or a larger development firm. There are many great platform specialists out there who operate as shorter-term contractors for startups helping to fill in technology gaps. Similarly, there are also some great development firms that might be able bring your product to market as much as three or four times faster than you can.

In the past, companies (including startups) would think about bringing in mobile-focused experts or firms to help their companies accelerate. Over time, mobile became more core to companies and the approach shifted from using outside help to bringing these capabilities in-house, often at the onset or early on in a company’s life. The capabilities of mobile continue to evolve and we are still seeing a lot of companies looking for help with their mobile strategies. Going forward, I see this trend being carried over into newer areas and platforms such as television, IoT, and virtual reality. In particular, I think we will see a marked increase in companies looking for help with machine learning and artificial intelligence over the next few years.

Startups could also look to outside help as a way to experiment with a new technology or to extend out to a platform that they know is already important to their customer base. Something essential to keep in mind is that when you are convinced the new platform is working for you, and you see this experiment or extension becoming part of your core capabilities, you need to think about how you will operate going forward. At this point it may make sense for you to bring the expertise back into your company permanently. You may decide to staff up to maintain and build upon this capability. Conversely, you may be content to continue to use outside help ongoing.

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Feature photo via Unsplash

Roger Chabra

Roger Chabra

Roger Chabra is the CIO at TribalScale, a global provider of digital products & companies for mobile & emerging technology platforms with offices in Toronto, Los Angeles, Dubai, San Francisco and New York City. You can follow Roger on Twitter at @rchabra