10 questions to ask before outsourcing work at your startup

Outsourcing is one of the earliest crucial decisions that startups have to make after inception. Often, the decision lies not in whether to outsource, but who to outsource to and how.

This topic was discussed at a recent panel session in Singapore organized by Startup Jobs Asia. On the panel were web developer Michael Cheng, who sat on both sides of the fence at a startup and development house, Golden Gate Ventures partner Jeffrey Paine, Pirate3D founder Brendan Goh, and Jaryl Sim, founder of web development agency Tinkerbox Studios.

The wide-ranging discussion was moderated by Nityanand Rai, founder of education platform Twofold. Here’s a summary of what went down.

1. Do you know what you’re doing?

The panelists agreed that there are startup founders, and then there are startup founders. If you’re an upstart entrepreneur who’s just trying things out and lack a firm idea of where to take your startup, outsourcing might be the way to go.

“There are some inherent risks when a salaryman joins a startup…if you’re not sure about your company’s future and how far you can bring your startup, it’s important not to play with people’s lives,” said Cheng, who once joined a friend’s company which failed.

Furthermore, Sim added that hiring in this way is a good stop-gap measure before seeking an employee. Since it’s a huge waste of resources to hire someone who does nothing, outsourcing gives a good gauge of whether a particular full-time role is needed.

Mature startups, on the other hand, may find outsourcing tricky. Cheng explained that at his previous employer, attempts to outsource various parts of their technology development were hampered by the fact that their infrastructure had become too large and intertwined.

“It’s hard to think about what can be outsourced when this part is linked to that. We spent a lot of time teaching them our system and handhold them halfway through,” he said.

2. Is your startup product- or technology-heavy?

If you’re an ecommerce startup, chances are technology isn’t core to your product. Plenty of off-the-shelf website builders like Magento and Shopify are also available, making it simple to build something fairly sophisticated in short order. In such cases, outsourcing is fine.

On the other other hand, if your startup involves a lot of intellectual property, then it makes more sense to hire an in-house software developer.

“If you’re game changing B2C or B2B product company that doesn’t know what you’re doing initially and need time to iterate, you will need a tech guy. But B2B startups with little technology differentiation that relies on mainly distribution as their core advantage need more sales than technical people in-house,” said Paine.

The nature of your startup could determine the cost of engaging a vendor, added Cheng. Typically, less technology-oriented startups are okay with outsourced developers taking code from one project and plugging it into theirs, as they’re more concerned about delivery. This saves time and money.

Startups that want to own their intellectual property, on the other hand, generally prefer their product to be coded from scratch.

3. What exactly are you outsourcing?

4. Is the vendor startup-oriented?

5. Do you want generals or foot soldiers?

6. Should you outsource to an overseas company?

7. Are you a good client?

8. Are you looking to hire the outsourced person?

9. Does the reputation of the vendor matter to you?

10. What do your investors think about outsourcing?