September 28, 2017 - Team Augmentation

Self-Funded Startups Need to Stay Lean: Outsource Development and Focus on Product Growth

by Antoni Żółciak
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Do you know how lean startups can stay lean? One way is through responsible and flexible outsourcing of software development.

Lean startup is a methodology for developing businesses and products that aims at shortening product development cyclesby adopting a combination of experimentation, iterative product releases, and validated learning.

Long story short, it’s about reducing market risks by meeting the needs of early customers.

You don’t try to make your product or service perfect. You don’t fund every little aspect of your project, nor do you spend money on expensive product launches.

You simply stay lean.

Hence, software outsourcing. What’s your primary goal as a startup?

We’re not saying you MUST outsource software development. We’re simply saying that you may want to consider it while building your Minimum Viable Product.

It’s totally up to you, or more specifically, your business strategy. Deciding when and what to outsource is tricky.

For us, the best practice is to apply the words of none other than Winston Churchill. One principle defined Churchill more than any other – singularity of purpose.

Think about your primary goal, your purpose as a business. Then, based on Churchill’s principle, consider giving serious attention to OMTM.

OMTM is The One Metric That Matters, a concept described in Lean Analytics: Use Data to Build a Better Startup Faster. The authors, Alistair Croll and Benjamin Yoskovitz, describe it as the one number, the one KPI, you should be completely focused on in your current stage. They state that “looking at CLV [Customer Lifetime Value] isn’t meaningful when you’re validating a problem, but it might be the right metric to focus on as you’re approaching product/market fit.”

Let’s follow the reasoning in Lean Analytics and talk about Moz, one of the most successful Saas (Software as a Service) companies in the SEO-optimization field. When the company was planning its development, one of the investors suggested reducing the number of metrics Moz was tracking. In the end, they decided to rely on one statistic: Net Adds.

Too much data can be counterproductive.

– Brad Feld, Foundry Group, one of the lead investors in Moz

Why the “One Metric That Matters” might be right for you

As described in the book, the OMTM methodology:

  • Answers the most important question you have,
  • Forces you to draw a line in the sand
  • Focuses the entire company around a single goal,
  • Inspires a culture of experimentation as a way of getting closer to this goal.

Let’s get back to the decision of what to outsource. Development is just one thing you may consider. At Insane Lab, it was one of the things we didn’t outsource – nor will outsource in the future.

Initially, we outsourced accounting, HR, and some business-related fields.

Since its beginnings, our company has been about the highest quality software development possible. We did what we could to:

  • First: learn how to deliver the code ourselves.
  • Second: find people who could write the code with us.
  • Third: check that the code is of excellent quality.

Our OMTM was to deliver the highest quality code we could at the given time. We believed (and still do!) that revenue increases and overall work satisfaction would follow.

And it worked out.

You wouldn’t be the only startup that outsourced development

The case of Slack

Did you know that Slack (we know you’ve heard of it) outsourced logo design, web development, and app development to a 3rd party?

When the software was good enough and the prototype was finished, Stewart Butterfield (also a co-founder of Flickr) began a small-scale distribution of the app.

Then they collected feedback and made tweaks based on the initial reviews. Today, Slack is being used by a few million people and is valued at almost $3bn.

It is our understanding that what Slack did well was test the MVP as soon as possible. And they accomplished that through software outsourcing.

The case of Skype

Skype is yet another development outsourcing success story.

But first, a little background. The founding duo of Skype was Niklas Zennström and Janus Friis, entrepreneurs from Sweden and Denmark. They first set out to successfully build Kazaa, a peer-to-peer file sharing software.Facing backlash from the entertainment industry, they decided to try and use the technology in a different industry.

Facing backlash from the entertainment industry, they decided to try and use the technology in a different industry.

That’s how Skype came into existence.

First, a few iterations of Skype were built in Estonia. Thanks to an outsourced team, an alpha version of Skype was ready for testing. The users loved it after they realized they could make calls for free.

23 (and more) other cases, including Github, Basecamp, Klout, AppSumo, Opera…

Entrepreneur Magazine prepared a compelling list of 25 startups that were built on the shoulders of outsourcing. In the end, it’s all about the low costs and knowledgeable talent that will help you develop infrastructure faster and get your company launched sooner.

The one tip for success in outsourcing

I’ll keep it short: test a couple of developers and make sure the code is clean.

Don’t wait. Do it now.

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