Important Questions Entrepreneurs Must Answer When Searching For Outsourcing Partners

The first and most important question to answer whenmistaking go with a company too small. There are
considering outsourcing is the services specialization ofmany offshore developers working from their
the provider. Even though somewhat of anapartments with a couple of friends. They are cheaper
oversimplification, software outsource firms are dividedas they lack company infrastructure. These teams do
into those that perform IT services and those thatnot have engineering processes or management to
specialize in product development. By their natureimplement anything non-trivial. Recruiting is also a
these are completed different kinds of outsourceproblem once they get past their immediate circle of
development firms - an IT services firm will not be ablefriends they are unlikely to attract top talent. It is almost
to do software product well and vice versa. There areimpossible for them to provide the full range of
many factors every entrepreneur must consider. Howservices your product needs including QA,
long will the team be together? When outsourcingmaintenance, support and management expertise.
software product development the assumption is theFourth, geography is important to consider. Some
selected team will stay together for a very long timecountries and regions are better suited for product
(years) as the product evolves.development. If you are Fortune 100 company trying to
By contrast IT development teams are typicallyimplement a large IT project, some of the large Indian
assembled for a limited time and then disbanded.firms are great choices. If you are a Boston startup,
There is typically no need to keep teams together forIndia might not be a good choice based on attrition, high
extended periods. Software product developmentcost of labor, requirement for complete specification,
teams should be located in areas where employmentand IP protection are issues associated with this
turnover is very low - this is a primary reason whydevelopment location.
product development (versus IT development) has aProducts requiring database or web development are
low success rate in countries like India. What is thegreat targets for development in Latin America. If you
specification process? For many product companiesare planning to implement QA, as well as development,
product specifications can be quite fluid as they adjusttake advantage of firms that have development
to their market requirements. As a result, the productcenters separate from their QA centers. For example,
development team needs to accommodate changescentral Europe does not have a tradition of using
to the product specification. Requirements may be aseparate teams to development versus perform QA,
moving target. Product companies are better offwhich can push out the product development timeline.
working with outsource teams that are highlyBy contrast, developing in Europe and performing QA
adaptable and creative. Quite often teams arein Latin America will enable 15 productive hours in a
required to take a minimum specification and develop a24-hour period. This "follow the sun" model has
creative solution. By contrast, IT development teamsincreasingly become standard practice for many firms,
rely on heavy specification - in fact many projects areincluding Neubloc. This gets us to the last point. There is
developed under fixed bids based on detailedan enormous advantage to picking a US
specifications.headquartered firm. They will be agnostic as to
Often Asian firms can be very successful in ITlocation. They will pick a location that will increase
software development, yet challenged with softwareproduct development success - not because of family
product development. The outsource company cultureor nationalistic ties. They will span geographies to
and processes simply don't lend themselves toimplement the "follow the sun" model.
adaptive and flexible development. Eastern EuropeanFifth, IP protection can be a critical mishap if not
and Latin American firms historically have had a strongconsidered when choosing a partner. Many countries
focus on product development and as such are muchregions have homologized IP laws consistent with the
more attuned to changing or undefined requirements.US approach. Japan, the European Union and most of
Indian outsource development firms can have as muchLatin America are safe IP protection bets - that last
as a 70% failure rate of product development projectsthing you want is to suddenly compete with a US
where developers in Poland or Argentina have a verycompany that has software remarkably like yours for
high product development success rate. Full range ofa fraction of the price. Not only does this happen, it
services - an IT outsourcer will not have a wide rangehappens more often than you think. As a result there
of services that a product company needs includingare many locations where the engineering talent is
branding, website development, collateral development,very high - such as the Ukraine and Russia- but may
product design including usability, all the way through tonot offer you the protections you need to run your
product architecture, development and maintenance.business.Sixth and final consideration, what is the
The second consideration is the technical specializationadded value provided by your selected outsourcing
of your outsourcing partner. Hire firms that havepartner? US based companies that focus on software
development experience with your chosen technologyproduct development are oftentimes led by software
or platform. For example, if the project is to utilizetechnology executives. They will often have deep
embedded Linux, don't choose a Flex developmentroots with venture capitalists, bankers, private equity
firm. They won't have the senior level guidancefirms and other technology companies. Implemented
needed, won't have a critical mass of expertise toright they can provide significant added value by
draw from, and will have to recruit from scratch everyestablishing business connections that help your
time you need to expand the team.If the technologycompany thrive. As a customer you should fully
has not been chosen, make sure to select a fullexpect them to be an active partner and not a vendor.
services firm that can take a raw idea and completelyNotice price did not get mentioned as a primary
convert it to a product. Services required to becriterion. It is possible to get developer resources for
successful include product design, human factors,as little as $4k or as much as $8k per month through
architecture, technology selection andNeubloc and other providers. Concentrate first on the
development.Third, entrepreneurs must consider thecompany that is the best fit for your company and
size of the outsourcing firm. Do not pick a softwareremember that they need to be a long-term partner.
product development firm that is too large or small.Once you have made the decision based on other
Typically a team of developers needed to develop acriteria, narrow down the choice based on price.
new product will start off as 3 to 10 developers. ManyRemember the developer in his garage with 3 of his
of the larger (in particular the IT services firms) will notfriends for $4k per month is not necessarily your best
look at engagements below 50 developers.choice but neither is a 100,000 employee IT
Even if the firm is willing to take the engagement youdevelopment company at $8k per developer. If price is
will always be "last man on the totem pole" - they willa major concern then look to outsource firms that are
put their least qualified resources and move themwilling to work with you on a partial equity basis - your
around as needed for their larger clients. They will notinterests will be aligned and you will preserve your
care about your product - you are too small to worrycash.
about. On the other hand some product companies