How Can Outsourcing Software Development Ease The Hiring Pains for Start-ups?

Hieu Nguyen

Hieu Nguyen | 12/09/2022

Outsourcing Software Development Eases The Hiring Pains for Start-ups

Hiring is costly for businesses, especially for startups like yours with little cash to spare and exponential growth to scale. Adding on to that is the global tech talent crunch, which makes hiring tech talent not just costly, but exorbitant. Most companies need more than a month to recruit a software engineer, and one-fourth of their hires needs to be replaced, as shown in The State of Tech Staffing Survey 2022. That’s why several startups have offered solutions to ease the tech hiring pains, such as Tryplebyte or These platforms may help, but you still have to trudge through applications, aptitude tests, and interviews. Such effort does not guarantee finding capable software engineers to timely deliver innovative features for your product.

Startups like yours are fighting an unfair battle against top businesses for tech talent, and to level the playing field, outsourcing software development companies may be your partners in command. But not so fast. Not all startups at all stages should outsource their software development, and choosing the right outsourcing company is crucial. When is the best time to outsource instead of hiring, and how? Here are what to do when you want to fast-track your startup’s growth without burning through your budget or compromising on innovation.

Early-stage Startups: Outsource Only to Established Software Development Companies

This advice applies especially to non-technical founders. You are entrepreneurs with brilliant ideas and business acumen but not the technological know-how to create the software. You’re eager to validate your idea, but you aren’t a software engineer and codes may intimidate you.

In the pre-seed stage, an outsourcing software development company can build an MVP within months, allowing you to quickly validate your idea. Choosing the best-fit outsourcing partner can make or break your product. Here are some questions to vet a good software outsourcing partner for early-stage startups:

  • Do they have experience working with a small business?
  • Do they respect your constraints, such as budget, time, or opportunity, and plan for that?
  • Does their portfolio include the kind of software you want to build?

A software development partner who can say yes to these questions is the one for you. As a startup founder, you may be new to the field, and you need their industry expertise. A mobile learning app would have a very different user base, design, and functions from an e-commerce web app. Since you’re still new to this, you have to trust their expertise because you can’t afford to mess it up. Thus, a portfolio of similar projects shows that they can advise you on potential roadblocks during development.

The right outsourcing partner for you is sympathetic to your constraints, with the experience of navigating them. For example, a startup has a shorter product roadmap prioritizing new and disruptive features, so some nice-to-have features can be ignored for the time being. Your outsourcing partners can help you focus on the most original features to make your product stand out in the market.

Once you make your choice, it’s best to go for a dedicated team who can take care of all aspects of the software development, keeping you in the loop, and delivering a complete piece of software by the agreed release date.  

Consider Getting a CTO First

To non-technical startup founders like you, turning to an outsourcing software development business seems obvious, but not so fast. You may easily feel overwhelmed by the technical details and decisions you have to make with your outsourced tech team. To avoid this, consider getting a technical co-founder first. It could be an outsourced Chief Technology Officer (CTO) or better yet, an in-house CTO who will be in the same boat with you and has your best interests at heart.

Why hire a CTO? Michael Seibel of Y Combinator advises that early-stage startups should outsource only when they can prove their growth potential to investors. At this early stage, what investors are looking for is not the product, but the team’s capability and the idea’s viability. Relying on outsourcing without in-house tech personnel, especially if your solution centers around a piece of software, does not give a good impression of these qualities.

Michael mentions that some startups have succeeded in outsourcing without an in-house CTO, however, they are the exceptions, not the norms, especially among those winning venture capital investment. Some reasons for possible failure when outsourcing without a CTO include:

  • It takes longer than you may think to get the first version of MVP out. Without a CTO at your helm, you’ll have to work directly with developers. How confident are you in communicating with them? This doesn’t just mean overcoming language barriers, but also thinking in ways that would bridge the differences between businesspeople - you, and tech people - your outsourcing partner. A CTO can be that bridge for you.
  • Despite your abundant enthusiasm for the product’s viability, building innovative software is hard work. Many founders have found it irritating when the outsourcing team delivers features that fall short of their expectations.  Without clear requirements and reasonable expectations, both sides may feel demotivated or confused during the process. A CTO can help you manage the gap between expectations and results, such as evaluating the deliverables and giving effective feedback for later sprints.

A trusty CTO can assess your technology needs and outline the technical requirements for your MVP. They can help you choose the best-fit outsourcing company, so you can focus on building a user base even before you have a product.

Outsourcing for Bootstrapping Startups

Bootstrapping startups are different because they build the product with the founders’ personal savings without venture capital funds. Bootstrapping founders prioritize earning revenue over attracting investors, even if it means slower growth initially. This means they may still be working at their day jobs. They also focus on building relationships with potential customers before launching a product, so that once launched, the product can generate revenue right away.

The most important thing for a bootstrapping startup to watch out for is their cash flow, because they are not looking for capital from angel investors and venture capital firms, at least, not at the beginning.

Bootstrapping startups in tech often have a technical founder, or at least, a founder - CTO partnership that can build an MVP with minimal costs. However, if the founders need specialist skills to code certain innovative features, then outsourcing software development to offshore places such as Vietnam is an attractive option.

One big reason is lower cost. If your startup is located in more developed economies, then the software development cost in emerging economies would cost you only a third of that in your local area. Countries like Vietnam, the Philippines, India, and Indonesia have mature software outsourcing industries, with some established offshore vendors operating for almost two decades. They have the industry experience that your startup needs, at an affordable price.

It may be tempting to go for cheap interns or freelancers but the best thing you can do for your startup, especially if you are a non-technical founder, is to choose an established offshore software development vendor. An established vendor gives bootstrapping start-ups three advantages:

  • Flexibility with an all-in-one package: they operate according to established industry quality standards to move your software from start to finish. You can choose to scale up or down. Switching from a team of one to two developers focusing on specific features, to a full team of developers, testers, designers, and analysts, is the kind of flexibility you can never enjoy with an in-house team.
  • Their experience working with similar customers and products provides you with much-needed market insights.
  • They have the industry access to a specialist talent pool, with the HR capacity to hire suitable talents more effectively than your startup can. With a proven reputation, they’re savvy in hiring and quick to identify the best-fit candidates for your project.

Some founders may doubt that the offshore team does not care for their software as much as an in-house team does. This may be true for some smaller vendors juggling various projects and yours is not on top of their list. You can avoid this by selecting a more established outsourcing vendor. They have a large enough capacity in terms of people, infrastructure, and management, to accommodate your needs. They get to where they are by being committed to satisfactory service delivery for their customers. So, treat your relationship with them as a strategic priority just like any other stakeholders, and you can have a well-synced working relationship and an MVP completed on time for an impactful launch.

Some startup founders often think of hiring freelancers or interns as a low-cost way to build their MVP, but freelancing isn’t a good equivalent to outsourcing. Why go for disparate freelancers if you can have access to a self-managed team? Building a new software product requires a lot of strategic thinking, intensive sprints, well-researched design, and rigorous testing. An outsourcing team has these qualities all in one place. With them, you can avoid the stress of managing a disparate team of freelancers.

Growth-stage Startups: Outsourcing Can Free Up Precious Resources for High-priority Functions

Your startup has a working product, a customer base, and monthly revenue. Well done! You have raised a project off the ground; now the hard work is scaling up. You can afford to hire an in-house tech team along with some key personnel for your go-to-market strategy. As part of management, you’re spread thin with running a full business on limited resources. Your software needs regular updates, new features, testing, and maintenance. Sounds familiar? Read on to see how IT outsourcing may be a life-saver for you.

But what about hiring? You need all the help you can get but tech hiring is painful. Even when your startup has had some traction, it is challenging to hire good software engineers in good times; in bad times like now, the state of the economy is not on your side. The salaries you can offer likely do not rival more prominent companies, even when your equity offer may seem attractive.

Efficiency is your biggest concern. It would help if you focused in-house resources on the essential functions that make your startup competitive and considered outsourcing for the rest. Once you invest in a lean internal engineering team, don’t be a hero; hire people for other management roles as soon as your budget allows.

If your budget does not, then outsourcing comes to the rescue. Established outsourcing software businesses often enjoy working for startups like yours because they match your entrepreneurial spirit of making more out of less. People come to outsourcing for cost-effective solutions, so a suitable outsourcing partner always keeps your budget and efficiency on top of their list. With many of them working in emerging economies offshore, chances are they also went through that phase of uncertainty and rapid growth with limited budgets. They know what it’s like being where your startup is right now.

Also, do you know that IT outsourcing does not just mean developing software? The range of services involves maintenance and support, QA and testing, and UI/UX design, to name a few, for projects of all scopes. You may just need outsourced assistance to modify a part of your software or develop integrated APIs. Opting for outsourcing means you pay for the specific skill sets when it’s needed the most and save when your needs are fulfilled. Such a variety of tech skills on offer gives you an incredible advantage in the current market downturn. Do you know that other businesses are also enjoying the advantages of outsourcing?

Another consideration in favor of outsourcing for startups keen to extend their runway is saving the costs of investing in equipment, infrastructure, and benefits for in-house teams. Your startup can’t afford big spending without justifying the ROI. How about skipping this decision altogether and letting the seasoned professionals at your outsourcing company take care of that for you? After all, the impact of a bad hire is more long-lasting than switching to other outsourcing partners.

The Bottom Line: How Do Startups Benefit From Outsourcing Software Development to Offshore Companies?

The Bottom Line: How Do Startups Benefit From Outsourcing Software Development to Offshore Companies?

Salaries are an enormous burden on a startup’s overheads. Thinking that hiring your own employees means giving you more control over your software is a fair point but only on the condition that you find quality, suitable candidates. The shortage of tech workers in your local area may make this search lengthy, costly, and eventually you may find yourself compromising with employees you aren’t too happy about. Startups have immense difficulty retaining quality tech talent, especially when competition from more established companies is fierce.

It would be easier to hire an offshore software outsourcing company that bears the responsibility of recruiting the right people for you. You know for sure you’ll have their specialist service for a definite period. Wouldn’t that give you more control than in-house employees who may jump for a nicer offer after a few months?

Outsourcing gives startups the flexibility to pause investments in new features during difficult months so their cash flow stays healthy.  It is an alternative to hiring, and when hiring is costly and challenging, outsourcing is often the only justifiable option.

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