Outsourcing tech: what every start-up has to get right 

by Ned Hallett
Published on March 2020

With the increasingly modular nature of tech, the perennial outsourcing question faced by start-ups at the point of scale becomes more relevant than ever: to take the growth cost in-house, or to outsource the technical capacities required to make the leap to somebody else? With monolith to microservices, X-Y-Z-as-a-service, and a number of other trends all pointing toward an increasingly granular and agile outsourcing market, many start-ups are looking outward for the technical leg up, but the choice isn’t as clear cut as it might seem.  In this article, we look at: 

  • Why start-ups often have to make big outsourcing decisions at the point of scaling
  • The problems that can occur if the decisions aren’t handled correctly
  • And how the concept of ownership can help see you through

Why does tech outsourcing play such a big part in the scaling process for many start-ups?

A person rock

There is no one clear-cut answer to this question. Rather, it would be accurate to say that there are a number of common scenarios in the tech world as it is today which affect this result.

  • Many start-ups work with offshore development companies to keep initial costs down. These companies can be great for starting out, but they often lack the singular commitment to your business and the up-to-date training of either an in-house technical team or a first-rate outsourced IT company. Meaning in order to grow as a business, you’ll need to either expand your in-house team or upgrade your outsourcing.
  • Once your product is live and earning money, it becomes very important it stays that way. This often means support needs go up, since relying on your in-house developers 24/7 isn’t an option unless they never sleep. 
  • What was acceptable at Beta stage in terms of performance no longer is. This can cover a multitude of sins, but essentially many start-ups work at a proof-of-concept level prior to scaling, after which they’re expected to perform in-line with market competition. This too means either expanding in-house capacity or outsourcing to somebody else.

What can happen if these decisions aren’t handled correctly 

A sad lego man

This is where it gets tricky. Every business is, of course, different, but generally, there are two pathologies associated with leaning too hard into tech outsourcing or in-housing, and both have the potential to cause your business serious harm.  Give away too much of your technical operations and you risk becoming spread too thinly to cohere: opaque third party teams who may or may not understand your culture and values;  agencies who own the licences to important tools, or even parts of your application, if you’re a product company; a set of microservice providers who are integrally linked only in your product and who, outside of it, have nothing to do with each other.  This is the pathology of over-outsourcing. And businesses that do this often end up stymied. Unable to make decisive moves after having given away too much autonomy.

On the other hand, there are the problems associated with not outsourcing at all. Here you’ll take on more and more unnecessary expertise costs, keep reinventing the wheel, and eventually slow under the burden of your own uniqueness: unable to incorporate easy, off-the-shelf solutions or give away parts of your process to teams whose whole raison d’etre is to handle that little piece of the puzzle perfectly. Obviously, a healthy balance between the two, and regularly taking stock of how your technical outsourcing is affecting your coherence as an organisation is one way to avoid both of the above scenarios.  But there is another concept which is helpful here, and which can be used to guide you through the outsourcing minefield.

What is ownership and how can it help me navigate the tech outsourcing debate?

a key in a hand

Ownership is the idea that whether something is in-house or outsourced, it’s yours. And while at first glance it may appear that ownership as a concept is just a way of constraining outsourcing, it isn’t. If your application needs to be able to locate your users within, say, 100 yards, to be yours: to be what you intended it to be, and a third-party geo-locator feeding data into your app is the only way to do this, then outsourcing is the ownership option. One way of understanding it might be that your outsourcing should never compromise the vision that drives your business.  If you are a cloud-native, microservices product company, for example, don’t allow any third party to push you toward cutting corners on that. Or, if you’re all about warm customer relationships, make sure any third-party communications system is sending the right messages, so to speak. The crux is ownership can be judged from a high-level perspective by the outsourced service provider’s willingness to centre your vision.  

A person with glasses

What ownership looks like in an outsourcing partnership 

Ownership in a partnership can be evident in a concrete practice or a value-commitment. When we do 24/7 support, for example, we give our clients ownership by keeping the service as close to them as possible. Because our clients are provided with a dedicated support number, and because we always communicate our actions to the client as soon as an issue arises, we ensure that support is never more than one degree of separation away from the clients team; that it’s something they understand, and that it’s mediated by a real human relationship.

Similarly when we – and many others – provide DevOps as a service, we emphasise the idea of cooperation between teams (even if a client’s main goal is freeing their team from DevOps work) and of having clients retain the licences to all tools used where they can reasonably be expected to take full ownership of those tools somewhere down the line (and of course when they have the preference to). 

Ownership can show up in an outsourcing relationship in a variety of different ways. But it isn’t only useful for navigating the outsourcing debate. There are implications for the long game too…

Getting to the other side

man high up

The giants of silicon valley rarely outsource anymore, because why would you when you can design everything around your every idiosyncrasy?  But if this is your start-up’s ultimate goal, then ownership is still a relevant concept. It’s much more difficult to wrestle a service from a disinterested, opaque third-party who’s never had a stake in your vision and certainly hasn’t been managing your support, hosting or XYZ in-line with it. An outsourced service that you still ‘own’, on the other hand, can be brought in with minimal friction. So ownership can help you stumble down the path from start-up to scale-up, and maybe one day to the Zuckerbergian lands a little further.  

The takeaways 

  • As tech becomes more modular, the start-up’s outsourcing dilemma becomes even more complicated
  • There are risks associated with too much outsourcing and keeping too much in-house
  • Ownership is one guiding principle that can help you make outsourcing decisions
  • If you’re aiming to become a huge, self-sufficient enterprise business, ownership is a concept with value, as it can make the transition between being a business with a normal amount of tech outsourcing and one with highly bespoke in-house solutions smoother

For a helping hand through the difficult process of scaling up, get in touch.

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