June 14, 2023
Startups are the lifeblood of innovation but are most susceptible to downturns in the economy. Software development outsourcing can offer a lifeline.
A year ago, in the face of soaring inflation and rising interest rates, the leaders of the famed Y Combinator startup incubator in San Francisco issued a stark warning to the startups in their stable.
“The safe move is to plan for the worst,” they wrote in a widely circulated memo.
“If the current situation is as bad as the last two economic downturns, the best way to prepare is to cut costs and extend your runway within the next 30 days. Your goal should be to get to Default Alive.”
Default Alive is startup speak for getting to the point where your company can make a profit with the assets you currently have access to. With venture capital drying up and banks much more cautious about issuing loans, startups have struggled this year to raise new funding.
Running out of Runway
That leaves them with two options to try and reach Default Alive - increase sales, a tall ask for a young company trying to disrupt a market, or cut costs. Many startups have been busy doing the latter.
Software development is perceived as the ‘secret sauce’ that gives a startup its competitive edge. Typically a software start-up will have a core team of developers who are integral to converting the big idea central to the startup’s value proposition into apps, websites, or products that can solve people’s problems.
So it would seem anathema to outsource some or all of that software development to a third-party development company, potentially based in a different country, in a different timezone. But here’s the reality - many famous start-ups, from Slack and Github to Appsumo and Alibaba, outsourced key aspects of their software development to help achieve critical milestones.
Smart startup founders are no longer leaning on outsourcing partners just to make their development budget go further. They are doing so to accelerate their time-to-market and to focus on their core competencies.
Here are five key ways start-up companies can benefit from software development outsourcing:
- Access to Specialized Talent: Building a skilled and diverse in-house development team is challenging for start-ups due to budget constraints and the scarcity of local talent. Outsourcing provides an opportunity to tap into a global pool of experienced software developers, designers, and QA specialists.
Start-ups can choose outsourcing partners based on their specific project requirements and have access to a wide range of technical expertise. This access to specialized talent enhances the quality of the software developed and promotes innovation through the exchange of ideas from professionals with varied backgrounds and experiences.
- Faster Development: Dedicated software development teams can work on the project full-time, focusing solely on delivering results quickly. With their expertise and streamlined processes, outsourcing partners can handle complex projects efficiently, meeting tight deadlines without compromising on quality. This enables start-ups to launch their products or services faster, seize market opportunities, and gain early customer traction.
- Scalability and Flexibility: Start-ups often face uncertainty and fluctuating demand. Outsourcing provides them with the flexibility to scale their development resources up or down as needed. With an outsourced team, start-ups can easily adapt to changing project requirements, business conditions, and market dynamics. Whether they need to ramp up development during peak periods or downsize during quieter times, outsourcing partners can swiftly adjust their team size and resources accordingly.
- Focus on Core Competencies: Outsourcing software development offloads the technical complexities and time-consuming tasks, allowing founders and key team members to concentrate on market research, product strategy, sales, and customer acquisition. By partnering with an outsourcing team, start-ups can delegate software development responsibilities to experts while maintaining control and oversight over the project. This division of labor enables start-ups to achieve a balance between business growth and product development, ultimately driving success.
- Cost Savings: Yes, outsourcing software development to a competent and experienced partner in Latin America, Asia, or parts of Europe, will let you take advantage of lower labor costs. This cost advantage translates into reduced overhead expenses, as there is no need to invest in additional office space, equipment, or employee benefits. Moreover, outsourcing eliminates the need for lengthy recruitment processes and training expenses, further saving valuable time and money.
Two Y Combinator startups, Airbnb and Stripe, were founded in the midst of the global financial crisis in 2009 and went on to disrupt the markets for accommodation and payments, respectively.
Tough economic times can forge lean, efficient companies with the ability to go the distance. With the right outsourcing strategy, start-ups can unlock their full potential and achieve long-term success in this uncertain business landscape.
Accelerance has worked with numerous startups, matching them with quality software outsourcing partners to help them achieve their business goals.
Get in touch with our consultants to discover how we can do the same for your startup.
