Unlocking The Most Underrated Benefit of Outsourcing Development

For early-stage startup founders, it seems like outsourcing has never been a more tantalizing proposition than it is now. In the age of remote work it feels like a wonderland of quality talent pools at reduced costs is just a click away.

Yet, if you actually listen to founders who have tried outsourcing development, many of them feel like it’s become a risky proposition.

Outsourcing has a tricky relationship with risk

It’s that sharp reduction in cost that first gets business owners hooked. According to an Accelerance study, US developers can charge anywhere from $105 and $187 per hour, while similarly qualified developers from Asia charge from $25 to $70.

A potential 70% reduction in labor cost for development is nothing to sneeze at. It's helpful in a venture’s earliest stages, where an inexpensive proof of concept is a powerful asset. It’s also helpful in more advanced stages, whenever you need to bolster development capabilities around new features and products.

All these benefits compound to an attractive proposal. They can actually minimize venture risk by reducing cash burn and compressing timelines through staff augmentation. But as entrepreneurs who have gone this route will tell you: there are reasons to be wary. Costs often seem to pile up, as uninvolved developers are common cause for reworks and missed deadlines.

According to Aberdeen Group, over 76% of outsourcing customers report that costs associated with administration and vendor management turn out far higher than expected. Dun & Bradstreet’s Barometer for Global Outsourcing shows that 20 to 25% of all outsourcing relationships fail outright within two years, while 50% fail within five.

How can you outsource to minimize risk?

Is it possible for early-stage founders to, so to speak, have their cake and eat it too? How do you identify the good ones and unlock precious efficiency gains that actually de-risk the experience of startups?

For starters, if at all possible, you must nearshore. Nearshoring is the practice of outsourcing work to a company in a neighboring country.

Nearshoring shouldn’t only reduce your costs, it should also minimize delivery risk.

As nearshore developers, in Latin America for example, are in your timezone, communication lag and potential travel costs drop dramatically. Culturally as well, they are better aligned with US corporate values and take an involved and consultative approach to their work.

These intangibles make the difference when it comes to mitigating risk. When developers actually dive into your product, ask questions and pitch in with their ideas, you save time onboarding and get smoother development cycles with less reworks.

The same Accelerant study shows that development hours in Latin America are also comparable in price to those in Asia, ranging from $35 to $61 per hour, assuring early-stage startups keep those burn rates in check.

You must also work with reputable, backed companies where you can: they can better take on the task of identifying and recruiting talent for your project and can also be held accountable for delays and missed deliveries.

Nearshore developers are also easier to audit! They usually share similar data protection laws with the US allowing you to take precautions. More often than not, it’s the reputable development companies that are open and transparent with their track record.

Minimizing risk also depends on identifying those assets that set apart top product development firms: an abundance of available case studies with real entrepreneurs, robust teams that go beyond developers, leadership with venture capital experience and abundant client testimonials are just some to look out for.

When a nearshore development firm displays the same interest in your business objectives as they do your tech, that’s when you know you have a good one.

Getting it right the first time

Here at Shokworks we are a nearshore services company with a ROI-focused approach to product development. We are US based and recruit from the top 1% engineering talent in the Americas.

Beyond development we deliver consultancy by experts with backgrounds in product development, venture capital and private equity. We do all of this inhouse, giving us the control and flexibility to adapt to any founders’ road map, enhancing teams seamlessly and without disrupting business continuity.

Our dynamic teams have helped develop over 150 products and achieve over $1 Billion in revenue and cost savings to our partners.

We operate from a founder-centric perspective, adapting the size and complexity of our teams to the requirements of your project, which ensures an extended cash runway for businesses. Particularly amidst market downturn, maintaining lean operations and high product velocity are invaluable assets. 

We do it to de-risk the journey of first-time founders and serial entrepreneurs alike. Get a free ROI Audit here.