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IT outsourcing: Go/no go?
Feb. 14, 2020
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Some start-ups decide to outsource product development, while others prefer to manage it internally. Should start-ups outsource developers or hire them? Many start-ups have a misguided view of what outsourcing entails and often believe that software is too important to outsource. The Partech Shaker brought together three experts to help you make the right decision: Olivier Pichon, dzango tech accelerator CTO, Florent Guyennon, The Machinery Co-founder, and Charles Bénard, Hiboo Co-founder & CPO.
Meet our panel
Olivier Pichon, dzango CTO, has 20 years of experience in IT and has been an IT consumer for much longer than he has been working as a provider. dzango provides managed software outsourcing solutions. After analyzing their client’s requirements, dzango sets up a customized team of one or more developers; the team then works exclusively for the client. dzango manages the team for its clients and implements the tools required for the project. The dzango Development Centre is based in Kathmandu, Nepal.
Florent Guyennon is the co-founder of The Machinery, a rapid testing lab dedicated to sourcing innovation projects. The Machinery specializes in two areas of expertise:They launch your project in four weeks before or without and existing product) in Growth Hacking mode, in order to measure potential users appetite and gather reliable data to make the best decisions;
1. They launch your project in four weeks (before or without an existing product) in Growth Hacking mode, in order to measure potential users’ appetite and gather reliable data to make the best decisions;
2. They structure your product once your market position is defined, by documenting, planning and designing the product – this is a key step in ensuring seamless production.
The Machinery does not have an in-house team of developers; it helps its clients to choose the right partners.
Charles Bénard, is Hiboo Co-founder & CPO. Hiboo helps the construction industry to compile connected equipment data and boosts productivity by providing large companies and ETI with a dynamic and data-driven overview of what is happening on the ground. For Hiboo, IT is a key skill and the firm outsources some of its IT to dzango. This has proven to be a great success and both dzango and Hiboo teams work as one.
Is the testing phase the best time to outsource?
Florent Guyennon – We believe that early-stage testing should not be outsourced. We prefer to work with clients who have really experimented with their technical expertise before they consider outsourcing. Before taking the plunge, alternatives such as tools and frameworks like Webflow or bubble.io and usage innovation in the retail sector, for instance, can be easily tested.
Olivier Pichon – I agree. I believe that some technical elements are critical, others are not. In reality, not all start-ups are technical, even if they all need some technology or an IT platform. Why hire a developer when the skills may already exist somewhere? An e-commerce platform is also a good alternative. Keep an open mind, and don’t automatically internalize everything.
Florent Guyennon – We used to believe that coding was essential for product development but now we have reached a more mature phase in which we view coding as a means to serve strategic activity. It is essential to clearly define your strategic activity and outsource your software. There is a misguided opinion that you become more vulnerable when you delegate your IT needs.
Olivier Pichon – Intellectual property can be a concern. Beware of who you work with. I regularly hear about start-ups that cannot access their source code unless an additional, higher invoice is paid to the IT supplier. This can be avoided simply by making sure your source code is yours and stored on your server. It is easy to open an external supplier account in which you can secure your source code.
Charles Bénard – It varies per business type. At Hiboo, we needed to have in-house developers because our core business is data processing. As a young company – just three years old – we do not have the financial means to enlarge our in-house development team. When we started collaborating with dzango, we had three in-house developers. We continued to recruit internally, and, at the same time, we outsourced some of our development to dzango. We chose to outsource some of our development business to continue growing and be able to respond quickly to our clients.
Why did we decide to outsource to dzango? We are a remote-oriented company and, as a result, have the right process in place to work with external teams. We discussed our processes and how we could work together with a remote team (dzango developers are based in Nepal), to make sure we worked to the same standards and level of excellence Over time, it was clear that dzango was providing us with high-quality code. Quality is the top priority when you are choosing your external development partners. In practice, we had one roadmap for our developers and another for dzango’s. As trust grew, we gradually integrated their teams into our processes.
Florent Guyennon – I believe that you should view subcontracting as recruitment and not as an extension. We used to do package development. One of our long-standing clients once told us: you deliver the product and we will pay you. The best way to outsource is to position yourself in terms of your own technical purchasing skills because when you buy a technical service, you put yourself in the recruiter’s position: you must be able to test their skills and ensure that there is a cultural fit. It's the same with an external provider. You must also fully understand your needs at T-time. Beware of hidden costs when you internalize, such as recruitment costs, and loyalty costs (you need to be able to motivate your talented developers with inspiring managers, etc.). One solution is to find the right service provider to match your projects.
Olivier Pichon – Make sure that you assess your service providers. There are so many offers on the market, and some providers even subcontract their services to third party providers. At dzango we work as a strategic partner with our clients to provide more added value than just simply the product. We bring added value to processes, i.e. the way code is managed. This aspect is often not very well developed in start-ups. I encourage you to consider your external developers as a recruitment process. We always work on time spent and not on packaged time. In the long run, this is the best way to motivate developers and teach them about your business. If you cannot afford a CTO, and so hire a junior developer instead, you are likely to fail because your junior developer will lack technical leadership. I recommend working with a well-established team and a CTO so that they teach you the basics. There is not much difference between an external developer based in India and an in-house junior developer with no technical leadership.
Charles Bénard – We often compare externalization with a management system, with someone who comes and goes. Dzango’s success lies in the fact that they consider their developers as our employees. We have developed a close working relationship with them, and we are committed to working with them on a long-term basis.
Olivier Pichon – There are two ways of working with external developers: you can work with an expert to solve a technical issue for one to three months, something that requires an extremely precise brief; or you can chose a long-term and flexible relationship with the possibility of ending the partnership at any time with low exit costs.
Florent Guyennon – Whether you are a service provider or looking for one, you should take two key elements into consideration: does your service provider share the same business culture? And how are processes organized? For example, the person paying should be present each time you deliver a product. The working method you define with your clients should translate into seamless processes. You can, for instance, send a weekly customer satisfaction survey to ensure that the shipped product meets the client’s expectations. To be a seasoned buyer means that you should be capable of organizing a mini-call for tender, with specifications. Do not rush into anything if you want a robust and efficient project.
Why are you reluctant to accept packaged offers?
Olivier Pichon – Because you always end up paying more than what the product is worth. When service providers reply to a call for tender, they generally win one out of four projects, and it is the winning client who will pay the costs of the three assessments made for the lost contract. Don’t waste time writing a specification document, as this is rarely read. Instead focus on what you can deliver to your client in the short run. Work on a weekly basis and invoice for time spent. This is the best way to ensure a fair price. Manage your service provider on a short-time basis in order to check on-going progress.
Charles Bénard – It is essential to work with small changes and be able to receive testable products every week, rather than waiting three months before you can discover your product.
Olivier Pichon – Remain flexible and agile in order to be able to change direction if necessary.
@ Charles Bénard: why did you choose dzango?
Charles Bénard – We met at an INSEAD event and a Vivatech exhibition. I was initially skeptical about outsourcing and had concerns about the choice of languages: would dzango be able to evolve with our future languages? We met to discuss this with them and very quickly their value demonstration convinced us that we had made the right choice: we share the same levels of requirement. At Hiboo, we already had some internal developers, so we were not fully dependent on dzango.
Olivier Pichon – Success also depends on the client’s capacity to be a good project manager. This happened with one of my first clients. We delivered something every day, which the client then checked, and every week we spent one hour on the phone discussing the aspects that were working and those which were not. Our client was able to prioritize the workflow week-by-week.
How do you manage if highly technical skills are required?
Olivier Pichon – If it is too technical, we say that we cannot do it and we look for resources.
Florent Guyennon – It makes sense to carry out technical pre-diagnostics.
How should a start-up decide what to externalize?
Olivier Pichon – Two functions are key in a start-up: CTO and PM. You might not be able to afford a CTO with 10 to 15 years of experience, but there are alternatives for that. PMs however are key because they are in charge of defining and delivering the product.
Florent Guyennon – When there is no CTO, we like to add user stories to technical specifications. Developers will understand challenges better if you begin with the user interface. Working on functional demonstrators is a good way to validate your MVP (minimum viable product) navigability. You can develop an interactive mock-up rather than developing a product to see if your users understand the navigation. After a few changes, you can come back to your developers with consolidated screens.
Charles Bénard – Prioritizing your roadmap is key. As an entrepreneur, you need vision, but you also need to assess your daily work to see what brings value to your clients: what is 80% of the added value that I can offer to my clients, with a 20% effort? This 20% is not necessarily technical. It is better to go as far as possible, before starting development work. You need to define the story told by each feature. Developers also need to understand the business value of the product.
Olivier Pichon – You do not need to fully develop a feature before you show something to your client. You can easily configurate templates with pre-entered data to show what a feature does.
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