New businesses have little money to pay full-time developers, especially since even entry-level programmers command more than $60,000 per year on average. By outsourcing development work, startups can save money while still gaining access to skilled programmers. In fact, some of today’s best-known businesses started with outsourced developers.
“Even the companies that have the money often spend four to eight months finding the right talent and if they don’t use freelancers as a stopgap, they burn through their capital without building their product,” says Michael Solomon, CEO of 10x Management, “This is frowned on by investors and not good for business. By comparison, it makes even the highest level freelancers a great deal.”
Here are a few examples of businesses that outsourced development in their early days:
Scott Chacon may be known as the CIO of GitHub, but he originally met the GitHub CEO and co-founder Chris Wanstrath at a Ruby meetup in San Francisco. Recognizing that he had an understanding of Gits, which was rare at the time, the founders asked him to work as a consultant on an outsourced basis. Chacon went on to write the backend of Gist, which is a sharing feature inside GitHub. The company may not have nailed Git without him.
AppSumo is proud of the fact that it was started on only $50. The AppSumo founder and Chief Sumo Noah Kagan describes asking various successful entrepreneurs for favors and, as a result, landing some of his early ad placements. He also found a developer willing to work for $50 to make a PayPal button and credit card form. He believes having a solid concept already in place helped him convince his developer to provide the code he needed.
Fab founder Jason Goldberg used a software development firm in India to build his e-commerce business. Over time, he saw that the site’s needs were more robust and, as a result, purchased the India firm. Goldberg’s company succeeded in its outsourcing efforts in large part due to Goldberg’s skill at managing the outsourcing process.
Alex Turnbull wanted a co-founder with a technology background. His product background wasn’t sufficient to handle the development part of building a software-as-a-service company. When he couldn’t find one, he made the decision to outsource the technical aspects of growing his business to a firm. In doing so, he realized he’d be able to retain 100-percent ownership of his company while also saving the money he would spend on full-time workers.
Slack was in its early stages when the company hired a design firm to refine its product. MetaLab reworked the company’s website and app, as well as redesigning its logo, creating most of what consumers see when they interact with the messaging service today. While MetaLab has designed numerous successful products over the years, businesses across all industries contact the design firm, hoping to duplicate Slack’s success. Of course, it's not their only win: they've also built brand assets for Brit + Co, Medallia, Coinbase.
UpWork specializes in crowdsourced work, so it’s no surprise the company was built using a team largely made up of contractors. The company is the product of a merger between the two largest freelancing platforms, ODesk and Elance. As Stephane Kasriel, CEO of Upwork, pointed out, 150 of the site’s 200 product and engineering workers are freelancers they hired through the ODesk marketplace.
SeatGeek founder Jack Groetzinger is a firm believer in the power of outsourcing in the early stages. He shares this passion with other startups describing how he uses contractors for everything from collecting ticket price data for various areas to software development. He points out that the cost of a contractor in a developing country can be as little as $1 an hour for quality work. In addition to his small staff, Groetzinger uses contractors across the globe.
Alibaba may be known as a global marketplace, but according to the book Alibaba: The Inside Story Behind Jack Ma and the Creation of the World's Biggest Online Marketplace, the company initially outsourced its development to a firm in the U.S. At the time, overseas development talent was still in short supply and the U.S. had the skills Alibaba needed to compete with ecommerce giants like eBay, and did it all behind the Chinese internet restrictions.
Outsourcing development to contractors can provide affordable talent to a startup when it needs it the most. These success stories demonstrate that whether a business opts to outsource to a firm, hire U.S. contractors individually, or outsource work overseas, the right approach can lead to success.