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I'm looking to do a internet based startup with a friend. It is heavily focused on the site development and although I haven't really made proper cost calculations yet, I'm guessing the initial development cost will be around $20k-30k.

Although this figure isn't crazily a lot, we probably don't have this sort of money to spare unless we took loans. The dilemma now is deciding whether we should outsource the development offshore which is substantially cheaper but you would probably risk on code quality and also the fact that your developer is offshore when your business relies on the web platform heavily.

The other option is to hire someone locally on a contract basis. Through this, you'd definitely get better control, quality, communication and have a smoother working process. However, obviously this is more expensive.

Also note that initially the business won't be making profit immediately so for ongoing maintenance costs, the offshore developer is going to be way cheaper to maintain than the local one.

I know that regardless, eventually I would like the development to be in-house but just wondering whether it's worth the risk to outsource to offshore to save cost initially.

Keen to find out if you guys have been in a similar position, what path did you take and what were the outcomes? Good decision or regrets?

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5 Answers

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Are any of you developers in the first place? I feel like to start anything that's development oriented, especially heavily development oriented, you probably would need to bring another person on board who has technical skills for the job. This would cut down on so many costs and 20K - 30K may seem not too much but in reality it actually is. But thats just my opinion.

A technical founder can also help with determining how much something costs or how much time a certain part of the overall development would take so that when you do outsource parts of your project in order to finish fast, you wont be cheated.

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Although by profession I'm not a developer, I have a developer background. However, the reason why I don't want to do the development myself is that I feel I can use my time in a better way, plus I have a full-time job and for me to develop it myself would take forever. It just makes sense to outsource this. I will be coming up with the technical specifications for the developer. It would be great to get a developer partner, however I can't seem to find the right people who either I can work together well or have the entrepreneurial mindset (they're happy with their 9-5 jobs). – danny Apr 15 '10 at 4:26
@danny "...I feel I can use my time in a better way..." - I can't think of a BETTER way to use time/resources than actually developing the product. What other things do you think are more productive or worthwhile? – TimJ♦ Apr 15 '10 at 4:42
@Tim: I am designing the product (technical specs) but want someone else to build it. My background is in online marketing so I'm a guru at online strategies, analytics, SEO and SEM. Also there's the business side of things. Monetization strategy, market research etc. I can do many things good but doesn't mean I should do it all :) – danny Apr 15 '10 at 22:12
@danny: Thats pretty cool that you have so much knowledge on SEO and SEM, i still struggle on those but anyways, maybe as of now you gotta think that you are lacking the key component to all this, the actual developed website? lol Even planning/designing the website now is way better than relying on someone to come along and help out. My experience has always dictated that if you want something done you gotta do it yourself...or rather work till you have made such an impact that others want to be on board. But as of now you gotta make that ball start rolling :) – vnchopra Apr 16 '10 at 10:38
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(It sounds like neither of you are developers. )

I've never had experience where outsourced/over-seas development really did turn out to be cheaper. If you even think of outsourcing development (even to local folks) you had better have very very clear specs and requirements...

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I would strongly discourage you from going the offshore development route unless you have a solid specification for your product or an excellent CTO that knows exactly what you want. The thing that rapidly kills the low cost offshore development is change orders and the communications challenges that multiple time zones create.

Your best bet is to find a local team that will work for stock and build it locally. This can be a much harder path but in the end you build your team for the next level.

So, find some co-founders that want to work for stock and get it done as fast as you can. I would even pitch in your own talent to move it forward. Good luck.

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Evaluate several different scenarios and do a SWOT analysis for each. This will help you decide which route is the more beneficial one.

Outsourcing might be an easy way to pick up the development side, but it does come with a lot of risks as everyone has mentioned. You have little control over the work once it is in another persons hands. Even your schematic can be precise as can be, but the work will still suffer quality wise as it is not coming from you or your exact vision of how it should be written. I guess you could compare it to a movie script based on a best selling novel. The book was great, but the movie almost always comes up short. The director almost always fails to grasp what captivated the fans from the book because he is not that fan nor the author. He lacks the vision.

Just come up with a basic prototype. If you have the capability to build something minimal than do it! Once you have something physical to show and the business plan written out, then you can work on funding. After you've nailed that you can then start hiring people to do the actual development. Sounds much easier than done, but if you are serious about it, you won't cut corners and outsource development.

Ill leave it with a quote from a very inspirational individual who likened dilemmas like this to brick walls:

"Brick walls are there for a reason. The brick walls are not there to keep us out. The brick walls are there to show how badly we want something. Because the brick walls are there to stop the people who don’t want something badly enough. They are there to keep out the other people." - Randy Pausch ( 1960-2008 )

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thanks Joe. ideally i don't want to go offshore if i can't help it but just need to find out the feasibility of doing the basics offshore first and then bring it in-house due to costing reasons (i don't have 1 million dollars under my bed!). however, i would prefer if someone local developed it from the ground up so that there's no down time fiddling around with handovers and understanding the code. – danny Apr 21 '10 at 0:16
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Congratulations on your decision to start up a new small business! As you said, there is a definite plus to having a local technology expert vs. off shoring. If you’re unsure of what specific applications you may need, I might recommend finding and talking to a local company. They can figure out exactly what you need and help you make your decision. To find a local technology expert who can help you with your specific needs, I recommend you use the Pinpoint tool. It will find someone in your area to discuss your specialized needs and pricing with you.

Pinpoint tool to help you find technology experts and special applications: http://bit.ly/bsF7q7

Best of luck to you in your new venture!

Cheers, Rebecca The Microsoft SMB Outreach Team v-jelind@microsoft.com

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thanks rebecca. unfortunately i'm located in Australia and pinpoint doesn't have AU companies. i've been talking to some of my developer friends & colleagues and they all seem to prefer .NET framework. i guess kudos then to Microsoft for developing a great language & framework :) – danny Apr 21 '10 at 0:13

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