Why I made a decision to develop the expertise of my startup with an inside group

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Not all companies are the same, but it is important to ask yourself the following questions when starting out.

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May
27, 2021

5 min read

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.

Opinions expressed by Entrepreneur contributors are their own.

Whoever starts a business must decide whether to invest resources to create their product or outsource software development to an external company. In my venture at Hitch , a talent tech SaaS, we decided to develop our own Artificial Intelligence software. Here I explain why.

On the one hand, we all know that time is money and that you can’t spend too much time creating a Minimum Viable Product (MVP) . As they say in these times “grow fast or die young “, that makes us think that hiring external experts to help us reach that product is the fastest and least expensive option since they dominate this type of development and thus we would avoid the pain of recruit an internal team; but on the other hand, shouldn’t own technology be the central quality of a startup ?

Both approaches have pros and cons and the decision is not easy. The answer depends on commercial and cultural factors, the type of product to be built and, above all, the vision of the founding team.

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With Hitch it was very clear that technology is part of the core value proposition of the product and not a vehicle to solve a corporate need.

An important advantage of forming an internal technology team is that people can align themselves more with the culture of the company, in addition to being much more committed to what is done and how the company works.

The disadvantage that we found lies in how complex it is to find good specialized developers, it takes time to find them, make a good fit and it is also a more expensive solution. The platform we developed precisely seeks to attack that problem, but at that time Hitch was not yet a reality.

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On the other hand, by outsourcing we could find specialists faster, in addition to being less expensive at first. However, the teams may not be 100% committed to the project, the agency may carry other projects alongside, and that makes alignment with the product and culture of the startup difficult. Also copyright negotiations for finished development can be a topic and contracts must be well stipulated to protect us as a company.

We finally had to wonder if Hitch needed a technological “secret recipe” that would make us unique.

The Hitch platform is aimed at HR specialists, not technology specialists, but the underlying technology and its implementation must be unique to add value, so the answer is yes.

In summary, I consider that outsourcing software development is not advisable when:

  • The business has technology as its main proposition.
  • The technology is unique in its implementation and a non-replicable model is sought.
  • Organizational culture is key to product development.

As Michael Seibel, partner at accelerator and venture capital Y Combinator, says: “When reading startup applications to YC, I see too many founders raising a little seed capital and outsourcing engineering to cut costs. This is a common misconception that is a huge red flag for future investors and is often much more costly in the long run than having a technical co-founder. ”This statement reinforces the ideology we have about building a robust internal technology model.

Agency programmers traditionally work in a “known problem, known solution” environment (for example, a clothing store that needs a website represents a situation where both the problem and the solution are known). While tech startups operate in an “unknown problem, unknown solution” environment (no one knows if the solution is appropriate until the new product is used). The idea at Hitch when developing your own SaaS is also to be able to iterate and improve along the way. It is definitely not the easy way but we do believe that it is the most profitable for us in the long term. Not all companies are the same, but it is important to ask yourself these questions when starting out.

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