Why your outsourcing will fail and how this one question will save your day?
The biggest reason outsourcing fails because the outsourcing company that you have hired is not truly invested in your product or your success. I have seen different outsourcing contracts which would have nice terms, payment conditions, penalties, clauses and so on, all in order to get your work done in quality and timely manner but still, outsourcing fails.
What could be the reasons? What does it mean not invested in the product?
These are the common traits you should ideally look into when you select the right outsourcing contractor –
- Understanding of the scope of work
- Having relevant experience.
- Having references and work samples
- Available IT infrastructure and quality certifications
- Matching company work culture
- Importantly, comfortable communication
These are all good things but what may get missed is how much your contractor will truly be invested in your work. The most obvious benefit of outsourcing development is cost reduction but even that can be achieved only after the project is being delivered on time in a quality manner. What if that does not happen?
So, your main goal of outsourcing should not only be cost reduction but to make yourself free by sharing the responsibility with your outsourced contractors.
Time tested wisdom says any outsourcing contract should have-
- Promotion of clear, consistent communication.
- Engagements consistent and true.
- Feedback loop for the outcomes of projects and responsibilities
- Payments conditions and penalties dependent on outcome
Even after following best practices there is always a risk of project failure. You always want the contractor on your side and looking out for your best interest. They will often see problems coming and understand their consequences before you do, but only if they are looking.
Depending on their involvement and keenness in the project, they can either help you or allow harm to find you. No matter what the written agreement is, no matter how best you are following the best practices if they are not engaged, the relationship is going to fail.
So why most of the outsourcing companies are not engaged? It may happen due to plenty of reasons
- They don’t really are buying in the idea
- They don’t see the larger picture
- They don’t have clarity on what’s in it for them
So what should be done that helps you find the right contractors who are ready to put in their skin in the game. Ready to walk the extra mile with you and attenuate your thoughts.
Well, in my experience, that extra mile could be Cash+ Equity model. The engagement where part of the fee is turned to equity.
Since technology startups have technology as the major hard work, you should not expect the service provider to take on full equity because then they could have just built the product themselves, a Cash + Equity model gives a good cushion to both sides with the contractor committing to the overall success while also earn the cash component to an extent.
Of course, not every contractor have an appetite to take the risk. And not all equities convert to cash. But I think that’s the litmus test for the right contractor.
When your contractor is ready to take that risk and ready to get involved with you in Cash+Equity model, then only he can become your true partner. Trust me, any contractor who is open for such engagement has a genuine belief in your idea.
So when next time you are thinking of engaging the contractor, ask him this question
Analyze their reaction and you are good to go.
“What do you think if rather than paying you 100K, I pay you 80K and XYZ % equity”
At Mindbowser, we have tried to solve this issue with our Select Acceleration Program where you can opt for a cash+equity arrangement and also get complementary support on marketing and support.