There was an interesting article on TechCrunch.com a few days ago that took the position that tech startups shouldn’t outsource product development.

While we generally agree that startups should steer away from outsourcing the core of their technology, we think that collaborating with a specialized outside team is very effective in accelerating time-to-market for products of companies of any size. System In Motion’s Inshore model, combined with our core product development expertise, especially in new technology areas like open source, social networking, mobility and rich web applications, is a highly cost effective way to accelerate product development and roll-out, without adding complexity to the delivery organization.

The article’s author, Vivek Wadhwa gives six reasons against outsourcing (which he actually confuses with offshoring). As we see it, an Inshore approach, where the outsourced development team is tightly integrated with the core engineering teams and working in the same time zone, mitigates all the challenges. Here’s a look at Vivek’s issues, and our take on each.

1. Communications and customer needs. “Locating R&D personnel away from customers limits the ability to develop innovative products…” That’s right. With Systems In Motion’s Inshore model, all personnel are located in the United States, in direct proximity to the company and its customers. The Inshore development team is much more aligned, culturally and demographically, to US customer base
2. Component Integration. “…members of a software-development team need to work closely together.” Exactly right. The Inshore approach leverages collaboration tools like Skype, Box.net, GoogleSites, Webex , and of course cars, trains and planes to seamlessly integrate development and test teams across the development lifecycle. Having product development in the DNA of the partner organization also ensures that teams are reading from the same page.
3. Management bandwidth. “It is a lot more challenging to manage diverse teams at multiple location and in different time zones than to manage them together.” In an Inshore development model, teams are co-located and offsite development happens within similar timezones, making program management and governance a much easier ask than globally distributed teams that iterate in 24 hour cycles.
4. Fewer developers can often produce more. “In the tech world, scaling up development teams doesn’t always lead to greater productivity.” Right. In fact, a flexible, dynamic team of bright engineering talent working together are far more productive than offshore teams. They don’t have to be all sitting in Silicon Valley.
5. Skills scarcity. “The specialized skill and mindset that tech companies look for are hard to find.” There’s no dearth of talent in the US. A scarcity in access to skills needs some investment and heavy-lifting in on-going training and workforce development – something Systems In Motion has committed to to, in partnership with state governments and local universities. The training investments in new technology product development is coupled with strong mentoring to build a highly capable and productive outsourced team.
6. Intellectual-property protection. “Employees often leave to start ventures that compete directly with their foreign employers, and the laws provide little protection…” . Not a problem for a domestic service delivery organization. In any case, Systems In Motion implements strict security processes.

Is Inshoring, then, the right model for outsourced product development? We think so.

So, the real question is the one around cost-performance. Despite the productivity gap, investment of management bandwidth, the sleepless nights and 75 different iterations, is globally distributed delivery still cheaper? The simple answer is NO.With an Inshore delivery center located in the mid-west, near some of the top engineering and technical schools in the country, with serious long-term unemployment challenges, outsourced product development is a whole lot faster, and as cost-effective as teams in Bangalore, Krakow or St. Pete..

Read the whole article here:
http://techcrunch.com/2010/04/17/should-tech-startups-outsource-product-development/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29&utm_content=Bloglines

and let us know what you think!

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