Series: Launching a New Venture

July 27, 2010

By Rob C. Masri, CEO, Cardagin Networks, Inc. 

Deciding Whether or not to Outsource.  One of the most difficult decisions for a technology company to make is whether or not to outsource development.

Cardagin Networks is building a mobile loyalty platform that allows businesses to digitize their loyalty card programs, capture customer transaction data to identify who their customers are and ultimately use that transaction data to create, publish and distribute mobile coupons and promotions to such customers.  Building out the technology is a laborious and time-intensive effort.  It requires technology development, web services, database creation and administration, web design, etc.  Before any sales and marketing initiatives can be engaged, technology needs to do what we have been telling our constituents it can and will do.  The process of deciding whether or not to build the technology in-house or outsource it can make or break a company. 

For us, we knew that building the technology in-house would cost us hundreds of thousands of dollars in salaries and licenses so we decided to issue an RFP to 5 companies that we thought could do the work for us.  We were able to receive a proposal from all 5 and selected the one that we thought we could work with the best.  There’s no question that we are saving money on cost and perhaps saving time since they are able to staff many more people on the project than we would be able to hire.  However, we are trading what we gain in time and money for what we lose in control.  Surprisingly there has been no issue with language or communication.  In fact, the most difficult aspect is project management, regular and specific updates or asking for small modifications that may be slightly outside the project plan or a specific work order.

Remember, an offshore development shop doesn’t have the same sort of creativity and intuition that an in-house development team would have.  Moreover, you can’t just ask someone to change a word or a graphic icon and expect it to be done instantaneously.  It has to be communicated to your project contact who has to communicate it to the team contact who has to communicate it to the actual developer in charge of that particular piece of the project.  It often takes at least 24 hours to correct a typo. But, at least there are no employee benefits or office overhead that you have to pay.