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Introduction

It’s a myth that technology-driven products require a founder with a technology background. Airbnb’s founder Brian Chesky had no background in technology. He had a degree in fine arts and industrial design. But he managed to build Airbnb, which earned almost $2 billion in 2022.

According to a Forbes article, tech startups need non-tech founders because they can handle marketing, sales, finance, and other aspects of the business more efficiently. The article further states that the founders can outsource certain parts of the business, like product development, to a trustworthy technology partner and focus more on developing the business. But it’s vital that the partner understands their needs and builds a product that matches their expectations. After all, the product is the core of the business. It has to be good enough to attract customers and bring in revenue.

In this article, we will discuss:

  • How to find the right partner for product development?
  • The different engagement models in outsourced product development
  • How to reduce risks and maximize gains

How to Find the Right Partner for Product Development?

Choosing the right partner is essential because they will handle the product’s entire technical aspect. The quality of the product will depend on how well the partner can interpret the ideas and make them a reality. Here are a few tips for choosing the right partner.

1. Choose a Partner Who Can Align with Your Strategy

Choose a partner who can understand the scope of the project, the founder’s vision, the type of customers the business is targeting, and the capacity and capability to implement the project. Check if they have worked on similar projects before and if they are capable of transforming the ideas into an actual business.

2. Evaluate the Partners

Do a thorough background check of the partners. Check their credentials. Were their previous clients happy with the work? What security and compliance measures do they follow? Can they adapt if the project scope changes? Are they scalable? A thorough evaluation is critical to build a successful product.

3. Discuss Post-development Support

An ideal partner will always have a dedicated team that will support the company once the product is launched. They should be available to solve issues that may arise post-development. Choose a partner only if they provide ongoing post-development support.

4. Discuss the Engagement Model

An engagement model defines the nature of collaboration between the partner and the company. There are many factors involved in deciding the right engagement model. This could include costs, the scale, and tenure of the project, etc. Discuss the engagement models with the partner to find out the right one. We will discuss the various types of engagement models in a minute.

There’s more to hiring the right product development partner. They must fit the budget, have the right technical capabilities, be accountable, and be clear in their communication with the company. The founder must take time to evaluate the partners on various factors before choosing.

The Different Engagement Models

Here are a few engagement models that companies can consider:

1. Fixed Price Model

The fixed price model involves setting the project needs, scope, and deadlines while signing the contract. It is done before the project begins. This enables the founder to determine the budget to keep aside for the project. This kind of engagement works well when the project requirements are pre-determined.

The only drawback is that this kind of engagement model is not very flexible. So, if there is a change in scope, the engagement with the partner will have to go through the change management process. Plus, any additions to the project would mean additional investments and a delay in launch. So, opt for this model only if the project’s scope is clearly defined or if it is a small and specific project.

2. The Time and Material (T&M) Model

The time and material model means that the founder will pay the partner for the time they invest and the material (in this case the resources and tools) they use to develop the product. The payouts are typically done every month. T&M works well when the project is complex and large-scale or when the project’s scope is not fully defined.

T&M is a perfect choice for products that evolve based on market and customer needs, as the project specifications can evolve based on the changes. The partner provides resources with pre-determined skill sets and provides a time-based billing rate for each resource. The only downside of such an engagement model is one can’t be certain about the overall cost till the final project is completed. The chances of overshooting the budget are very high.

3. Offshore Development Center (ODC)

ODC teams are an extension of the company’s in-house team but are situated in another location. The company has full control and access to the ODC teams. The ODC teams are more cost-effective as most work is outsourced to countries where developer costs are less. The teams can be scaled up or down based on project needs.

4. Build-Operate-Transfer Model (BOT)

In the BOT model, the partner will build the product and look after the operation for a contractually bound period or till the company is confident enough to manage it on its own. The transfer happens when the company is prepared to take over or when the contract ends. This kind of arrangement would work well for large-scale, complex projects. It helps accelerate the development process and saves costs as most of the project is managed by the partner’s team.

5. Dedicated Team Model

In the dedicated team model, the company is provided with a dedicated team that will be fully involved in building the product. The company has the ultimate say in hiring team members and managing them. These team members work as an extension of the existing workforce. The dedicated team model works well for large, long-term projects that would go on for years. However, the costs involved are high and these are not suitable for small or short-term projects.

How to Reduce Risks and Maximize Gains?

Even if the founder chooses the right partner, there’s always a risk of mistrust, miscommunication, data breach, and lack of accountability. That’s why a strong partnership and continuous communication between the company and the partner are so crucial. A healthy partnership can accelerate the product development process and enable the company to generate revenue and earn profits. Here are some tips on reducing risks and maximizing profits.

1. Do Risk Analysis

A project that starts with mistrust will not be completed on time. Do thorough background checks of the partner. Check their ratings and reviews on independent websites, read their case studies, and then make a decision. Be clear about the responsibilities they are expected to meet and do a thorough risk analysis before entering into a partnership.

2. Sign the Non-disclosure Agreement (NDA)

Sometimes the partner might get access to the company’s sensitive information through a database, intranet, etc. There’s also a risk of them claiming intellectual property (IP) rights on the product they develop. Hence, getting the partner to sign the NDA and IP agreements before the engagement begins is critical. Educate them about the security policies followed in the company and do regular audits to ensure that they are adhering to them.

3. Discuss the Costs Upfront

Although the costs vary in engagement models like T&M, we would recommend discussing ancillary and hidden costs of software and hardware, overhead expenditures, and additional expenditures for changes and modifications to ensure that the entire cost does not exceed the budget.

4. Discuss the SLAs and Milestones

Discuss the milestones for completing every phase of the project and the service level agreements to ensure that the product is developed on time.

5. Establish Key Performance Indicators (KPIs)

Quality is paramount for the success of the project. Establish the KPIs that define the quality and success of the product. Determine the key metrics and benchmarks to measure the performance. This will help the company in measuring performance and ensuring that the partner delivers a high-quality product on time.

Conclusion

Outsourcing has several benefits. It is cost-effective, and the partner brings in the expertise that could help the company grow to the next level. What’s important is to choose a trustworthy partner who can understand the business and is committed to turning the founder’s vision into a reality.

At Pratiti, we provide end-to-end services such as product development, product support, and staff augmentation to enable non-tech founders to fulfill their vision.

To know more about our services, contact us.

Nitin
Nitin Tappe

After successful stint in a corporate role, Nitin is back to what he enjoys most – conceptualizing new software solutions to solve business problems. Nitin is a postgraduate from IIT, Mumbai, India and in his 24 years of career, has played key roles in building a desktop as well as enterprise solutions right from idealization to launch which are adopted by many Fortune 500 companies. As a Founder member of Pratiti Technologies, he is committed to applying his management learning as well as the passion for building new solutions to realize your innovation with certainty.

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