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I spend most of my time talking to executives of SMBs (small & midsize businesses) about outsourcing their innovation. The expression SMB encompasses highly profitable companies with a successful client base, all the way down to small startups, with very limited funding and sometimes no product yet. While the major challenges of larger SMBs is often to “cross the chasm”, smaller size companies are struggling to find the resources to develop their product.
An average salesperson would certainly focus all of his/her efforts on the high-end of the SMBs market. At Venus, we are careful spending an equal amount of time on both. We even recently signed a contract with a local (Bay Area) startup that just raised the bare minimum from Family and Friends.
And guess what? The large, well-established, sometimes even risk-averse Venus Corporation basically agreed to commit top-notch resources (who are in high-demand as we all know) to:
- Develop for a fixed-price an application that has not been fully designed yet
- Guarantee the quality of the work (the client were not too interested in the long list of wonderful resumes we showed).
I know it sounds crazy, but we found several good reasons to work with them:
- The 2 co-founders have a successful track record of setting up successful companies
- The CTO is a recognized expert in the WEB 2.0 arena
- Venus can benefit from their solution
- They are to be a reliable and long-term partner of our company.
But if you look at this from a Venus standpoint, what do we get?
- First our developers love this type of projects where there are a lot of interactions with the client (agile methodology). Moreover smaller size clients will usually ask developers to assume much more responsibilities than large corporations would. It means for us a satisfied employee base, i.e. a lower attrition rate and the reinforcing of a true “Venus Spirit”
- While the application has not been fully designed yet, we trust the judgment of our customer regarding the workload. Moreover we also have extremely seasoned project managers who tended to agree with the workload. Our financial risk should not be greater than 10-15% of the overall estimate
- If we succeed in building a relationship with this customer, then we will have made significant progress in proving our point: it is a sound decision for startups to outsource their innovation as soon as possible. And by the way, I notice every day that most of the engineering challenges larger SMBs are facing today come from the fact they have not thought through early enough an efficient process to outsource their innovation.
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This’ll probably work out well for both parties. It sounds like a good setup on both sides of the fence.
Is the client planning on eventually bringing on employees to take over dev, or is it a permanent ongoing relationship?
The only downside I’ve seen in situations like this is when all of the original developers move on to other projects or employees are brought on to take over. All of that knowledge about the codebase from the original contractors is then lost, or, is slowly transferred/learned by the new ones.
I’ve turned down many contracts because it involved working on someone else’s code. Even if it’s great stuff, coders almost universally prefer working from scratch if they have a choice in the matter.
Left by Shanti Braford on June 24th, 2007