For a software vendor, the idea of outsourcing the development of its core product may seem nonsensical, but for one Canadian start-up, it was a must to get its software to market quickly and drum up financial support.
David Cork, co-founder and CEO of Ottawa-based Natural Convergence Inc. (NCI), said a lot of people will not even consider outsourcing their development because they think of that knowledge as the crown jewels.
“The product that has been developed in the last nine months surpasses what would have taken us two years to build,” Cork said. He estimated it would take two years to build a complete development team, the tools they would need and the software they would eventually come up with.
He added that it is difficult to raise money for a new business if it has no product to show potential backers. Using Ottawa-based bitHeads Inc.’s Development Accelerator, Cork said NCI had an alpha model in four months. The company was able to use that in presentations for investors and potential clients.
The software is designed to give Telco carriers the ability to host networks, and to deliver business services over a broadband connection. “Telcos are pushing cable today for Web and e-mail and with our product they can provide all these services – voice, data, etc. – over a single link,” Cork said.
However in order to gain clients in the Telco industry, NCI had to be able to show some sort of product, because as Cork put it, “from the telephone companies’ point of view, they see a lot of PowerPoint ideas.”
Outsourcing development also freed up money and time to be used on other parts of the business.
bitHeads wanted to reduce NCI’s reliance on full-time developers, according to Scott Simpson, president and CEO.
Simpson said bitHeads is not a product company, it just likes to build them. “It doesn’t seem like something you would want to outsource, but if you want it done by people with the know-how, then it’s an option.”
bitHeads clients have the option of buying into a longer term maintenance on the products bitHeads builds for them, or they can opt for a hands-off approach, Simpson said. In the case of a hands-off customer, bitHeads will mentor the in-house development team before the end of the contract. The products are built from scratch and the client owns the intellectual property at the end of the process.
Thomas Murphy, senior program director with Stanford, Conn.-based Meta Group, said development outsourcing is nothing new. He noted that there has not been much of it going from the U.S. to Canada, because a lot of the business goes offshore to India or Ireland, where there are a number of cost benefits.
“If you look at big consulting firms, they’re saying, ‘We have people trained in technology for certain markets with a lot of expertise.’ Potentially they already have toolkits and frameworks ready,” Murphy said.
This means an enterprise could save money on the cost of labour, but would have to make sure they were getting the product as quickly as they would if they went offshore.
He warned enterprises to ask if they can continue to save money with this type of plan.
Cork admitted he wouldn’t outsource the development of his main software after a while, but said the service would be good for smaller projects that come to NCI.
“If you have a team of 20 developers and then get little projects that would require four more – then it takes time to hire and train, so using bitHeads for that makes sense,” he said.