Saturday, October 4, 2014

Outsourcing VS hiring a CTO

I’m currently taking the online Kauffman Fellows Academy class, titled “Venture Deals”.
One of the other students was asking on the class forum about how to proceed when outsourcing web development to a contractor in India and making sure to not be losing the intellectual property rights by neglecting to draft a proper contract. Someone else added that it would be much preferable to hire a CTO locally.
I have a little bit of experience with this and so I’m turning my reply into a blog post  (recycle, recycle, recycle …).
When I absolutely knew nothing about startups, some years back, I hired someone from India on I screened the living daylights out of the contractor on Google Chat for well over 20 hours — could even have been closer to 40 hours, I can’t recall precisely. I made a contract to ensure it was understood that I would own all IP by downloading a general template and customizing it. I also clearly spelled it out on the Google Chat and had the developer confirm that he understood and had him repeat the concept in his own words, to be on the safe side.
The developer built the site in PHP on the Zend framework. I had no idea what that meant at the time.
I then pivoted the idea and had him build another site.
Both sites worked but the design (my responsibility) was awful.
I then hired a designer for the second site only to discover that the developer couldn’t implement the new design I had paid for due to his having relied on templates on the Zend framework that he claimed made it impossible for him to work around.
Two years had now passed by this point, and I knew quite a bit more, as I had not sat on my laurels, and had done my homework.
[To be fair, I’m sure that my Indian developer would have been able to produce an even better result for me if I had been willing to pay him more. He was excellent at keeping the communication flowing between us, and he was completely transparent about having no experience with scaling a site. And lastly, he would keep a promise once made].
I went on Odesk and found a former CTO from the Ukraine who was versed in Agile and Scrum. Look all those terms up if you have to, it’ll be worth the effort.
He implemented the design and let me know with no uncertain terms that the code was messy, but that he could nonetheless work with it.
The site can speculatively handle 100,000 users per day on three servers so I could be set for a while, but it will need to be re-built from scratch so as to be able to scale horizontally; and if we get to that point, I’d probably have it done in Node.js this time, as a side note.
So the point is that it can work to get it done in India to build your 1.0 version, but expect your code to look like spaghetti noodle and need to be re-done at some point, sooner than later, that’s all — as long as you know what you’re getting into.
I personally think you might be better served in the Ukraine, as an aside.
There is a general consensus among techies and many VC’s, for example Mark Suster, that you need a serious rock star CTO if you are intent about building a high-growth company. And my little two cents would be that you can’t avoid this fact.
But I would personally say it doesn’t mean that you have to start there. It all depends on what your startup is about. If it centers around serious technology implementation, then the rock star CTO becomes a requisite. I’m going to assert that if YouTube had been outsourced, it would most certainly have flopped.
But if you are building a social network for pet owners, for example, or a content sharing site, the technology for those has been productized enough that perhaps outsourcing would be a valid way to get going until you get serious traction, as long as you are successful with your screening process in hiring your developer/contractor.
Based on my own personal experience, if you are outsourcing to India, you may want to keep it simple with a customized template in terms of contract. I’m definitely not a lawyer, but my understanding is that you are not protected much in this case, if at all, and you obviously want to save money in the first place, if you bother going down that route. If you can afford a lawyer, that is your safest bet, it goes without saying. But beware. I’ve approached a law firm to give me a simple copyright infringement opinion and they wanted $3,000. I declined and ended up pivoting the idea after some months and so I would have wasted the money.

I now know lawyers dedicated to tech startups, but I still feel it's too early to pull the trigger on that yet.
If you are building this in Canada or in the US, where you could realistically get sued in the event that you succeed by the contractor who now claims yours was indeed their idea, then getting a lawyer involved becomes really prudent.
The above is not legal advice. It may even be bad advice. But it is my experience and I’m putting it out here in case it might be of help to someone.

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