Building a startup product: Freelancers vs In-house Team vs Consulting Firm

“I have a solid software product idea but I am non-technical. Is it better for me to hire freelancers, hire an in-house team, or a hire consulting firm?”

This is one of the most common questions, new-age startup founders are asking us when it comes to building a startup product.

This is equally true for people innovating inside large enterprises (intrapreneurs) or small and medium size business owners digitizing their processes to grow their business.

So let’s have the answer for everyone. They have following alternatives.

Hire Freelancers

There are many online portals like Upwork, Freelancer etc. where you can find talented freelancers. The quality of freelancers has improved over the period of time. These sites have the unlimited talent pool and reasonable availability. This option may prove to be a lot cheaper as the cost of freelancers can be very less compared to other alternatives.

However, hiring freelancers has following challenges:

Finding the right freelancers, who are equally passionate about your product.
Freelancers may not be available full time for your job causing division of attention.
Many freelancers are great coders but not so great at communication, making it very difficult to effectively collaborate.
They may be in a different timezone, which does not have meaningful overlap.
Legal issues, freelancers can use/sell the work to someone else too. They may stop working on your product at any time without any strong legal binding.
They may not adopt right kind of processes for product development.
Owning the technical part of your product, later on, will be very difficult.

Some of the above shortcomings can be taken care by,

Placing a strong techno-functional product manager and have him manage the team of freelancers from the beginning.
Onboarding freelancers after proper due diligence on their reliability, maturity, rating and past client feedback. At the time of onboarding need to make sure proper legal contracts.
Establishing suitable product development processes according to your need from the beginning.

Develop An In-house Team

This is a popular alternative, whereby you find and recruit right talent for your product development. This option gives you greater control, cost benefit and reliability.

Yet building in-house team has following challenges:

Finding the right technical talent for your product will be difficult as you have less experience in interviewing them.
Adopting the right kind of processes for product development will be a challenge if you are unable to hire seasoned individuals.
Technical people tend to join technical organization more (core software development companies) as opposed to product or non-technical organizations.
Retaining and motivating technical talent to innovate requires a different set of culture and a greater level of trust.
It will take more time to find and build a team, causing increased time to go-to-market and validate your product.
It takes few iterations to find product-market fit. You may need to reduce the initial team upon finding clarity about product-market fit. This may put you in an awkward situation.
Building team will further divide founders’ focus from building the product, validating market and getting traction, this can be very harmful at initial stages of the startup.
You have less control over budget as you have a lot many unknown variables affecting cost. An e.g. quality of resources, salary, whether they will perform or not, infrastructure cost etc.

Some of the above shortcomings can be taken care by,

On-boarding senior technical people having right experience at the beginning, they should play a pivotal role in finding the right team and setting right culture.
Providing them more autonomy to build right culture and setup right processes for product development.

Hire Software Consulting Firm

The Third option is to find right software consulting firm having experience in building right products, good teams and mature processes around product development.

This approach removes the need of finding right technical talent in today’s competitive market and establishing strong processes at the initial stages. It helps you zero down your focus on building the product, validating market and getting traction. You can build something (MVP) quickly without compromising on quality, immediately go to the market to start validating your idea (traction).

But again there are challenges here as well:

Initially, this will look like an expensive approach than the first two.
You may end up working with a wrong consultancy and waste time and money building wrong product.
Owning the technical part of the product, later on, may get difficult if the consultancy does not have experience in proper hand holding process.

Some of the above shortcomings can be taken care by,

Carefully choosing the software consultancy firm based on their experience building similar products and maturity of their processes.
Having close collaboration between your team and their team from the beginning will help you learn a lot from experts.
Setup flexible arrangements for the effective transfer of the product development at any stage to your team.
Involving your own technical team at a right stage in product development life cycle.

Obviously, according to us, the third approach works best in most cases. But all approaches can work perfectly well if you understand your requirements and work towards addressing the challenges involved.

PS: If you also believe in the third approach, let’s talk! 🙂