Growing a software business requires drastic measures at times. One such well known, albeit, radical growth strategy is to “purchase” and own whole development shops whose business focus shifts to developing solutions for the acquiring company.
On the surface, acquiring development shops and offshoring/outsourcing seemingly offer all the same benefits. By opting to acquire a development company, ISVs gain access to full-time resources which increases the availability of workforce to meet deadlines and shorten the development cycle. Similarly, organizations are able to successfully augment their own development effort by engaging with an offshore services company to develop an entire product or line of products. From an economic standpoint too, acquisitions and offshoring both prove invaluable in amplifying competitive edge in terms of cost and time to market. In addition to this, companies with distributed development teams can leverage various unique perspectives that are intrinsic to geographically diverse teams.
However, for small to mid-sized ISV business to truly achieve success with their growth endeavors, the recommended strategy is to engage a dedicated team from a reputable offshoring partner. Although acquisitions can be an effective and profitable business model for larger organizations, there are stark inefficiencies in adopting such a strategy for smaller organizations, including startups and mid-size ISVs. Check out why dedicated teams can prove much more effective for business ROI in the long run, compared to acquisitions:
1) Avoid all overhead costs: Whether you are a bootstrapping startup or a mid-size ISV, overheads can quickly add up and divert finances away from areas you could rather be spending on, and those that are capable of delivering real business outcomes. When you opt for acquiring a company, you still have various overhead costs to worry about, such as administrative costs, accounting fees, advertising, insurance, interest, legal fees, labor burden, rent, repairs, supplies, taxes, and utilities. However, when you opt for a dedicated team with a trusted offshoring services provider, they will take care of all these aspects for you, and you get complete freedom to focus on building your product and your overall business. A dedicated team works in complete alignment with the client’s methods and expectations which directly ensure an optimal cost-effective output. And since the customer has access to highly competent, experienced and carefully selected resources, he does not have to invest much on training or fixing problems.
2) You get access to the best developers because you get to interview and select them yourself: When you acquire a company, you get a preset team of developers, testing professionals, project managers and scrum masters. However, when opting for a dedicated team, you get to make a call on who gets hired, from a pool of vetted professionals who have already gone through various levels of qualification by the offshoring service provider, thereby maximizing the changes of finding highly talent software talent for your product. A dedicated team is directly hired by the engaging customer and all subsequent operations of the team are supervised directly by the customer. This level of control directly impacts the end product and its quality in a positive way.
You also have the ability to choose your team based on the dynamics of your already existing in-house team. You can start looking it from an angel of combining synergies and bringing out the best work from both sides of the teams. The dedicated team model offers the customer the liberty of aligning the culture of the offshore team to that of his/her own organization and gives them flexibility in setting expectations according to company standards.
3) Lowered risk: Acquiring a development shop, also means, you acquire with it, all the risk of owning someone else’s company. Despite all the due diligence you may do, circumstances such as replacing non performing developers, can quickly turn into a tricky situation. With the dedicated team model, the vendor carries the responsibility of ensuring that all operations run smoothly. Even in the case of non performance or attrition, they take charge of finding new talent for you. This enables you to have your own smoothly functioning offshore team and drive delivery at much lower costs.
One of the greatest advantages of hiring a dedicated team is complete control over the offshore team—from hiring the team to setting up processes and business hours. The team works exclusively for the customer who can supervise the resources and processes closely and ensure efficient workflow through project management and regular status updates. The customer also has the option and ability to rapidly scale up operations, when required. In essence, having a dedicated team offers all the benefits of acquiring a company, minus the inefficiencies associated with it.