Outsourcing is a solid strategy that can really boost your business. We at Codable are strong believers of that principle, so much so our core business relies on it. That’s why we produce useful content that will help you with understanding more of how to, for example, integrate outsourcing into your current workflow, what you need when you’ll be working with a remote developer, and so on.
This is good, but it’s still missing a piece of the whole puzzle.
Information is better digested when you accompany it with real examples. And that’s what I’m going to do here, in this article where I’m going to tell you more about the top companies in the world who leveraged outsourced/remote development and are today worth millions of dollars.
Before we start, let’s bet on it: I bet you didn’t know (at least) one of these companies took advantage of outsourced developers. Are you in?
Great, let’s roll!
For many, Alibaba.com is China’s eBay but few know that it started as a small “internet company” called China Yellow Pages. Today Alibaba is the world’s biggest global marketplace, one that in 2014 when it went public, was able to score the biggest IPO to theses day.
But what does outsourcing have to do with? Well, according to the book "Alibaba: The Inside Story Behind Jack Ma and the Creation of the World's Biggest Online Marketplace", in its early days, the founder Jack Ma outsourced the website development to a U.S. firm. At the time, development talent in China was in short supply, while developers in U.S. had the skills Alibaba was looking for and needed. That’s just one reason, though. The other being Ma had to find workarounds and viable ways to grow his company overcoming all Chinese internet restrictions. Currently, the company still relies on outsourcing partners for production, but they're mainly located in China.
If you’re just a bit interested in marketing, you already know the name I’m about to drop here: Noah Kagan, serial entrepreneur, worked for Facebook, Mint.com, and founder of AppSumo. Launched in 2010, AppSumo is a website that shares and distributes daily deals to his subscribers, mostly tech-focused or software related. Discounted prices on high-priced software, lifetime access to yearly online courses, and so on. This company is now valued at $2 million, with an impressive mailing list accounting for 700K subscribers.
In an entertaining blog post from a while ago, Noah personally explains how he saw a niche for the business he had started to work on and needed to validate his MVP. That’s why he hired a remote developer to code him a PayPal integration to start collecting payment through his new website.The overall cost was $50. He started then by selling subscriptions to Imgur PRO, an image sharing website and image host, and then added to a broader list of paid web apps, softwares, and courses too. To these days, AppSumo still relies on outsourcing for many of their areas and projects.
Launched in its first iteration in 2004, Basecamp is a web-project development tool that helps businesses and project managers with a set of features to handle project development more efficiently. The company behind it, 37signals (now re-branded as Basecamp), had started to work on it couple years before because they were directly experiencing some key issues with their client work. As Jason Fried explains:
”As demand for our services grew, we found ourselves increasingly disorganized.[…] We didn’t like the rag-tag image we were portraying to our clients. They were paying us good money — and our work was good — but the way we organized the work, communicated about the work, and presented the work wasn’t becoming. It was time to tidy up and get our shit together.
Still, they were a web consulting company and Basecamp wasn’t their core business. To move development of the app further, Jason and his teammates outsourced it to remote developers to optimize their cost-opportunity gain. Thanks to implementing outsource development into their product development strategy, they quickly started seeing Basecamp generated more revenue than their current consulting work and opted to focus exclusively on working on it as their core business. Today Basecamp employs 50 people around 32 countries worldwide.
When it’s time to do your taxes, you always scream at yourself: ”Next year, I’ll take notes and store all my receipts as soon as I spend any money. I promise”. Then the next year comes, and you might find yourself in the same situation, just a bit more frustrated. Founded in 2008, Expensify wanted to help people by providing a tool to collect expenses, keep track of receipts and transactions, all in a more convenient way.
Before becoming a company with 130+ employees and over 2 million users, Expensify partnered with an outsourced international software house to take care of their back-end systems; this enabled them to concentrate (almost) exclusively on front-end development and ultimately growing their business.
In the world of code, GitHub is one of the most known tools and community people use and engage with. Founded in 2008 by Chris Wanstrath, PJ Hyett, and Tom Preston-Werner, as a way to host, document, edit and share private code, it has its roots into an outsourced development consultancy. It was, in fact, by attending several local Ruby on Rails meetups in San Francisco that Tom met with Scott Chacon, a huge expert on Git, an Open Source distributed version control system.
As Tom recalls:
I was thinking Git might be really cool and could get really popular
Scott was the ideal candidate for that. The problem was they didn’t have enough money to hire him as a full-time developer. So they had only one choice left to reaching their goal of simplifying their product and push it further: they hired Scott as a Git outsource contractor to eventually build the backend of Gist, a sharing feature within GitHub (See the difference here).
Started as a side project, GitHub has now 56+ million of projects posted, 600+ employees, and Scott Chacon as CIO.
As one of the top companies that pride themselves on taking care of their in-house culture and employees, it might look as a bit of a mistake to list Google here. Well, it’s not because the tech giant headquartered in Mountain View, California, has been taking advantage of outsourced staff for years. Whether it was a matter of IT specialists, developers, as well as virtual assistant types of work, Google is a strong implementer of outsourced work to take care of the many projects they continuously deploy and work on.
One area that made it on the news, and that many might not know about, it’s when they decided to outsource phone and email support for AdWords to around 1000 reps. AdWords is one of their top grossing product, so they wanted to have the biggest ROI possible out of it. And, this might not come as news to you, they’ve succeeded.
When Alex Turnbull had just recently sold his previous company, he already wanted to jump back in the game to launch a new one. Problem was he had nothing that could have helped him do that: no prototype, no customers, no fundings. To make things even harder for him, he lacked the technical knowledge required by a soon-to-be-launched SaaS product, usually impersonated by a CTO.
At that time, Alex was an “entrepreneur with a product to launch”. Yet he wanted to retain 100% ownership of his company, while trying to save some money he would spend on full-time employees, after validating the product. That’s why he decided to take the leap and went outsourcing the entire early development of Groove, an online customer support platform, to an agency. Today Groove is a company who closed 2016 with $5.2 million in revenue, more than 6K paying users, and with 13 employees around the world.
While he was recovering from a jaw surgery that forced him not to use his mouth, Joe Fernandez realized how powerful social media is, as it was his only way to communicate.
An idea started to build stronger inside of him and grew into a tool that ranks users based on their social media influence, namely Klout.
For the first few years, Fernandez worked on the startup and his product by himself. Actually, he did more than that: Joe flew to Singapore, where he had outsourced much of the development, and worked on the early version of his app. While in Singapore for 3/4 months, Joe recalls he stayed and slept on a developer’s couch before flying back home with a working prototype:
I outsourced myself and stayed with my team (sleeping on one of the developers' couch) for more than three months. I came back with a working prototype that let me fill out the rest of my founding team here and then raise money. Some other side benefits are it was much cheaper to live over there on a daily basis than it was here. This extended the amount of time I could bootstrap the company. It also let me focus entirely on what I was building since there was a lot fewer distractions.
In 2014, Klout was bought by Lithium Technologies for $200 million.
With its first release back to 21 years ago, MySQL proved to the world it was something we needed when it comes to working and manage databases. Part of its success is due to two key elements: the release of its source code under GNU General Public License and the smart outsourcing strategy implemented by the management right from the beginning.
In fact, the company saw their growth strategy would need to include mostly outsourced developer and staff all over the world to boost operations in each location. Today, MySQL runs on millions of servers, and it’s used by many of the world’s largest and fastest-growing organizations such as Amazon, PayPal, Nasa, Cisco, just to name a few.
Opera is a modern and light web-browser born as a research project inside Telenor, the largest Norwegian telecommunications company. It’s first public release dates back to 1995 when the project branched out into a separate company, named Opera Software ASA (bought by Oracle afterward).
As with many other startups, with uncertainty breathing down their neck, it was a matter of launching the product without squandering all the money the company had at that time. That’s why they opted to outsource part of the development to developers in more than 25 locations around the world to create and implement their platform.
The ticket industry is backward technologically
. It’s this blunt statement that the whole idea of SeatGeek gravitates around. It's a search engine for tickets based on event-ticketing websites that help save money to its users and that was launched by two friends, Russel D’Souza and Jack Groetzinger back in 2009.
Both are firm believers in the power of outsourcing in the early stages. And that’s why, when they needed to launch their product, whether because they weren’t able or simply didn’t want to commit to code, they relied on outsourced developers for building their website and their database structure. Even today, the company runs the business with an internal team (~100 employees worldwide), while receiving support from outsourced contractors.
Skype was one of the most disruptive tools and technologies during the early 2000’s. The idea of Niklas Zennström and the Dane Janus Friis wouldn’t have been part of our lives if they hadn’t outsourced the back-end development of the app to three Estonian developers named Jaan Tallinn, Ahti Heinla, and Priit Kasesalu.
To be fair, they all had already been working together in previous years on another product with similar peer-to-peer technology for sharing music called Kazaa.
The important thing here to stress is that thanks to outsourced developers, who later became partners, Skype was able not only to enter the market but also becoming a widespread tool among businesses of all size. From 2011, Skype is part of Microsoft who bought it for $8.5 billion.
If you work with remote peers, there’s a high chance you use Slack, an online collaboration tool app for teams based on Instant Messaging. Launched in 2013 by four founders Stewart Butterfield, Eric Costello, Cal Henderson, and Serguei Mourachov, this “gem” perfectly embodies the startup approach to launching a new product. Before opening it up to the first beta testers, Slack’s development was outsourced to a design firm, who took care of the app, website, and even their logo.
After that phase, once the product was good enough for the founders, they started to invite other users and teams to test it out and provide feedback (8K users signed up the first day). Today Slack accounts for 5 million daily users.
Founded by two former Yahoo! employees, Brian Acton and Jan Koum, Whatsapp is today’s take on SMS: encrypted communication, group messages, file sharing and, recently, even calls. This startup who launched in 2009, and eventually got acquired by Facebook in 2013 for $19.3+ billion, has never denied taking advantage of outsourced developers.
Actually, based on publicly available info, we know the core development was outsourced in Russia, starting with a contractor iPhone developer named Igor Solomennikov who joined the company eventually as CIO.
Why outsourcing development is beneficial to any type of business
I’ll admit: I'm a strong supporter of outsourcing. I've used it in the past (and still do) for things I'm not able to do, or just I don't have time to spend on.
This doesn't mean I don't understand those who raise their eyebrows, or even wrinkle their nose when they hear the word "outsourced development". From a broader perspective: not everyone feels comfortable delegating work to contractors. It might even provoke a deep feeling of discomfort to some.
I get that, really. I felt that way the first time I hired a remote contractor to do some code tweaks on one of my websites. I had no idea how it would have been to work with him, what to expect or what would happen if things went wrong. But those were just tiny concerns raised by my uncertainty and inexperience.
On the other hand, having a team of in-house developers has undoubtedly great benefits.
The thing is not everyone can afford (senior) developers, especially in early stages of their business. And not everyone wants to spend money to hire full-time developers before they have a stable flow of incoming client work yet.
A research from IBM revealed that
only 27% of companies outsource to cut costs, whereas 36% are innovators and 37% are growth-seekers, using outsourcing as one of their tools to optimize their businesses.
Saving money it's just one result of why business owners implement outsourcing into their business strategy. With others following such as:
- Increased productivity and competitiveness 10-to-100-fold
- Hiring and staffing in a Gig Economy world
- Growth and key advantages over competitors
What’s the moral here? All these stories should have shown you how leveraging outsourcing (moderately to highly) can truly have a positive impact on your business. Specifically, outsourcing part of your client work, or even part of your product development, can benefit you because:
- It’s budget friendly
- It’s time-efficient
- It allows access to expert and specialized service providers
- It relieves resource constraints to a minimum
- It lets you balance in-house staff and overhead expenses
Ultimately, outsourcing resolves into a specific approach to running a business. And anyone should aim for that, i.e. one that's deeply effective and efficient, when it comes to being successful. Otherwise, why would you even start a business?