Jonathan (a.ka. ‘Rocko’) is an aspiring entrepreneur with a great idea for a web-based business in the education sector: it’s a concept that he believes very strongly in.
Like many of us with ideas that can and should be implemented via the Internet, the technical aspects can be a real stumbling block – I mean, if you’re not a tech-head yourself, how do you get the damn thing developed without a budget?
That’s exactly the question that Rocko e-mailed to me earlier this month:
My question is about taking the necessary steps to get your website’s more technical aspects completed when you have no capitol to work with – how do you find an interested “angel”?
Well, I can tell you this …
I have been working on a web-based concept for a while now, and wrestled with the same problem. I obtained some estimates to have the site developed professionally and found numbers between $50,000 and $250,000 to do ‘properly’.
The problem is this:
You may be able to fund – or find partners to fund – such development, but I don’t recommend it for the following reasons:
1. By the time you develop it, your requirements / specifications for the project will have changed 50 or 60 times … the chances are that lots of small “how about we add this? and “how about we change this” will add up to a net 40% to 60% change in the way you originally envisioned the site
2. You will launch a Beta trial of your site (you’d better!) and will find a flood of user requests for changes: errors, omissions, and simple functional additions/changes that you could not have foreseen.
3. Your site will require plenty of maintenance – and, will probably need to be fully rewritten two or three times to cope with the architectural stresses of a hugely (we hope!) expanding user-base.
All of this adds up to one thing: super profits for the outsourced developers … they have you by the [BLEEP] and both you and they know it!
Think about when you last rehabbed or built a house: the contractor provided a great estimate for the work and you selected them … then they ‘found’ hidden problems that required supplementary invoices. It’s common wisdom that you should expect to pay 20% more than estimated for this kind of work …
… it’s worse in IT … much worse!
Realizing the above, I did the only sensible thing when we needed to rewrite our operating software for one of my businesses way back in 2000 (to cope with the Y2K ‘bug’ … remember that?): I hired an inhouse team.
I never regretted that decision … it turned out to be the ONLY cost-effective way that we could have operated.
But, for your little start-up, Rocko, how will you be able to afford an in-house team?
You will need three IT people: a back-end database designer/programmer; a user-interface programmer; and, a web-designer. Good people … and, you will need the best … will set you back $120K a year or more. Each!
So, how did I solve this problem for my start-up?
Simple, I found my team of three and offered them 50% of the concept to write, maintain, manage the site …
Just out of curiosity… what type of site are you envisioning? At that cost it must be a pretty large site! This is actually the business I’m in so I’m interested in seeing how I compare to other providers.
Going back to the original question, the best way to reduce costs is to know exactly what you want. If you can produce a detailed document that explains exactly what will happen on each page of the site and you’re happy if that’s exactly what you get, that will lower the cost (if you don’t want to spend anything, people might think more highly of your plan if you can show you really thought about it).
Unfortunately software development is never a smooth process and you’ll always think of new things once you see something running – which means more time has to be spent on the project. Other than that all you can do is pace the development according to your growth so it’s a good investment.
@ Richard – Let’s just say that my site is very large in scope (by so-called Web 2.0 standards), and I had estimates from $50k – $250k.
Hate to rain on your parade, though, these are EXACTLY the types of applications that you cannot outsource because you simply can’t explain “exactly what will happen on each page of the site” because it’s not ME that has to be “happy if that’s exactly what [I] get” but MY USERS …
… just ask anybody who’s put a ‘beta’ version of their site up how many partial and/or complete rewrites that they had to make … and, at what cost if outsourced! Sorry, but have to call it as I see it …
If you’re new to IT business, it’s best for you to pay premium by hiring insource people.
Then.. as you go along and get yourself familiar with the IT business, you will find that you can save a lot of money by outsourcing. This is especially true for tweaking little stuff that you know it’s very simple to do.
Just like buying aspirin.. if you know the ingredients, then just buy the generic one.
@ Fanny – If you’re saying do the big stuff ‘in house’ and just outsource small well-defined pieces of “one off” stuff, then I agree whole-heartedly! If you don’t have the money for the inhouse IT staff – go into partnership with a couple of bright young sparks!
You’re right – if I could tell exactly how long a site of that size would take before starting, I would be investing in the next decade’s growth stocks today 🙂 For something like that I have to admit that I wouldn’t give you a price at all. It would have to be divided into phases and ongoing maintenance work.
On the other hand, this applies to anyone who’s doing the work. When you hire programmers you won’t know if it will take them 6 months or 3 years to get things working because it’s always a moving target. If you can find someone who has seen a few projects through to the end they can help give you realistic information and plan things to make future changes easier.
I know how frustrating this can be but there’s no good solution. All I can do is explain the problem so everyone knows what to expect. If you’re talking to an outsourcer and they try to pretend this problem doesn’t exist they’re definitely hiding something from you!
@ Richard – My ‘solution’ to that problem is to JV the opportunity with the IT guys … no money changes hands, only future equity. Of course this opens up a whole can of worms on partnerships etc. but for Rocko (unless he has very DEEP pockets), as it was for me, I think it’s the wise ‘solution’ …
Well you could do a smaller (beta) version of your site.
I would also, FOR SURE, try to outsource. I was in the Philippines last year on a personal trip, while I was there I put an ad on craigs list, the next day I had 10 people wanting to redo my website. I met with them and about 10 days later it was all done. It was more simple than what you need but it worked and it was good. Total cost was UNDER $100. This would have been at least $2000 in the US. They did a great job. You may just want to fly to the Philippines or India and manage a small team, You may be able to get it done with 10% of your budget. I suggest these two nations because they are very Techy and both speak good english. I like Philippines better my self, it is a bit cheaper.
Also most everything out there has been done before. You may be able to find a company that has something that could be adapted to your idea very quickly. I am sure many readers here know this, maybe post your idea and we can help.
Let me clarify. I would not outsource unless I was personally there to manage the team. You have to move there for the development term, open a small office and manage it. If you don’t do this your costs will be 4-5 times as much and it will take much longer. I lived in a city called cebu. The going rate for very high quality talent is about $500-$700 per month. They are as good at the $90k per year people in the US.
Jason Dragon
http://blog.capitalactive.com/
@ Jason – Absolutely – with your caveat. Bulgaria is another option that my friend is currently pursuing in a big way. Even so, you need to have a local team member (in house) who can pick up where the o/seas team leaves off (for ongoing maintenance, site rewrites, etc.) unless you plan to stay in Manila for ever 🙂
Hehehehe, na I moved back to AZ long ago, only really plan to visit there. Never liked manila much, I lived in CEBU…much better for Americans.