To compete, FinTech startups must execute and innovate quickly. Software outsourcing offers the speed, flexibility, quality, and cost savings they need.
FinTech’s impact is growing by the nanosecond. Consumers are embracing it, driving the global financial services industry to adapt and innovate. PricewaterhouseCoopers’ Global FinTech Report 2017 found that 88% of incumbents feared losing business to standalone FinTech companies, and 82% expected to increase FinTech partnerships in the next three to five years.
In other words, the FinTech playing field is wide open and teeming with opportunity. The question is: Can FinTech startups keep up?
To succeed, FinTech startups must grow, execute, and innovate quickly. They often lack the staff, capital, flexibility, or risk tolerance to do so. Even if they’re newly funded, it doesn’t make financial or logistical sense to build all technologies needed in-house and from scratch. So what’s a FinTech startup to do?
Fortunately, there’s a clear, straightforward solution: Outsourcing. Read on to find out why smart FinTech startups are embracing software outsourcing to compete and win.
1. Speed to Innovation (aka Access to Top Talent)
Deloitte’s Global Outsourcing Survey 2018 sends a clear message: More and more businesses are using outsourcing to drive innovation, and it’s enabling competitive advantage. From 2016 to 2018, Deloitte saw an increase from 20% to 49% in the number of organizations moving services to outside providers as they innovate.
Innovation is the essence of FinTech. FinTech startups use both existing and emerging technologies (e.g., AI, blockchain, cryptocurrency, IoT, biometrics) to rethink and revolutionize financial services. Their success and competitive advantage depend on having the specialized knowledge needed to harness the power of these technologies. Where do they get it? By finding experienced, top-tier development talent to help them conceptualize and develop their solutions. Only startups who engage the most innovative, intelligent and creative development talent will succeed.
With US unemployment at the lowest rate in 50 years, that top talent isn’t exactly hurting for work. Newly funded startups often can’t afford the sky-high salaries required to attract these professionals, ending up with less-experienced professionals who can’t deliver. Over and over, the data backs this up:
“CIOs across the board identify lack of skills and other human resources as their №1 barrier to success.”
“Talent has now been recognized globally as the single biggest issue standing in the way of CIOsachieving their objectives.”
53% of respondents “hired tech talent who did not meet the job description requirements out of immediate need,” and 83% felt the tech talent shortage had hurt their business through “lost revenue, slower product development, market expansion, or increased employee tension and burnout.”
Outsourcing or co-sourcing software development talent removes this barrier to success, letting FinTech startups:
- Engage expert developers for only as long as they’re needed.
- Hand-pick the FinTech expertise and intellectual capital you need to drive success.
2. Cost Effectiveness
The data also shows that outsourcing saves costs. In Deloitte’s 2016 Global Outsourcing Survey, 59% of respondents cited “cost-cutting” as a primary driver. When assessing how innovation creates value in outsourcing relationships, 44% pointed to reduced delivery costs.
With software outsourcing or co-sourcing, FinTech startups gain significant cost-related benefits, including:
- No need to pay the costs of recruiting and training development professionals (easily a $50k investment), not to mention their benefits, office space, and hardware/software, or the high costs of turnover
- No need to pay the hefty salaries required to keep experts on staff long-term
- Increased budget control/visibility, given clearly delineated scopes of work (SOWs) that outline your investment
- No paying for development downtime
3. Improved Flexibility — and Reduced Risk of a Bad Fit
The risk of a bad fit is considerable when making hires central to development success. One bad hire could slow your progress or throttle your budget.
There’s no guarantee professionals hired in-house won’t be a bad fit technically or culturally. And hiring specialized resources in-house can drain or strain capital that could be better used toward other strategic priorities. Countless startups (e.g., Slack, GitHub, Skype, Basecamp) have built their businesses using outsourced development talent they couldn’t afford full-time. Needing to ensure sustainable growth, FinTech startups are catching on.
Co-sourcing and software outsourcing offer massive flexibility and scaling benefits for FinTech startups, including:
- Ability to quickly scale delivery teams up or down to meet important goals/milestones
- No need to hire extra employees to try new frameworks or ideas — just request the right specialists from your outsourcing or co-sourcing partner
- Improved ability to flex your budget to fit evolving priorities
- No long-term commitment made to in-house employees who may be a bad fit
- Development professionals experienced in collaboration and communication, reducing the risk of a bad fit
4. Increased Speed to Market
Deloitte’s Global Outsourcing Survey 2018 asserts, “Today, disruptive outsourcing is about collaborating with partners in the marketplace to integrate services an organization cannot quickly build on its own to innovate, transform, propel its growth, and unnerve its competitors” (emphasis added).
For FinTech startups, speed matters. You can’t let your competitors get to market faster, so you need to build, execute, and innovate more efficiently than they do. As McKinsey echoed in its 2018 “Ten trends shaping FinTech,” “The most successful FinTechs have evolved into execution machines that rapidly deliver innovative products.”
Outsourced or co-sourced arrangements offer significant speed advantages:
- Ability to quickly source top-tier development talent with proven experience on similar projects — without being slowed down by recruiting, hiring, and onboarding
- Less ramp-up time and faster progress, given their familiarity with similar projects and efficient, time-tested processes
- Potentially having team members in multiple time zones, ensuring continued progress while you sleep
5. Improved Quality
As a FinTech startup looking to disrupt, can you afford to gamble on the quality of your development team’s work? Capital is not inexhaustible. Investors need to trust you’ll deliver, or funding will dry up. Partnerships with financial services incumbents will be at risk if your work’s quality or reliability is in question.
Working with a software outsourcing or co-sourcing partner is a huge help here, too, because:
- You can choose a partner with a track record of award-winning FinTech products with millions of satisfied users. They’ll already know your industry and business landscape. Their proven expertise on similar projects means increased quality, speed to market, and flexibility for your product.
You’ll have improved control over your development team, and recourse if expectations aren’t met. You can use contracts and SOWs to guarantee deliverables and their quality, and ask for staffing changes or additions when needed.
Finding the Right Outsourcing Partner is Worth the Effort
FinTech startups are focused on development for the long haul. The product is the business, after all. So the right outsourcing or co-sourcing development partner can be central to long-term success. The resulting quality, reliability, speed to market, flexibility, cost-effectiveness, and fast access to top talent will help you innovate faster while scaling more sustainably.
FinTech companies should consider co-sourcing models, in which development partners assign dedicated resources long-term. They’re often available to work onsite. They become fully integrated team members who understand your vision and are invested in your success.
In fact, any development partner worth having will be 100% invested in your success. (That’s exactly how we feel about the FinTechs we’re proud to partner with, like Tala.) So, when assessing potential development partners, ask the right questions to ensure they’ll support your long-term success.
As many FinTech startups have already learned, the right development partner is a massive competitive advantage. Don’t get left behind. Instead, let software outsourcing help you accelerate.
Still have cold feet about working with an outsourcing partner? Our “cure for cold feet” offers solutions to answer each of your concerns — while bringing compelling benefits to your business.
Need help evaluating whether outsourcing is the right fit for your project? Check out our decision-making guide.
Want to learn more about why companies like Google, Microsoft, and Slack outsource? Read on to learn why and how five global powerhouses use outsourcing to make their businesses better.