Off-shoring your web-development is a great way to save money and, if you are bootstrapping a small start-up, it could be the perfect strategy to hang on to more equity and delay financing. However off-shoring your development is also fraught with risks, it is far harder to manage your development and communicate ideas, so it is vital to take proper steps to protect yourself. In this post I continue describing the system I’ve used several times in order to ensure that I get developers who are motivated, technically capable and trust-worthy.

You’ll find stages 1 and 2 discussed here.

Step 3 – Send the developers you’ve found a “Request for Information”

A Request for Information (or RFI) is a questionnaire to help you short-list developers. The objective of the RFI is to enable you to decide which developers can deliver your project in the right sort of price range. Your RFI should at least gather the following information:

• Hourly rates for different staff types
• Which currencies the developer can raise invoices in
• Whether they are prepared to set a fixed cost for the project (you want a fixed cost, right?)
• Between 3 and 5 customer references
• Information about the company (how long has it been running, how many people it employs)
• Information on their typical project (how big it is, how long it lasts)
• The development methodology employed and development technologies supported
• Whether they have a design house
• Their preferred development technology
• Any technology certifications which they may have
• a “difficult technical problem” which is related to your project, ask the developers to sketch out how they would solve it

I’ve included an example RFI in the documentation bank to help get you started.

When asking for references, try and get projects which are similar to yours. Also get a reference for a company which is physically near you and then arrange to meet up with them for a coffee and a chat.

Your RFI should also tell the developers all the key deadlines for the selection process. It ensures that the developer knows where they stand at all times, and it gives you targets and deadlines to meet yourself. When you issue it give the vendors at least 2 weeks to respond and an opportunity to ask you questions.

If you are worried about controlling your IP, then there’s no need to discuss what your actual business is in the RFI. However, you might want to describe in broad terms the type of business you are launching, or refer to some similar companies.

When you send the RFI out, update the vendor dashboard which you set up at the start of the process.

Note that not every company will respond to your RFI. Some companies will respond but fail to answer the final question, some companies will send you back documentation packs which probably contain the answers, but they’ve not bothered to put them into your format. All these companies should be immediately dropped from the list.

Step 4 – Short-list the developers

Two weeks after you’ve issued your RFI you should have all the responses you are going to get. I tend not to bother chasing any companies who don’t reply to the RFI and just stick with those that do. Your next step is to short-list the developers, you want to work through the responses until you have 4-7 companies to take through to the next stage.

Before you start short-listing the developers, you need to think about what your ideal company is. You might want to work with a small company, or you might be looking for a larger company with ISO or CMM certification, you may have a particular development methodology in mind, or you might want your system built with a particular technology, etc.  Collate all these thoughts to help piece together what you are looking for.

You are then ready to start “the sift”. First stage is to remove any companies which just aren’t right. Personally when reading through these responses I arrange them into three piles: yes, no, and questions. I then ask the questions and update. I continue to do this until I have only a yes pile and a no pile.

Remember to always check the references, this is one of the best signals of quality company. If they are in your country, arrange to go and see them, otherwise drop them an email. You want to know whether the developer delivered on time and to budget, if they still use them, if they’ve given them any new work and if they’d recommend them.

Keep working the list until you get between 4-7 companies. It is important that you don’t take too many vendors through to the short-list round as you don’t want large numbers of companies knowing what you want building. If you don’t have enough, approach more companies. Finally, ensure that you feedback to all the companies involved (good news and bad) and update the vendor dashboard to so can keep track of where each company is.

In next week’s post we’ll look at how to get a price for the development and how to select which companies is going to build your business.

You’ll find stages 1 and 2 discussed here.

Step 3 – Send the developers you’ve found a “Request for Information”

A Request for Information (or RFI) is a questionnaire to help you short-list developers. The objective of the RFI is to enable you to decide which developers can deliver your project in the right sort of price range. Your RFI should at least gather the following information:

• Hourly rates for different staff types
• Which currencies the developer can raise invoices in
• Whether they are prepared to set a fixed cost for the project (you want a fixed cost, right?)
• Between 3 and 5 customer references
• Information about the company (how long has it been running, how many people it employs)
• Information on their typical project (how big it is, how long it lasts)
• The development methodology employed and development technologies supported
• Whether they have a design house
• Their preferred development technology
• Any technology certifications which they may have
• A “difficult technical problem” which is related to your project, ask the developers to sketch out how they would solve it

I’ve included an example RFI in the documentation bank to help get you started.

When asking for references, try and get projects which are similar to yours. Also get a reference for a company which is physically near you and then arrange to meet up with them for a coffee and a chat.

Your RFI should also tell the developers all the key deadlines for the selection process. It ensures that the developer knows where they stand at all times, and it gives you targets and deadlines to meet yourself. When you issue it give the vendors at least 2 weeks to respond and an opportunity to ask you questions.

If you are worried about controlling your IP, then there’s no need to discuss what your actual business is in the RFI. However, you might want to describe in broad terms the type of business you are launching, or refer to some similar companies.

When you send the RFI out, update the vendor dashboard which you set up at the start of the process.

Note that not every company will respond to your RFI. Some companies will respond but fail to answer the final question, some companies will send you back documentation packs which probably contain the answers, but they’ve not bothered to put them into your format. All these companies should be immediately dropped from the list.

Step 4 – Short-list the developers

Two weeks after you’ve issued your RFI you should have all the responses you are going to get. I tend not to bother chasing any companies who don’t reply to the RFI and just stick with those that do. Your next step is to short-list the developers, you want to work through the responses until you have 4-7 companies to take through to the next stage.

Before you start short-listing the developers, you need to think about what your ideal company is. You might want to work with a small company, or you might be looking for a larger company with ISO or CMM certification, you may have a particular development methodology in mind, or you might want your system built with a particular technology, etc. Collate all these thoughts to help piece together what you are looking for.

You are then ready to start “the sift”. First stage is to remove any companies which just aren’t right. Personally when reading through these responses I arrange them into three piles: yes, no, and questions. I then ask the questions and update. I continue to do this until I have only a yes pile and a no pile.

Remember to always check the references, this is one of the best signals of quality company. If they are in your country, arrange to go and see them, otherwise drop them an email. You want to know whether the developer delivered on time and to budget, if they still use them, if they’ve given them any new work and if they’d recommend them.

Keep working the list until you get between 4-7 companies. It is important that you don’t take too many vendors through to the short-list round as you don’t want large numbers of companies knowing what you want building. If you don’t have enough, approach more companies. Finally, ensure that you feedback to all the companies involved (good news and bad) and update the vendor dashboard to so can keep track of where each company is.

In the next post we’ll look at how to get a price for the development and how to select which companies is going to build your business.

Without doubt, this is one of the most revealing, painful, and valuable stages in creating your start-up, so I thought I’d blog about it.

When launching anything you want ensure that not only does it work, but people find it easy and natural to use. Your own functional testing should cover the first objective, your alpha testing should cover the UI.

At Aroxo we’ve employed four different techniques to get the system ready for launch:

Not only is each stage different but you get different learnings from it. I discuss each stage below.

Over-the-shoulder tests

This test phase is the most fascinating for the founders, as you get to watch people actually interacting with your system. This test should be done independently, as those close to the system are inclined to guide the user towards positive responses, rather than getting genuine feedback.

But if you are bootstrapping or operating on a tight budget, you may well be doing it. So, here’s what you do:

1. Write out a list of scenarios or tasks which you are going to as people to do
2. Find 5-15 people who represent your expected customer base
3. Sit them in front of a machine and get going

Your first task should be to get them to look at the homepage for a few seconds (no more than 30 seconds), then ask them what they think the site does. People should find it easy to understand the site from the homepage. If not, probe a little to find out what you can change to make it clearer. Then get started on the scenarios.

Your job is to generally keep quiet and take notes as they use the system. You are particularly looking for times when something confuses them, you may notice the person lean forward and start to look confused. At these points feel free to interrupt and probe, ask them what they are looking for and what’s missing.

When probing, be very careful to use words like “what” (open) rather than “why” (implies fault). Try not to reveal any emotion, you’re not asking people to tell you how great your system is, you’re after honest feedback. Therefore it is also important not to make people think they are stupid for not being able to use the system, frame it as “we want to get some open and honest feedback”.

Expect some excellent and easy improvements to come out of this to really make the system substantially easier to use.

Task-driven testing

Task-driven is quite different. For a start, you won’t actually be watching people, they’ll be running through tasks on their own. This is particularly interesting because for the first time people will be using the system without anyone to ask for help. This means you can get more people involved.

To perform this sort of testing there are a few things you need:

1. around 20 particpants to start with (expect about half to actually use it and 2-3 who give you really good feedback)
2. a well defined list of tasks for them to perform
3. a way to communicate the tasks to them and
4. a way for them to communicate their findings back to you.

As you push these changes through to the alpha platform you should start adding more and more people onto the trial. You want fresh eyes to test your UI improvements, people who’ve already seen it, won’t test it as well, if at all.

Your objective here is the test how well the system performs with a small number of people performing defined tasks, so each task you ask people to do should come with some prompts to help them give you relevant feedback.

Goal-driven testing

Goal-driven testing differs from task-driven testing in two ways. Firstly there are a lot more people involved in the trial, and secondly instead of having tasks which people have to perform on the system (e.g Register on the site). You set wide goals for the participants. In context of Aroxo this is something like “buy something” or “sell something” the UI and the website itself should then guide the users through the system, rather than the tasks.

Start your goal-driven testing when you’ve reached the point that you believe the UI of the system is strong enough that people know what they should be doing and how to use the system.

Beta testing

Beta testing isn’t really testing in the same way as the alpha testing which you’ve already performed is. You want a large number of people get see the system and many of them will have registered on your site to do it, so you don’t know them.

This makes beta testing public. If it is public, it’s part of your marketing. Therefore it is essential that it shows your site running well and easy to use. What you may get is some useful learnings about how the system scales, or you may also be able to learn something from some clickstream work.

However, what is most important about beta testing is that it should not be part of your functional and UI testing, it is too late to make any significant changes to the system as you’ll be moving towards a full launch within weeks of starting your beta.

Closing thoughts

One thing which I’ve not discussed in this article is the emotional impact which testing has on the founders. If you’ve been careful with your IP whilst you’ve been building your system it’ll be the first time which you’ve had large numbers of people looking at your system. This means you are going to get a lot of feedback.

It is important not to take this feedback personally. It should help make the system stronger.

You need to remember that you are asking people to look at your system and tell you the flaws and problems with it. You are not asking them to look at it and tell you how clever it is! This means you are going to get a lot of (hopefully) constructive criticism. You need to take this on the nose and think of creative ways to improve the system.

Finally, in the case of Aroxo something which we learned is that it just isn’t possible to test the UI of your own stuff: you are way too close to it. So it is important to have lots of fresh eyes to test each new release.

Good luck!

From starting the search, to the first developer writing code should take around 3-5 months and there may be further delays whilst you complete your documentation. In this article I’ll talk you through what you should be doing at each stage, and what the objective of each stage should be. Here’s an overview of the process:

1. Build a long list of development companies
2. NDA all the companies on the long-list
3. Issue a Request for Information (RFI)
4. Analyse responses and short-list the developers
5. Issue a Request for Quotation (RFQ)
6. Analyse responses and select a preferred vendor and a spare
7. Negotiate contract with preferred vendor
8. Commence development based on your documentation

This is a long process, and therefore I’ve split it up into 4 sections, these will be posted each week for the next four weeks. Any regular readers can relax – the whole lot has been written in advance, so there won’t be any 1 month gaps in between!

Finding a great development company is one of the most important decisions your company will make. Changing developers mid-way through a development is near impossible and so it is important that you select a company which you are confident has the ability to see it through. The purpose of this 8-step process is to stack the odds in your favour by finding out as much as possible about the development company before you sign the contract.

At several stages I’ve included sample documentation to give you more guidance on what should be included. You can download these examples from the documentation bank on Aroxo.

Before we start, one word of advice. Running a vendor selection process will involve giving a large number of developers bad news (and only one company good news). When I first started doing this I found the process of giving bad news quite unpleasant. It is, but it is still important to do it. Vendors are used to receiving rejections, so they tend to take it more easily than expected and I also find that giving the bad news, along with some personalised feedback is always much appreciated.

Step 1 – Build a long-list

Before we start populating a long-list, it is worth spending a few minutes getting properly organised as running a vendor selection process involves a lot of time, organisation and communication. I find it easiest to run these off a spreadsheet which we’ll develop going forwards. There’s a sample vendor dashboard included in the documentation bank.

Building a long list involves populating this dashboard. The aim is to get 20-30 companies into the dashboard that satisfy your broad requirements for the type of system you want to build. You want to make sure that each company has:

1. Experience in building the type of system you’re looking for (if you think your system is entirely new, it almost certainly isn’t, there will be parallels which you can look for, even if those are purely functional elements)
2. Experience working with start-ups
3. Offices somewhere in the world you are happy doing business
4. Experience in the technology you want your system built in (if you don’t have a preference, then ignore this)

By far and away, the hardest of these objectives to meet is the first. You may need to contact many companies to determine whether they have built a similar application to the one you’re looking for.

In order to find companies, there are a few tricks you can employ:

1. Use your network – ask anyone you know who works in the software industry for 2-3 development company recommendations
2. Use referral companies to provide connections and act as a filter
3. Use associations to help pinpoint development companies
4. Use tools like eLance, Scriptlance and Rentacoder to find developers
5. Use Google to help find companies
6. When you’ve found a company you like, do a reverse search for their homepage on Google to see if they belong to any associations with links to other companies

You may need to look through a large number before you’ve found 20-30 companies which can meet the 4 requirements set out above.

Step 2 – NDA everyone

You’re a start-up (I’ll return to this point later), so an NDA offers no protection. If you’ve got funds to sue a company then, frankly, they would be better spent fixing the mistake with a new developer. However, it is still essential that you NDA all the vendors, even though you are not going to be providing them with any confidential information (other than of your existence, just yet).

First thing you’ll need is an actual NDA. There are plenty you can download for free on the web, so I’ve not provided one. Read it to make sure that you are comfortable with everything included in it. If you’ve selected a lawyer at this stage, ask them to provide an NDA, but don’t pay them to write out a new one.

Email it to all the developers on your long-list and ask them to fax or scan signed copies back, make sure there’s a deadline for return in your email. When you receive one back, open up the Vendor Dashboard and update it so that you don’t forget you’ve received it. Then print it out and file it.

When you hit the deadline, ignore any further submissions, if the development company can’t meet this simple deadline they are not going to meet any further deadlines.

In the post coming next week I’ll detail how to write and issue and RFI and then short-list your developers.

Over the next 5-6 posts I’ll outline the process which I’ve now followed at several corporates and which I’ve honed to work with my own start-up, Aroxo. I’ll discuss what skills you’ll need, how to write your requirements, how to source developers and designers, how much to budget, how to agree a development contract, how to manage your vendors, how plan your release, all the documentation which you need and much more.

The Aroxo plug

I’ll use Aroxo as my primary reference for how to run the process so it is useful if you know a little about it.

Aroxo is a person-to-person trading exchange for consumer electronics, computer gear, whitegoods, and more. It uses new way to match buyers and sellers that has several benefits over auctions and fixed price sales models. Interestingly it isn’t constrained by the critical mass of other marketplaces – you cannot compete with an existing auction with another auction, no matter what your marketing budget, hence we’ve got a different model which is currently under-wraps.

Marketplaces are inherently complicated systems to build, with lots of workflow which needs building and testing. Especially in our case where we’ve built something which hasn’t been done in the consumer space before. If you’d like to know more may I suggest you sign-up for our beta trial using the sign-up code “bootstrap“.

At 400,00 lines of code, we’ve been up a steep learning curve whilst we’ve bootstrapped Aroxo and we’re passing on the benefits of our learnings here.

What is bootstrapping?

So, what does it mean to bootstrap a company? Bootstrapping involves launching a business on a low budget. Practically this means that you’ll out-source (most likely off-shore) your design and development, you’ll rent your servers, you won’t have an office and you’ll have no salary. Prior to launch, the only expensive professional services which you’ll buy will be your legal advice and accountancy services. Everything else, you’ll have to pick up yourself and learn as you go along.

Why bootstrap? There are a couple of good reasons a company should consider bootstrapping its market entry. The founders may believe that they are onto such a good idea that they don’t want to give up any equity. Or the founders have taken on a small amount of seed financing, just enough to get them into the market. Either way, bootstrapping is a viable model.

There one very bad reason to bootstrap and a major pitfall to be avoided. If no-one would give you any money to build your business, but you’re still convinced you’ve got a great idea then for the sake of my conscience, please think long and hard before spending any money or giving up a source of income. The information I’ll impart here will give you some clear instructions for launching a business, make sure it’s a good way to spend your money before you do.

OK, intros over. On with how to do it.

Overview of the bootstrapping process

I’m starting this series of weekly posts with an overview of the whole process. In the upcoming posts I’ll go into much more detail about each one.

Bootstrapping is a potentially very exciting prospect to an entrepreneur. It enables you get keep a much greater slice of the equity, getting you in to the market so you can raise financing (if you’re going to need it) with a trading history in hand, rather than some PowerPoint. But as I said before, it is fraught with risks and the primary risk which you need to guard against is the failure of the developer to deliver. Two thirds of out-sourced projects fail, whilst this varies from developer to developer, there is a high likelihood of failure – especially when you consider the general start-up failure rate.

Much of the process which I’ll outline is designed to prevent this from happening, so it is worth understanding the main causes:

1. Client fails to precisely express their requirements to the vendor
2. Client continuously changes their mind during the development process
3. A poorly constructed development contract

I could go into detail here with some warning signs and observations about these, but if you faithfully follow the process which I’ll describe here, then you’ve done much to protect yourself.

With this in mind, the bootstrapping process is as follows:

1. Strategy – build your idea into a documented strategy, write down the market you want to serve, what is wrong with how it is currently being served and how you are going to fix it, also think pointedly about how you are going to get the word out to your potential users, where they are online and how you’ll approach them. Test that your idea makes sense
2. Mock-up – build a mock-up of the system you want, each screen in the mock-up must contain the information and navigation you want the final system to contain, you’ll need several goes to get this right, it is not simple
3. Functional Specification – write a document called a functional specification, this explains to the developer what each screen in your mock-up does and what every button and link on the mock-up should do
4. Vendor long-list – build a “long-list” of possible software vendors and NDA them all, but don’t rely on it (more on this later)
5. Request of Information – Write and run an RFI process to sift your long-list of vendors down to a short-list of between 4 – 10 vendors
6. Request for Quotation – Write and run an RFQ process to determine approach, costs, timescales and conditions under which each vendor would deliver, select a preferred vendor and a spare in case of any problems during contract negotiations
7. Award contract – Negotiate a software development contract. There are some essentials to ensure that you’ve got covered, which I’ll go through
8. First trip – if you’ve off-shored then you’ll need to go over there and see the developers to get them started, take them through the entire mock-up and all the documentation, to ensure that they know how the system hangs together. Building a real face-to-face relationship with your developers is not only immensely valuable for you, but also for them too
9. Managing the development – running the development as a client has many responsibilities, you’ll need to know how to deal with delays, systems problems and you’ll need to know how to think like a developer so you can communicate with them. You also need to know when you’ll need to be out there. During this phase you’ll need to be there for the developers to answer all their detailed queries which they’ll have as they start to architect and design the system
10. Alpha, Beta, launch - Aroxo is currently in the process of recruiting beta testers (feel free to sign up using the sign-up code “readwrite”). Getting a large number of triallists and acting on their feedback is essential to building a strong business and having a successful launch, I’ll go through the best way to achieve this

Clearly, whilst I’ve presented this list linearly, it is entirely possible to parallel run some components, e.g. you can start building up a vendor long-list whilst you are doing the mock-up and you can easily be running your RFI and RFQ process when writing your functional specification. But each stage needs to be completed if you are to reasonably expect a quality product by the time the process delivers.

Running through a process such as this is what it means to be an “entrepreneur”, so I’ll be going through each of these stages in plenty of detail in the coming posts.

How much does might this cost?

It is often said that bootstrapping is cheap, and whilst it is certainly cheaper, it is not cheap. Producing a professional and slick product costs money. Our development was a particularly complicated build requiring 5 developers, a systems architect, an html coder, a SQL specialist, 4 testers, 2 designers, a graphic designer, a project manager and a security specialist. If our aim was to raise financing and employ these people directly we’d have burned through $5-7 million before launch. So yes, it is considerably cheaper, but it is not cheap.

With that in mind a rough budget which should be sufficient to bring a system of reasonable complexity to market would be (note that this doesn’t consider any marketing or PR spend):

Project complexity is the main driver of cost, delivery risk and timescale, therefore it is exceptionally hard to be accurate with this, but you are in for a minimum spend of $50k, systems as complex as a trading exchange will involve much bigger numbers. If you have less than this, then you’ll have to do the development yourself, nothing else is going to shift the needle. By doing the development yourself you’re competing with an off-shore company which has specialists in all the skill areas I mentioned above, and there’s a practical limit to the size of the project you can accomplish.

When you consider the question of whether to off-shore your development, if you keep things local, you’ll save on your travel budget, but you development cost will be anything from 5-10 times higher than off-shoring to India or Eastern Europe.

Similarly you’ll need at least one fulltime founder during the development phase to handle the developers and manage any other business development issues which arise during set-up. You’ll notice that there is no budget above for any salary for this individual, so the real cost much higher if you consider lost earnings during the build.

This should give you a good overview of the boot-strapping process, in my next post I’ll outline how to document your requirements in a “functional specification”, how to build a mock-up of the service using free development tools and how to structure your strategy. And I’ll be giving away plenty of examples.

Key takeaways

• If you are out-sourcing design and development, then you’ll want a budget of around USD 50k – 100k, more if you’re developing a complex solution. Anything less and you’ll need to develop the system yourself
• You are not going to be able to manage professional developers part-time
• You absolutely must thoroughly think through how to implement your idea
• Be 100% sure that you have the drive and finances in place to see it through to delivery

Having been through a vendor selection process which encompassed 32 different companies, some off-shore and some on-shore I’ve seen a massive variation in quality, costs and skills. I found the principle of caveat emptor very relevant.

My key learnings were firstly that off-shoring is not cheap, it is cheaper, but it isn’t cheap. Secondly there is a significant variation in quality which a properly run RFI and RFQ process can help select out. Many of the companies we included in our process I would use again, several I would not.

In my experience, there are two pitfalls to avoid when out-sourcing, both of which a professional client can avoid. Firstly the client must prepare a clear specification of what they want – in order to communicate precisely what needs to be developed across timezones and continents the client needs to know exactly what they want. My understanding from talking to off-shore developers is that they frequently receive little information about what needs to be developed.

Secondly, out-sourcing still requires time on the ground with your development team, all the technology in the world won’t replace the accuracy of face to face communication. In addition careful and close management is necessary – speaking to your developer on a daily basis helps to prevent costly errors.

I am also of the view that, assuming the development company has the basic technical skillset to deliver your project then any failure to deliver will be as much in the hands of the client as the developer.

In the end my company we went with a development partner based in India and so far we’ve been very impressed with their professionalism and skills.

See my LinkedIn profile to link to the full range of answers: http://www.linkedin.com/in/mrogers

Yesterday we reached a major milestone and I wanted to share the news with you. We have signed a development contract with an off-shore development company and we are leaving for India tonight to begin the development process. The functional specification is at the printers.

I am personally really excited to be starting the development process and can’t wait to be able to show you more of what we’ve been working on. Our next steps when we’re back we will be to start the patent drafting process, select our site designers and begin work on our detailed marketing plan.

We can’t reveal too much yet as the patent hasn’t been filed, but to give you a little more detail – we’re launching a new online trading exchange, behind it will be an entirely new way of buying and selling – something which has not been done before in the consumer space. You’ll be able to use Aroxo to buy and sell a range of tens of thousands consumer products at extremely competitive prices.

There’s much more to come, watch this space…