Portal development: to outsource or not?

As a small business, would you develop your site in-house or outsource it to an Internet solutions company? The decision can make or break your company, because cost and time overruns could prove fatal to a fledgling start-up.

INDIA (ZDNet India) - When Sunil Khairnar decided to launch an agriculture portal, the very first problem was the development of his Web site agriwatch.com. Should he develop the site in-house or should he outsource it to an Internet solutions company? Since cost and time overruns could prove fatal to a fledgling start-up, Khairnar knew that the decision could make or break his company.

At last, convinced that in-house development may entail the risk of cost overruns and a long gestation period, Khairnar handed over the job to a New Delhi-based Internet solutions company. Today, as CEO of agriwatch.com, Khairnar recommends outsourcing with a missionary zeal.

Clicking past Khairnar, this dilemma is a universal one for all Internet startups. Outsourcing may be a modern day management mantra but it has its own upside and downside.

Barun Das, assistant general manager with Zee Publications believes that better cost-control can be achieved by retaining a low-cost team under the guidance of an able consultant from outside. For Das, the strengths of a large, cash rich media house like Zee TV are a great advantage but cash-starved Internet startups are not entitled to such largesse.

Obviously economics governs the decisions of an Internet startup. Unlike Zee, few startups have the resources required to build a good technical team and maintain it with adequate exposure to the latest technologies. The recruitment process itself could be time-consuming as skilled manpower is scarce and costly these days. Given the high attrition rate among technical talent, the challenges of retaining the team could torpedo the startup.

Sanjay Trehan, vice president (Content and Strategy), at the shopping site, Jaldi.com feels that the character of the website decides its technology architecture. For plain vanilla sites, with no depth and multiple level interfaces, outsourcing is the cheapest option. For more complex Web site, if the technical architecture is developed in-house, modifying and scaling up the site become much easier. At the same time, problems with outsourcing are also legion. A personal finance magazine's experience at the hands of a Delhi-based Internet company illustrates the perils of outsourcing. Three months after commissioning, the project was yet to materialise. The vendor company blamed the client squarely, saying that the client failed to communicate its requirements clearly.

Outsourcing can be self-defeating if the client lacks a vision and the capability to spell out his requirements, says Sanjay Soni, chief of Web Services with Jain TV, which recently launched a free Internet service provider (ISP) in Delhi. Soni sees meaningful interaction between the vendor and client as the key to success in outsourcing.

This will allow the client to exercise control over the product he is outsourcing.

Soni says that when it is critical to retain the intellectual property rights of the site, outsourcing has to be avoided. As can be seen, the rich and famous, be it Zee TV, Jain TV and Jaldi.com tilt towards the in-house option. And their confidence has much to do with the resources at their command.

Aditya Tripathi, business development head of Go4i.com says that excessive dependence on outsourcing could prove fatal. "It cuts at the root of innovation. In-house development can be feasible in many ways. The opportunity to avail of vendor-independent technology is just one among them." As far as Go4i.com is concerned, the in-house team conceptualized the architecture and design of the portal even though many technological components were outsourced.

This is supported by Sanjay Gupta, chief operating officer, NetSansar.com, the multi-lingual Internet portal in eight Indian languages to be launched soon. Gupta, who has been behind several incubations like hindisamachar.com and pmonthenet.com, says that outsourcing is good in the beginning. But later on, the expertise has to be built up in-house. "If you are outsourcing your core technology indefinitely, then what is the point in doing business?" he wonders.

But Aniruddha Bahal, Editor-Investigations at Tehelka.com, points out that if the project is ambitious, the internal resources have to be correspondingly strong. Bahal says outsourcing is inevitable but is a poor excuse for not developing in-house capabilities.

At the same time, there are several companies like Hungama which believe in outsourcing technology and focussing all their attention on their core competence-in this case marketing.

While outsourcing has become a management mantra, technology now plays an extremely strong role in the destiny of startups.

Outsourcing is therefore one decision that demands a very pragmatic analysis of one's resources and the objectives of the organization.