Why 99% Of New Apps Developed By Outsourcers Fail

Why would top developers be looking for gigs on online marketplaces when elite coders can make 3.5x more (with benefits) working for a VC funded startup or an Amazon (which lets many devs work from home)?

Or, why would average developers work for an outsourcer when they can get 2x more in an online marketplace?

Five9 Founder John Sung Kim

Nothing about the claims of online marketplaces (“Hire ex-Googlers to work!”) or outsourcers (“We work for Microsoft!”) make any sense. But people always want to believe they found a $100 bill for $20…

Like “Dave” (not his real name) who sat across from me at a cafe in Kiev, nearly falling out of his chair with excitement. He was a very fit, middle-aged London banker who had an idea for an iOS app and had hired an outsourcing firm in Kiev.

$150,000 into his yet-to-be-launched app, he kept saying “I’m certain.”

It doesn’t occur to many first-time product founders that success in this game is all about the team you have.  Your ideas are for shit. 

But here’s the dirty truth outsourcers don’t want the public to know:

Outsourcing is a grueling business that relies on tier C talent, with 10% to 25% margins at best, and that doesn’t account for the constant churn as developers leave you for better-paying positions, nevermind the sales and marketing costs.

Almost every outsourcer I know is working on their own product, hoping one day to leave outsourcing. That’s why 99%+ of apps developed by outsourcers fail.

If outsourcers could build successful products, they wouldn’t be outsourcers.

Dave became upset when, instead of joining in his excitement, I told him “Dave, you’re a great guy but if I could short startups, you’d be first.”

I really got to work on my tact.

However, a few months later Dave sent me a Facebook message with the all too common, “John, I should’ve listened to you… hey can you meet up for coffee?”

Well, who the fuck are you to say, John?

Call it luck or psychotic determination, but both of my startups have had profitable exits and nearly all of my clients who I’ve been a growth advisor to have had: an IPO, a Series A investment, or been acquired.

Who is founder Five9 john kim
Who knew this website I designed for my first startup in 2004 would become a $3.5 Billion company? I certainly didn’t!

When I think of why “luck” has been on my side, my belief is that it has to do with one core habit I’ve developed with my colleagues over two decades of building, advising and investing in new software projects that I call the CMP model:

Every successful project is a product of Consistent Mini-Pivots based on a relentless collection of data. 

Too often I hear younger founders say something like, “We failed because of _______ but we learned a lot!”

I don’t believe failure is anything to celebrate. And most of the time I’ve seen that it could’ve been avoided with CMP.

At my first startup Five9 we were the David versus multiple Goliaths, so we had to come up with a 10x better product with a 3x better marketing strategy using the CMP model with our engineers and marketer.

Based on CMP grew from $0 to $10 Million in annual recurring revenues within 24 months. $20 Million in just 35 months. Quite frankly it felt easy, it was fun (while our competitors used words like “grinding,” to describe their lives).

It just happens that CMP is the exact opposite of how outsourcers operate profitably – they have to give you the cheapest developers for the highest price taking the most amount of shortcuts. 

There are no guarantees with any project, but I believe the CMP model gives a project multiples more chances of success, and in this gambler’s game – it’s all about playing the odds by reaching for the best hand. And team.

So what now?

At my new company JetBridge we’re disrupting the terrible performance of software outsourcing with our CMP and “Boots On The Ground” model. Reading our client reviews it’s clear we’re onto something – our devs often outperform our client’s in-house teams! Send us a message if you have a need for excellence & speed with the least amount of risk.

Five9 DoctorBase founder John Sung Kim
We don’t just teach geeks how to code like us, we teach them how to be entrepreneurs like us. Learn more at the JetBridge blog