Hiring in-house developers vs. outsourcing

Apart from your legal and task implications you should ask yourself whether you have the infrastructure and organization in place to outsource some of the work to developers on-line. Are you organized well enough to determine what work can be done remotely? Do you have the infrastructure to distribute the code base on-line and track and verify the contribution of the on-line developers? Only if both questions are anwered with YES you should consider the legal and tax implications of outsourcing the work. If one or both questions are a NO, don't even consider outsourcing, because you are introducing risks to the quality and legal status of your software.

This is an interesting conundrum that I have faced in a few prior startup efforts. In one case, I outsourced a large amount of work, got a prototype completed and sold the entire company for a SMALL profit. For my next startup, I tried this process again - and fell flat on my face.

As it turns out, and like Frank says, you need to have good control over your consultants in order to succeed. Even that fails unless you are able to strongly project manage all components of your development effort - something commonly lacking when venturing down new frontiers.

Based on that failure, I then divided my work into novel/innovative and grunt work. The novel/innovative work went to my internal team and the grunt work went to my outsourced teams. This effort is extremely difficult from a project management perspective - especially if you run tight flights - but it can be accomplished.

that stated, my current company actually got a huge blow back from potential investors as they thought outsourcing was very bad and they wanted to see all of the developers inside my company. Even the potential enterprise companies wanted to see 85% or more of my work done internally.

On top of that, nobody likes external support staff and those people have to come from somewhere in your company. If you are spending all of this time project managing and training, and you want your company long term (say over 3 years) then hire internal. If, however, you have a path to a quick exit OR you are going after the personal/SMB market then outsourcing make work for you.