Navigating a CTO-as-a-Service arrangement
Attracting a top-tier Chief Technology Officer (CTO) can be challenging at the best of times, but for tech startups – who often have limited resources, a yet-to-be-proven product-market fit, and financial instability – it can be even more so. Add tech’s ongoing talent shortage to the mix, and it’s easy to see why CTO-aaS is gaining traction, while hiring a permanent CTO is put on hold.
If you’re considering utilising CTO-aaS, but are unsure if it’s the right choice for you, I always recommend starting with this question: what precise issue is your startup facing? Is it a lack of technical management, vision, or a risk of having to re-engineer your product in the near future? When it comes to a tech startup’s challenges, which can be so varied, the ‘one size fits all’ approach simply doesn’t work in talent management, which is why you must clearly define your challenges, before considering the following pros and cons:
Pros:
● Rapid market entry: Choosing CTO-aaS facilitates swift access to technical leadership, enabling quick responses to market opportunities much faster than the time needed to hire a permanent CTO.
● Diverse talent pool: Expanding your reach outside of the UK, opens you up to a wide array of candidates, offering the flexibility to find a CTO with precise expertise and skills tailored to meet the specific needs of your startup.
● Efficient cost management: When executed effectively, CTO-aaS can lead to significant cost savings, especially when addressing immediate technical requirements. Additionally, it allows avoidance of expenses associated with permanent hires, such as salary, benefits, and precious equity.
● Strategic adaptability: CTO-aaS can offer you an incredible amount of flexibility to adjust to evolving business needs; something that’s particularly beneficial when you understand the duration and purpose of requiring technical expertise.
● Facilitates product ownership: For startups where the ‘product ownership’ team remains integral to core functions, CTO-aaS provides valuable guidance while allowing the company to retain control over its product development processes.
Cons:
● Potentially lower commitment levels: CTO-aaS may not offer the same level of passionate commitment, emotional attachment, and dedication compared to a permanent CTO or a dedicated cofounder.
● Less control: In the case where a startup’s value proposition relies on unique technology, outsourcing it may mean less control over your core technology functions.
● Impact on long-term strategy: As your startup succeeds and expands, there may be a point where a permanent CTO becomes essential for sustained strategic leadership. Prolonged reliance on CTO-aaS can defer this critical decision, potentially impacting long-term strategy and stability.
Selecting and integrating your CTO-aaS provider
If, after reviewing the above, you’ve come to the conclusion that CTO-aaS is a good fit, it’s time to research vendors. Look at what they might give you, under what terms, speed of implementation, potential risks, associated costs, adaptability, and culture and value alignment.
It’s also a good idea to prioritise your startup’s needs – based on timings – and then communicate this problem list with shortlisted CTO-aaS vendors. Challenge them on how they’d address your problems – their proposed solution, expertise, and how well they align with your startup’s goals, will make the choice clearer.
At this point, you’re ready to consider integration. Start by establishing well-defined targets and a commitment to meeting deadlines. Even if the vendor’s primary role involves team supervision, set specific targets such as team velocity or aligning team growth with your startup’s business goals. Openly discuss expectations, concerns, and potential risks related to onboarding, and share your plans and aspirations for the collaboration, emphasising how important it is for your company’s growth.
You could consider developing a role integration plan with your chosen vendor, considering the perspectives and feedback of internal stakeholders, and again, alignment with your overall goals and strategies. Include early deliverables in the plan that can be assessed within a few weeks or a month. This will help you establish the suitability of your choice early doors and the vendor’s ability to address your challenges effectively. As trust in your vendor grows, you can then gradually increase the scale of deliverables, assigning more responsibilities and taking on a more substantial role.
As well as early deliverables, make sure you regularly assess progress and results throughout the collaboration – and don’t hesitate to challenge your vendor. Unlike an employee, a vendor’s role is to solve problems, and you should ensure they are doing so effectively, seeking improvement where necessary.
Finally, while exiting the arrangement may not be a focus when you first join forces, it’s important to clearly define an exit strategy from the offset, ensuring that the startup’s interests are protected.
Exiting a CTO-aaS arrangement
Exiting a CTO-aaS arrangement with a focus on long-term strategic vision and business maturity requires careful consideration. There are several reasons why it might become redundant, such as the startup no longer derives sufficient value from the relationship, the technical needs of the company have become simpler or smaller, or even just changed, or an in-house candidate has been identified to assume the role.
To ensure an efficient transition, make sure you:
● Define vendor obligations during the transition in the initial contract to establish responsibilities and expectations.
● Seek a handover plan from the vendor, leveraging their expertise for an efficient transition.
● Designate a qualified person or team on your side to manage the transition and ask relevant questions.
● Emphasise the vendor’s interest in a smooth transition, aligning it with their future business success, reputation, and recommendations.
No matter where you are with your startup’s journey and CTO needs, it’s important to remember that CTO-aaS is not one-size-fits-all solution – but with open communication and careful consideration of challenges and goals, it can be a highly valuable resource, boosting growth and innovation in the dynamic startup landscape.
