white labeling problem

What is white-labeling and why it can pose a serious threat to your business?

You may not have realized but white-labeling is a wide-spread problem in software development. In this post, we outline why it can be problematic for your next web project as well as present an alternative solution you might want to consider, namely the split-agency model.

For many entrepreneurs there comes a time when help from another company is needed to take their venture to the next level. The simplest example – you need a custom web and phone app to handle your business needs. It will involve elaborate backend architecture and high-end design. You decide to choose a digital agency, a one-stop-shop for all your web needs and they promise to deliver designs, frontend, and backend. You sign the contract, wait 3 months and then… an unpleasant surprise. The product they developed doesn’t match your expectations. Worse, your users are totally dissatisfied with your new app. What happened? After some investigation, it turns out that the digital agency used third-party suppliers to build the app for you. This is called white-labeling, a practice of secretly outsourcing the services to the third party suppliers and selling it under the outsourcer brand.

The problems with white labeling

There are several things that can go wrong in the white label scenario but here are three most common issue:

  1. Miscommunication
    Do you know the game of Chinese whispers? This is exactly what can happen in the white label scenario. You pass your vision and product backlog to the digital agency and they pass it on to the project manager at the development company who then passes it onto the team. Without your input at every stage of the communication process an important part of your vision, as well as functionalities, can get lost in translation. The same story repeats itself with the feedback loop. If you cannot get in touch directly with the developers and point out, for example, the mistakes, there is a good chance that misinformation and miscommunication will reign your project.
  2. Client’s and user’s needs become secondary
    Grasping your product vision should be absolutely crucial for the development team. Without your input, the end goal – serving the user – may be lost among the charades and cover-ups. How can you expect a full understanding of the product when the dev team doesn’t have a direct access to your business vision and market knowledge? Without this access, they have to make a lot of assumptions and thus you cannot expect that the end product will match your needs.
  3. Overdrawn budgets and exceeded deadlines
    It is easy to see how the above mentioned points can negatively impact your budget and expected time frame. Miscommunication leads to delays in development, unwanted functionalities developed, and wrong backlog priorities to name just a few. Can you really afford to delay the project launch when the window of opportunity is really small? Can you spend money on fixing things after the product launches? Are your users this forgiving or will they go to your competition?

So what’s the alternative?

A common choice in case of products that need complex backend and state of the art design is selecting two separate agencies. Why? Usually, software development companies focus on delivering outstanding back-end and usable front-end but may lack the creativity to provide you with a stellar design and user experience. Meanwhile, web design agencies excel at high-end UI and UX but may lack the expertise to architect complex backend. However, the companies who end up with two contractors often complain that collaboration and communication between all the parties is a hugely complex and time-consuming operation.

Another way: Split Agency Model

Alternative to white labeling or contracting two separate companies is the split agency model. Instead of choosing a one-stop-shop or two separate companies, you pick a software development company, which closely collaborates with a web design agency or vice versa. These often work under one roof, know each other well and have collaborated together on many projects. They act like one company but they create two environments suitable for client’s needs. Each focuses on different aspects of your product. In this scenario, you get the best of both worlds within one project.

We are lucky enough to work in a split agency model with our sister company Chilid. Eight years ago, XSolve’s CEO Piotr Majchrzak together with his business partner Anna Zarudzka decided that XSolve needs to open another company, with a slightly different culture, where creativity and great design can flourish and grow. Anna Zarudzka headed this change as the new CEO of Chilid. Since then, the two companies have been sharing the office, clients, process and core values. However, each company has a different focus: whereas XSolve is focused on stability, long-term solutions, and scalability, Chilid puts emphasis on emotions and artistic quality, quick solutions and MVP concepts. Across the last eight years of practicing the split agency model, our clients observed a number of benefits to this method:

  1. One team with accountable individuals 
    The beauty of this method lies in creating one team consisting of backend and frontend developers, designer, and scrum master as well as you, the product owner. The team consists of employees from both companies working together, in the same office and at the same time on your project. This benefits clients in a number of ways throughout the development life cycle: starting with contract negotiations (when you negotiate only one contract), through your vision at a shared product workshop and creating one backlog for the whole team, to shared daily meetings, weekly reviews, and plannings. However, this also means that the product owner knows exactly who is accountable for which part of the project, the role division is clear and each individual focuses on their area of expertise. Every team member takes ownership of the part of the project they are responsible for. If something goes wrong the product owner can go directly to the source.
  2. Creative tension and peer review 
    One team consisting of individuals with such varied skills and focus areas allows achieving creative tension, between artistic and practical values. The two perspectives are in constant competition, challenging the ideas between backend, frontend and design resulting in a best possible outcome for the end user. Additionally, simultaneous development of backend and frontend, and a constant access to the designer allows the team to effectively implement all ideas without quality loss. Everything is implemented exactly as planned and in sync.
  3. Direct and transparent communication
    In this model, there is no middle-man. As the product owner, you have a direct access to all the members of the team. When something is not quite right you quickly go directly to the source of the problem e.g. the designer. This also means that the team has a direct access to you and they can pick your brain every time they have questions. Everyone can quickly catch up and clarify all problems before they become serious.
  4. Time efficiency and cost effectiveness
    One communication route and one process mean less time wasted and less money spent. If you are testing early, communicating quickly and transparently you are not going to develop unnecessary features or loose time to redo the ones that resemble your initial idea.
  5. Cultural fit
    Many companies underestimate the importance of cultural fit between the parties but this is a hugely important success factor. When the parties involved share the same values and work ethics this results in transparent and effective communication reduces uncertainty and mitigates risk. The team members know exactly what are the strong suits and limitations of each individual. They also appreciate the complexities of delivering each component and respect the work methods applied.

When TV first appeared on the market everyone watched, no matter what currently was on. The novelty of the product was simply enough to interest masses. In time, TV programming, as well as technology, became more sophisticated and currently consumers demand exactly what they want at a convenient time and place for them. The same process is happening with web products. As the novelty wears off, the consumers are looking for more and more advanced products that can meet their sophisticated needs. If you are looking to gain a competitive advantage over your business rivals you need to provide absolutely stellar user experience including beautiful and usable design as well as a reliable and stable system. Your unique vision and market knowledge can be translated into this successful product but you need to find a pre-assembled team that can work together well and is accountable for their decisions. The creative tension and peer review with the team can immensely help to take your product idea to the next level. Transparent communication is a key to delivering your project on time and budget, meeting your expectations but more importantly the needs of end-users. Be vigilant when choosing your partner – your product will be in their hands.

If you would like to find out more about the split agency model and our working methods please don’t hesitate to contact us.

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