CTO-as-a-Service. Is outsourced technology leadership the right option for you?

Over the last few years the idea of outsourced Chief Technology Officer (CTO) services, aka ‘CTO-as-a-Service’ or ‘Fractional CTO’, has grown in popularity. There are very good reasons for this, as an early involvement of CTO expertise as a rule leads to vastly improved outcomes for companies developing technology products or services.

Ideally you would have a trusted permanent and fully engaged world-class internal technology leader, or a CTO on board. But not every business can afford this early on, and it often takes time to find this perfect match. In the interim it is better to have an outsourced CTO than have to face the complexity of technology and risk making wrong decisions on your own.

However, there are also significant downsides to CTO-as-a-Service, or Fractional CTO arrangement, that need to be evaluated.

In this article I will explore the concept in depth, and provide a balanced analysis, with the aim of leaving you more informed regarding the applicability of using part-time CTO services for your company.

It is good to have a CTO

It is generally the case that every company engaging on the path of digital offerings and software development would benefit from having an experienced CTO onboard. But some think that they can’t afford, or can manage without, one.

This is usually a misplaced view, and there are many ways in which the right expertise can be secured without the need for creating a formal, full-time internal role. Whether the CTO is internal and employed full-time, or external, interim, fractional and shared, it is vastly better to have one than to not. So what are the available options?

It is best to have an in-house technology leader (but)

The best way of engaging a CTO is to employ a great expert in a permanent position. Once a truly capable CTO is found and completely sold on your vision, mission and values, such a person can bring maximum benefit, and no other option comes close. There are, however, several complications:

1. You need to find a truly great expert who will agree to work with you on the terms you are able to offer. This usually implies a hefty compensation package with equity and other benefits.
2. More importantly, he or she needs to be fully aligned with your vision – believe that it is worthwhile using her limited time on this magnificent planet, and striving for over the next number of years.
3. The greatness criteria includes not only extraordinary and relevant level of technical expertise, but also ability to work well with you and the rest of the executive team, as well as great leadership capabilities.

As you can see, this is not a usual candidate that you can find in every Job Centre Plus. At the time where there is a global shortage of really good experts at CTO level (or in tech in general), and they are offered numerous opportunities and great packages, finding the right fit for your organisation may not be easy.

It may take a significant effort and time, your dream candidate may be out of your financial reach, and in many cases you may also need to settle for someone who does not fully match the above (important) criteria.

If you can’t find or afford a permanent in-house CTO, do not despair. There are other options available. You can find a way of managing without a permanent CTO while the search is in progress, or decide to use a fractional CTO, or CTO-as-a-Service on the interim basis.

There are alternatives (with benefits)

It is offered by some consultancies, private experts and software development / digital agencies. The terms they use to describe their service differ. Some like the modern-sounding CTO-as-a-Service (CTOaaS, or CaaS) name, others prefer to call it an Interim CTO, Part-Time CTO, or a Fractional CTO service.

There are numerous benefits, as well as downsides to using an outsourced CTO approach.

The key benefits are:

1. You will get the CTO expertise infused into your project
2. You’ll benefit from strategic insight and foresight
3. You may benefit from high quality technology leadership
4. CTO-as-a-Service arrangement is flexible, and possibly more affordable than a permanent CTO
5. It will be easier and quicker to find the help you need
6. It will buy you the time to find a perfect permanent candidate
7. Fractional CTOs are easier to fire if things don’t work out
8. Contract CTOs are less fussy about your vision, because they do not have to embrace it as the main project, passion and legacy for many years of their work-life

The Fractional CTO, or CTO-as-a-Service, route can be used either permanently, if your organisation only needs a part-time technology leadership capacity, or temporarily until your project is complete, or your company gets to the stage where it is more appropriate to recruit a permanent tech leader.

Another alternative is starting with a more junior hire, such as an Engineering Manager or Head of Software, but this is an inferior approach, because you’d be missing out on the strategic input into your vision which only an experienced C-level technology leader can bring to the table. A truly good leader can co-shape your direction and make sure that it is optimal, aligned with secular trends, avoids pitfalls, and leads to the right destination. I wrote more about the role of CTO, and benefits he or she can offer in my article Chief Technology Officer. Does your business need a CTO?.

Alternatively, you can read about the Chief Technology Officer role on Wikipedia here.

What are the downsides of CTO-as-a-Service?

There are quite a few downsides of having a part-time CTO. Let’s start with the most obvious one:

1. Part-time CTO will only have a limited time available for your company and projects – as is the nature of any part-time engagement.

   This is only bad if you truly need a full-time CTO capacity. In other cases you may be getting more value by paying only for the strategically important aspects of the role, and fully utilizing the limited contracted time. Unless you have enough scope to keep your CTO busy, you may be overpaying for a permanent position.

2. Interim CTO is not there for the long haul. This is not a marriage for life.

   Although it is quite possible that the relationship may progress into a permanent position over time, once trust is developed and your situation matures. The benefit of this for the business is immense, because you rarely can fully know and assess someone’s skills and abilities in the traditional recruitment process.

   This is also a benefit. The risk of a wrong decision is much reduced. And everyone knows the rules of this flexible arrangement. Parting ways is easy and nobody’s feelings are hurt if and when it is time to say goodbye.

3. Fractional CTO may not be as committed to your project as a permanent employee.

   This is the opposite aspect of the lower need for full buy-in into your vision, and a long-term alignment with your project, for a CTO candidate to accept this position. But this is also natural – as the consultant is not expecting a long-term commitment from you, and a fantastic benefits package with equity in your business. This is a more transactional business-like arrangement, with all the upsides and downsides of that.

4. Quality of the candidate.

   You need to verify the qualifications and experience of the consultant, as this role will have a significant impact on your business.

   This is important regardless of the source of the candidate, but especially in the case when CTO-as-a-Service is offered by an agency. They may claim that their staff members are all top-level experts, but this has to be proven with the relevant experience for the specific person they are offering. Make sure to interview and judge the specific candidate on his or her own merits. Do not just rely on the reputation and solemn promises of the agency. Otherwise, you may end up with an average quality business analyst or engineer, with no necessary experience, posing as an experienced CTO. (I’ve seen this happen more than once in the past.)

5. Lack of impartiality (especially when hiring from an agency).

   Another critically important factor is that a digital agency may contract out one of their experts to survey as your technology leader, but he may not be fully impartial and have another agenda. This is a clear conflict of interest. His loyalty should be firmly with your cause, and not biased towards finding more business for his colleagues at your cost. It is hard to serve two masters while remaining fully impartial. Hence, there is a risk that a software agency employee delegated to your project may offer prejudiced advice, proposing solutions that are not best aligned with your needs, but acting as a double agent who drives technology and contracting decisions that are advancing the prospects of his agency. (Aka, trying to upsell their services.)

   This is not to say that it is necessarily a bad idea to use other services of his agency, but you need to be very cautious in this situation, and ideally seek independent advice from someone completely impartial.

The key takeaways

If you are developing technology products or services, you can increase your odds of success if you consider that:

1. It is good to have a CTO
2. Sometimes you may not be able to employ a permanent technology leader, or it may not be the right time for you business to do so
3. If this is the case, you can find an interim, temporary, fractional, outsourced or contract CTO, or CTO-as-a-Service
4. There are pros and cons to this, as well as important considerations to be aware of, but this is a viable and often beneficial option

I hope that this post gave you the information you need to make an informed decision, and help you avoid common pitfalls when looking for a technology leader.

If you find it useful, please comment below or share with your network, so your contacts may also benefit.

If you would like to chat about your company, vision or project, give me a shout in comments below, DM me on social media, or use the contact form to get in touch.

Best if luck with your project!

Rafal