Six top tips to avoid an outsourcing disaster

I see so many start-ups that simply waste money, unintentionally (I’ve invested in them).

They get $100,000, or maybe a couple of million, and before they know it, the money is gone! I once told a new investor in my business that I valued every cent he invested “as if it was my own”.

He promptly told me, “Bugger that! This was the money that I was going to use to send my kids to college!”

So when you’re at the ATM getting a credit card cash advance to pay the staff salary, you’ll be debating if you really needed to spend all that money on the EMC SAN or that $1,000 a day “consultant” during your early start-up phase.

There are times and places for big shiny EMC SANs (storage area networks) and $1,000 a day consultants. Most people get this timing wrong.

The same can be said about start-ups and outsourcing. It can be a good way to extend your time to life and reduce time to market or you could just be wasting precious time and money.

The trick with outsourcing for start-ups is knowing what to outsource and what to keep in house.

Here are six top tips on how to get it right:

1. Own and create your IP/architecture

You cannot, should not, and must not outsource this function of your start-up!

You are the owner/creator of your IP and architecture – not a company in Hyderabad, Manila, or Ho Chi Minh.

This doesn’t mean you personally need to be an uber-tech-god/goddess yourself. However, someone in your company who has a significant piece of skin in the game should be.

That person needs to be living, thinking, breathing this stuff 24/7. This is the sort of person who goes to sleep dreaming about what they are going to be working on tomorrow:

“Sorry honey, not tonight. I’m thinking about distributed content mechanisms for mobile networks in emerging markets.”

You don’t get that level of commitment when you outsource to IBM, Accenture or Avanade. (Use these guys when Sequoia Capital opens their cheque book.)

2. Product management

You cannot outsource product management (especially not at $1,000/day!). I think this is even more important than #1.

A good product manager is like your technology architect. Instead of understanding how technically it all works, your product manager understands how it works from the business logic side of things.

In many cases in early-stage start-ups, you are the product manager. See point six below about how you can outsource some low-level product manager functions.

3. Design is king

Design is important these days. Design is something that can be outsourced, but again, probably not to Hyderabad, Manila, or Ho Chi Minh.

Find a local designer in Australia, UK or the US for the core design layout and style guides. Get them in and work together on this.

Once the design is nailed down, the rest will follow. Change it on the fly – you should be always able to tweak and change things, even at a moment’s notice.

If your developers whine that it’s too hard, takes too long to make a change, etc, screw them! Change your developers today!

If it can’t be changed quickly and easily, they built it wrong. If the new design/layout doesn’t work, change it back.