Outsourcing - is it good for a startup?

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2

I would take heavy advantage of cloud services like gmail for businesses. For a very low cost you get mail administration, storage, and simple collaboration and document sharing capability. Startups should be focused on getting the business off the ground and not paying an expensive IT team for services you can buy for a couple dollars a month. As you mature, you can shift your strategy toward a more internal model if it's right for you. Also hosted services with hardware included (basically infrastructure in the cloud) can save you a bundle as your capital costs will be far lower, but you need to be very careful of your Service Level Agreements in the contract and if you have something extremely proprietary, confidential and critical to your success, that should not be stored or kept in the cloud/hosted environment.

2

It depends! Outsourcing development of your core technology or your key product/service, IMHO, does not make any sense. But outsourcing virtually everything else must be considered. Outsourcing admin, legal, finance, PR, ... activities that are not essential to differentiating you from others are no-brainers. You should also consider outsourcing lead generation, biz dev, sales activities, an interim CEO ... if you are not in a position to hire full time employees to do those, or existing founders lack those skills/experiences. As a founder your top priority should be to ensure that you have a viable and marketable product/service that addresses real world needs. Good luck.

This is one of answers with which I most agree! It depends. I recommend outsourcing those tasks that take you away from your revenue-generating and vision/goal-setting responsibilities. It's taken me years to finally get a Virtual Assistant, and now that I've done so it's the best decision I could have made. Ditto for my graphic designer.

2

Arjun

Yes, and in fact it is essential for a start up to outsource.

While the CEO or Founder needs to be in the lead, manage and control the venture, one cannot "stand up" a new venture without help from others - especially if you need to be a fast company. This help can be for IT infrastructure or other operational roles (like back end accounting, payroll, etc.), strategic business design to gain financing; and revenue generation before a full sales force is on board. (Just to name a few areas.)

In fact, all companies large and small, once they are in in steady-state mode, still use outsourcing to run and grow their business. This was confirmed with the acknowledgement of the strategy of "Core Competence" which became big in 1990s and drove a lot of business and industry redesign since then. The approach is to find your competency and then outsource the rest in order to have a most efficient, flexible and competitive business model that can compete globally. It was observed in the information and computer sectors at first and once it was recognized by leading business school professors it expanded.

Example: Apple is a design and marketing company and outsources actual manufacturing to Korean and Japanese companies, etc.

Example: Banks outsource customer services and IT operations.

And there are historic roots. The value of international outsourcing builds upon the 18th century Theory of Competitive Advantage by economist David Ricardo.
'According to Ricardo, if one country is more efficient than another in producing all commodities, trade between the two nevertheless would be of mutual advantage. "
(more at http://timelessecon.wordpress.com/2010/05/15/ricardos-hit-comparative-advantage-and-miss-labor-theory-of-value/)

Best
Syl

1

Thanks all - for you views. For me YES - everything is now getting global. So you really don't have to worry about each and everything in your business. Just focus on your core business functions - and out source the rest. However finding a reliable and genuine outsourcing partner is very important. Specially for startups - its very time consuming and costly, if you don't get the right outsourcing partner in the first place. I'll manage to post some tips on how to find right outsourcing partners in the first place soon.

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Update:

So almost everyone agrees outsourcing is good (and sometimes 'a must'). I'd like to post some tips on how to find a reliable and genuine outsourcing partner:

1. Know your business. Know what you're outsourcing & what outcome you're expecting.

2. Review their profile, portfolio and previous work.

3. Speak to them (only email doesn't work well). Skype them or call them at least once. Ask them if they can do your project - if yes ask them how they'll be solving any technical part of it. Ask them what technologies they'll be using etc.

4. Ask them to provide some (at least 1 or 2) reference of previous client(s). You can contact one of them.

5. Aks them if they're okay to sign NDA (no matter if you really need it)

6. Ask them if they're okay to give you full copyright of everything produced ('Work For Hire')

7. Ask them about the prices, payment models and methods.

8. Ask them about the post delivery support

9. Ask them about how they communicate during the project. Make sure you are getting updates on regular basis.

10. Ask them if they understand what you need (many times!) and make sure they really understand it.

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Add more points - being based on your experience.

1

I think ALL of these recommendations are spot on. From my own experience, I've learned that if you don't know your business yourself, you won't be able to effectively manage your outsourced team. So, get that down like so many of the recommendations below and be prepared to invest in slower turnaround times with your contractors until you get the hang of working with one another. Also, don't be discouraged when looking for the right fit. I went through a few contractors with various positions before finding the ones that fit with our work ethic. We don't plan on having any w-2 employees for at least beyond our first year because of the many benefits with working with contractors. Just be sure you speak with your accountant about the requirements of contractors vs. employees so you know your boundaries and rules of hiring contractors. Good luck!

1

I see that there are mixed opinions there. Some strong objections too. Outsourcing is a great option if you know exactly what you want. Someone mentioned here that businesses will not succeed if core activities are outsourced. Of course they won't! If you want some assistance with secondary business tasks like bookkeeping, accounting, call handling, etc outsourcing is a great option. You will have more time to focus on your core business.

But if you outsource your very core, it means that you are letting the outsourcing firm take over. In that you do not have control over your business and so naturally you will have a bad experience. So if you know what you want, and go to the right company, yes, outsourcing is great. Check for data security measures like 128-bit encryption, 24/7 surveillance etc. Once you are sure everything is in place you can begin. The cost reductions and quality of work at some of the firms are great - real value for your money.

But the secret lies is "knowing" what you want. Cheers!

0

Not just for a startup but for anyone in business. Do what is core and leave the rest to experts.

0

If you need something that is not core to your mission, focus and key strengths, outsource it. For example, if your key strength is software and you need hardware, outsource the hardware. Also, in the early days you may not be able to afford a key asset like an experienced CFO or Bus. Dev. person - find a great consultant and outsource it.

0

It is probably the best operational means for any startup. You will have an area of expertise which is the core of your business. Make sure you have developed a positioning that outlines your uniquness as a business then outsource key business processes so you can stay focussed on developing your value proposition to drive sales.

0

Yes, but not everything. I would need to have some more information about your business to give you specific recommendations. It might mean just having a virtual assistant as an example. It also is depended on your budget etc.

Virtual Assistants are the best resources on earth! I started my business15 years ago as a Virtual Assistant Services business and although we have grown and evolved, my entire staff is virtual. We accomplish so much being this way - think of the talent in one pool! Different services come with different fees, but even small budgets can get some help. A Virtual Assistant can do what you don't want to do, think of how great that would be.

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