Why startups should offshore their IT from day one

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Yesterday night at the CIO diner show 2015 I was pleased to present a price for the ‘The most innovative ecosystem’ to Rockstart.

Rockstart is building ‘the world’s greatest Startup Machine that offers any startup any type of support it might need’. The jury had awarded the price to Rockstart because of their way of cooperation with the startup companies.

The price is guidance for their members to offshore IT delivery.

Why would a startup need offshore IT?

Startup companies probably won’t think of offshoring IT as one of the top priorities. However, there are several reasons why they should consider offshoring.

Three good reasons for offshoring from day one

IT expenditure

For many startups the core of the business is a complex transaction oriented website. They are constantly improving and extending their business and their website. As a result IT expenditure is relatively high. Therefore it makes sense to perform the IT work in a cost effective geography.

Experts

In Eastern-Europe and Asia there are many bright and experienced IT specialists who can take part in thinking about the technology part of the business at the highest level. Although some may still think of offshore resource as ‘cheap hands’ rather than ‘valuable experts’ this is a misperception.

Transition cost

Starting locally and moving it to an offshore location later will cause transition cost and temporary loss of knowledge.

‘We should have been aware of this before’ is a commonly heard sentence, when talking to startup companies.

Three wrong reasons for not offshoring

Overhead

Some may fear that offshoring isn’t possible without additional costly overhead. There are bad examples indeed of organisations who have organised the governance in the wrong way or suppliers who have added useless overhead – named ‘quality assurance’ or ‘management’. However, it is possible to find a well performing offshore/nearshore supplier and to organise the governance efficiently.

Size

Some may think that offshoring or nearshoring is something for large organisations. They fear that offshore suppliers won’t be interested in small clients or will assign their best resources to large clients. For large suppliers this may be true, but there are many small offshore suppliers, having bright and experienced IT specialists as well. Additionally they may have a pioneer attitude that suits the startup client.

Incomplete requirements

Some may think that offshoring is only possible for clients who present detailed requirements and ask the supplier to do exactly as described. That’s a misperception. The best approach is to engage a senior specialist from the early start. This specialist will help the client to build the requirements and realistic estimations and to lead the agile development process.

Don’t know where to go

Some like the idea of offshoring but don’t know where to go. Do we need to find a supplier? Or create an offshore department ourselves? In which country/area/city? How do we assess the veracity of sales stories? What contract would suit us? How do we monitor performance?

These are important questions. Experienced guides may help startups to answer them.

 

Menzo de Muinck Keizer

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