This is a lecture given at USF Business School for entrepreneurs interested in starting new software technology startups. Emphasis is the best use of offshore development, best practices for distributed engineering teams, and lean startup concepts.
February 2010
USF Lecture on Offshore Best Practices, Agile Offshore Development, and Lean Startups
1. NeoContext
Delivering Agile Offshoring
USF – 2/11/2010
Agile Offshore Development for
Startups
Jim Chiang
President and Founder, NeoContext
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Bio – Jim Chiang
• Current: President, NeoContext Consulting Group
• Education: BS - 1991, from MIT.
• Experience:
– AT&T Bell Laboratories (Researcher) – 1989 – 1991
– Systems Consulting (JP Morgan) – 1991-1995
– Informix/IBM (Product Management) - 1995-2000
– eCommerce Startups (Agile Software, Citadon, Intershop) – 2000 –
2003
– RFID Startups (CenterBoard, rfXcel Corp) – 2003 – 2008
– NeoContext Consulting Group (founded) – 2009 – Current
• Specialize in managing offshore teams
– Experience in Germany, Norway, India, China, Russia
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So, you want to start a company.
Now what?
Introduction to Agile Startups
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Delivering Agile Offshoring
What is a startup?
• A startup is a human institution designed to
deliver a new product or service under
conditions of extreme uncertainty.
– that’s one definition (there are many).
– Nothing to do with size of company, sector of the
economy, or industry
– Nowadays, frequently requires a substantial software
component (i.e. marketing, experience, product)
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The Harsh Truth - Most Startups Fail!
There has to a better way
But how?
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Startup 101 – the current way!
• Come up with the Great Idea!
Is this the right way?
• Start a company with a compelling long-term vision.
Maybe and maybe not!
• Raise plenty of capital (angels, VCs)
• Hire the absolute best and the brightest.
• Hire an experienced management team with tons of
startup experience.
• Focus on sales and quality
• Build a world-class technology platform.
• Build buzz in the press and blogosphere.
– Examples: HP, Sun, Oracle, Apple …
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Maybe Not!
• Case Study example:
– 5 years of pain (multiple VC rounds)
– Spent $40 MM
– Crippled by “shadow beliefs” that destroyed the
efforts of all those smart and expensive people.
• Apple was started in 1976. Times have
changed.
• Game changers: iPhone, open source,
viral/social marketing, clouds, blogs, etc.
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Shadow Beliefs – just the common ones
• We know what customers want.
– Because we know what we’re doing. After all, we’re much
smarter.
• We can accurately predict the future.
– Did you see our business plan with multiple excel
spreadsheets?
– “Our 5-year revenue projections are accurate to the hundred.”
– “Have you seen our long-term technology roadmap?”
• Advancing the plan is progress.
– “This past quarter, we executed 3 marketing campaigns and 1
major product launch.”
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Lean Startups (alternative) … a la Eric Ries
• Commodity technology stack, highly leveraged
(free/open source, user-generated content, search engine
optimization)
• Customer development – find out what customers want
before you build it.
• Agile (lean) product development – tuned for startups.
• The new startup model
– Cheaper, faster, uber-responsive.
– Pivot based on new information. Intended to adapt.
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Product cycles can
be up to 2 years long.
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Pros/Cons – of Startup Approaches
• Implement according to plan
– Build a great product with many features that increase the odds
that customers will want it.
– Pros: Established model, more readily fundable.
– Cons: no feedback until the end, might be too late to adjust.
• Release early, release often
– Get as much feedback as possible, as soon as possible.
– Pros: Costs less, more agile, more reactive to market
conditions.
– Cons: run around in circles, chasing what customers think they
want.
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Lean Startups – Minimum Viable Products
• Visionary customers can “fill in the gaps” on missing
features, if the product solves a real problem.
• Allows us to achieve a big vision in small increments
without going in circles.
• Requires a commitment to iteration.
• Expect bugs and some limited and obvious quality
issues.
• Learn! Learn! Learn!
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Lean Startups – where it fails?
• False negative: “customers would have liked the full
product, but the minimum viable product sucked, so we
abandoned the vision.”
• Visionary arrogance: “but customers don’t know what
It’s OK to fail,
they want!” as long as it’s cheap and fast,
• Too busy to learn:you can learn, recover and adapt build it
and “it would be faster to just
right. All this measuring distracts from making
customers happy and meeting my next deliverable.”
• Job insecurity: “If my experiment fails, I may be out of
a job.”
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Agile Offshoring
“Offshore Development for Startups”
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What is Offshoring?
• Offshoring
– Offshore development is a term used to describe the business
of outsourcing software programming and engineering services
beyond national boundaries.
• Outsourcing - sourcing from an independent external
service provider (i.e. Call Center, etc.)
• Nearshoring – term used to describe relationships
between geographical near markets.
• It’s all relative – the world is getting flatter!
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Benefits of Offshoring
• Reduce operational costs
• Faster time to deployment
• Allows company to focus on core activities
• Access critical technology specialists
• Create predictable cost structure
• Resource management flexibility
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Top 10 Issues with Offshoring
• Attrition
• Poor Communication In short, we haven’t
figured this all out yet.
• Poor Knowledge Management
• Poor Quality
• Inadequate Review Cycles
Are there processes that
• Limited Code Reviews need to be implemented to
improve productivity and
• Poor Project Planning accountability?
• Bait and Switch Resource Allocation
• Poor Technical Decision Making
• Conflicts of Interest
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Common Pitfalls of Offshore Development
• Choosing an external partner wisely.
• Ensuring they can work with your business model.
• Integrating and managing outsourced and in-house
processes, applications, and services.
• Language and cultural differences.
• Lacking industry-specific business process expertise.
• Internal personnel unrest
• Lack of buy-in from upper management.
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The World of Offshoring
• Outsourcing by India is about $US 50 Billion, with
growth of 5-15% per year.
– Big players include Tata, Infosys, Wipro
– Represents approximately 51% market share.
– India is the biggest and most advanced.
• Offshore firms typically come from high education
centers, with a developing technology economy.
– Far East (China, Malaysia, Vietnam)
– Eastern Europe (Russia, Ukraine, Belarus)
– South America (Argentina, Colombia, Brazil)
• Most offshore firms struggle with commoditization
issues, try to differentiate based on pricing.
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Why Agile Offshoring for Startups?
• Cost is far better.
– If it’s a Lean Startup experiment, it might be thrown out
anyway.
• Elastic workforce – scale up, scale down.
• Agile model allows for iterative review cycles
• Availability of technical talent is incredible.
• Collaboration on Internet is practically seamless.
• People are more comfortable working with virtual
resources.
– Gaming, Virtual Goods, Social Nets.
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Sample Customer Case Studies
• Industrial design firm wants to include software
components in product design, definition, and launch.
– NeoContext helps to source, implement, and manage offshore
team (per project).
• Startup web company, grows organically, and signs big
customer deal.
– NeoContext helps to rapidly scale engineering team and
separate QA process.
• New Startup wants to focus on the vision, not the
technology.
– NeoContext helps source team, define technology
requirements, and help implement the vision.
• Re-launch of previous VC startup as a Lean Startup
– NeoContext virtualizes engineering and support.
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Why NeoContext?
• Specialized in finding firms, across many geographies,
to maximize technology and vertical compatibility.
• Adapted to work with startups and small/midsize
companies.
• Minimize “training” time to get team up-to-speed.
• Experts in agile methods for offshore development
teams.
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First I need the funding …
Quick Intro to Venture Funding
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Venture Funding 101
• No two firms are the same. Research the firm.
• Many firms fund based on the 18-24 month plan.
• Don’t want to talk to VCs with competitive companies.
• Angels are a better option, if you can find them.
• Venture investing is a lot like dating …
– Average exit for portfolio companies is 7 years.
• Do NOT blast them with pitch emails. Introductions
are the only way.
– Try to meet the VC, before you pitch for the investment.
• Term sheets, negotiations can all be researched online.
• Expect to give up controlling interest in the company.
– Be careful what you wish for. You might get it.
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Some Venture Myths …
• “They like great technology.”
• “3X returns is a successful investment.”
• “The business plan will sell itself.”
• “There is a secret valuation formula.”
• “They can fund this. We don’t need much money.”
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