Michał Jaskólski Co-founder & VP @ Grupa Nokaut S.A.

July 1st, 2013

Outsourcing, Partners and Suppliers
23 rules, tips and tricks
The Founder Institute

Outsourcing
Outsource everything that is not your core business.
“Instagram had only 14 employees when acquired by Facebook: how many of them were handling HR, accounting, server administration, network administration, legal paperwork, and other necessities for them to be successful? (...) Instagram’s initial core competencies were (a) software development of image filters, (b) iPhone photo-sharing application development, and (c) driving adoption. 14 employees can handle that.” https://medium.com/on-management/4578569760e8

Outsourcing
If you employ someone, you pay for his time. If you outsource to someone, you can pay for the result. The mindset is different.
It ’s usually better to pay even 50% more for one developer ’s (or other specialist ’s) month of work through respectable outsourcing company than to employ him yourself. Why? Because if the contract with the outsourcing company will be result-based, you will pay for the result, not his time. He probably will be much more result-oriented and productive as well.

Outsourcing
If you think about creating a new workplace in your company, make sure that: (a) you are ready to cover its costs for 12-24 months (b) you are sure that additional value added by your new employee to your company will be much higher than his cost. If so, employ. If not, outsource.
Avoid employing people for high-risk projects just to dismiss them a few months later – unless they are aware of the risk.

Outsourcing
Don’t be afraid to outsource things you can do yourself. Focus your time on things that cannot be outsourced.
Are you a great product manager, web designer and frontend developer? Focus on product management. Outsource design & front-end development - unless design & front-end development is your core business.

Outsourcing
Always control the quality of the results before acceptance. Do it yourself or... outsource it.
If you plan to outsource development of your mobile app or hardware appliance, make sure that someone with a great deal of experience in this particular field will take care of quality management and oversee the entire process. If you don’t have enough experience in a particular field, you should hire an independent, external consultant just for this purpose.

Outsourcing
It is worth to ask the outsourcing company to help you to reach certain goal/result using all their knowledge and experience instead of providing certain deliverables according to specification.
...at least if your outsourcing partner has a lot of experience in certain field (he should have!)

Outsourcing
For software development outsourcing, choose a company experienced in using agile methodologies.
Scrum or Kanban = faster results and much lower risk.

Outsourcing
Talk with at least two customers of your potential outsourcing partner before signing the contract. Even if you don’t know them personally (yet).
Just find them through LinkedIn or Facebook, tell them that you think about cooperating with certain outsourcing company they are already cooperating with and ask for their experiences and recommendation. In most of the cases, they will help you.

Outsourcing
Outsource a test project before signing a contract for a larger one.
Test project is the best way to verify the relationship, performance and quality of the particular outsourcing company.

Outsourcing
Choose one (and only one) contact person from your company for the particular outsourcing partner.
He or she must be fully involved in the entire project and preferably - fully decisive.

Outsourcing
If that contact person is just a messenger between certain groups of people, organize a face-to-face meeting/workshop with them.
It is especially crucial for product/software development.

Outsourcing
Use e-mail or more specialized tools for information exchange. Use phone/video calls and face-to-face meetings for discussion. Meeting is better than mailing.
E-mail is probably one of the worst possible mediums for discussion. In case of any problems, disagreements and misunderstandings, just call or meet with the person on the other side.

Outsourcing
Do not outsource software development to India.
I’ve heard too much horror stories about it.

Outsourcing
Give additional incentives for finishing the project earlier than expected - as well as penalties for the major delays.
Don’t underestimate the effect of such provisions in the contract.

Outsourcing
Read “ The 4-Hour Workweek” by Tim Ferris.
This book will change your perspective regards outsourcing and time management.

Partners
Do not base your business case on one particular partner.
What would happen if your potential partner changes his mind?

Partners
Avoid using general contact emails or forms to get in touch with potential partner.
Take your time to find a certain contact through LinkedIn, Facebook and/or personal recommendation/introduction instead.

Partners
Remember that it often takes 6-12 months to reach a decision and launch a new project in a large corporation.
Be prepared for it.

Partners
When dealing with corporations, make sure to be focused on understanding the needs and capabilities of a particular person representing it.
Make sure that you know how a particular person performance is assesed (KPI’s, etc). Ask what is his or her budget. Focus on providing him or her with easy-toimplement solution that will help in reaching particular goals without much risk, time involvment and fixed investment.

Suppliers
Don’t be dependent on a particular supplier.
One day he will try to gain something from it. Be prepared for such moment.

Suppliers
Have at least 4-5 potential suppliers you can choose from.
Your risk will be much lower and competition between them – much higher.

Suppliers
Always have a plan B.
Be fully prepared for unexpected circumstances.

Suppliers
Learn all the Murphy’s laws.
Anything that can go wrong, will go wrong.

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