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USF Lecture on Offshore Best Practices, Agile Offshore Development, and Lean Startups

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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 ...

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

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USF Lecture on Offshore Best Practices, Agile Offshore Development, and Lean Startups USF Lecture on Offshore Best Practices, Agile Offshore Development, and Lean Startups Presentation Transcript

  • NeoContext Delivering Agile Offshoring USF – 2/11/2010Agile Offshore Development for Startups Jim Chiang President and Founder, NeoContext NeoContext Confidential 1
  • NeoContext Delivering Agile OffshoringBio – 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 NeoContext Confidential 2
  • NeoContext Delivering Agile OffshoringSo, you want to start a company. Now what? Introduction to Agile Startups NeoContext Confidential 3
  • NeoContext Delivering Agile OffshoringWhat 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) NeoContext Confidential 4
  • NeoContext Delivering Agile OffshoringThe Harsh Truth - Most Startups Fail! There has to a better way But how? NeoContext Confidential 5
  • NeoContext Delivering Agile OffshoringStartup 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 … NeoContext Confidential 6
  • NeoContext Delivering Agile OffshoringMaybe 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. NeoContext Confidential 7
  • NeoContext Delivering Agile OffshoringShadow 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.” NeoContext Confidential 8
  • NeoContext Delivering Agile OffshoringLean 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. NeoContext Confidential 9
  • NeoContext Delivering Agile Offshoring Product cycles can be up to 2 years long.NeoContext Confidential 10
  • NeoContext Delivering Agile OffshoringNeoContext Confidential 11
  • NeoContext Delivering Agile OffshoringAgility – turning learnings to ideas NeoContext Confidential 12
  • NeoContext Delivering Agile OffshoringPros/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. NeoContext Confidential 13
  • NeoContext Delivering Agile OffshoringLean 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! NeoContext Confidential 14
  • NeoContext Delivering Agile OffshoringLean 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.” NeoContext Confidential 15
  • NeoContext Delivering Agile Offshoring Agile Offshoring“Offshore Development for Startups” NeoContext Confidential 16
  • NeoContext Delivering Agile OffshoringWhat 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! NeoContext Confidential 17
  • NeoContext Delivering Agile OffshoringBenefits 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 NeoContext Confidential 18
  • NeoContext Delivering Agile OffshoringTop 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 NeoContext Confidential 19
  • NeoContext Delivering Agile OffshoringCommon 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. NeoContext Confidential 20
  • NeoContext Delivering Agile OffshoringOffshore Development Models NeoContext Confidential 21
  • NeoContext Delivering Agile OffshoringThe 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. NeoContext Confidential 22
  • NeoContext Delivering Agile OffshoringWhy 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. NeoContext Confidential 23
  • NeoContext Delivering Agile OffshoringSample 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. NeoContext Confidential 24
  • NeoContext Delivering Agile OffshoringWhy 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. NeoContext Confidential 25
  • NeoContext Delivering Agile OffshoringFirst I need the funding …Quick Intro to Venture Funding NeoContext Confidential 26
  • NeoContext Delivering Agile OffshoringVenture 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. NeoContext Confidential 27
  • NeoContext Delivering Agile OffshoringSome 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.” NeoContext Confidential 28
  • NeoContext Delivering Agile Offshoring Contact:jim@neocontext.com 650-823-5070www.neocontext.com NeoContext Confidential 29