(cc) BY NC SA, Rodrigo SEPÚLVEDA SCHULZ Presentation prepared for the Founder Institute, Santiago 18 Dec 2011

1. Outsourcing, Partners and
Suppliers
Rodrigo Sepúlveda Schulz, Dec 2011

2. 5W
• why?
• when?
• who?
• how?
• what?

3. why?
S

4. why?
Revenue
S

5. why?
Revenue
- COGS Supplier(s)
S

6. why?
Revenue
- COGS Supplier(s)
- Sales & Marketing Supplier(s) S

7. why?
Revenue
- COGS Supplier(s)
- Sales & Marketing Supplier(s) S
- Technology Supplier(s)

8. why?
Revenue
- COGS Supplier(s)
- Sales & Marketing Supplier(s) S
- Technology Supplier(s)
- HR

9. why?
Revenue
- COGS Supplier(s)
- Sales & Marketing Supplier(s) S
- Technology Supplier(s)
- HR
- General & Admin. Supplier(s)

10. why?
Revenue
- COGS Supplier(s)
- Sales & Marketing Supplier(s) S
- Technology Supplier(s)
- HR
- General & Admin. Supplier(s)
EBITDA

11. why?
Revenue
- COGS Supplier(s)
- Sales & Marketing Supplier(s) S
- Technology Supplier(s)
- HR
- General & Admin. Supplier(s)
EBITDA
from >100% of revenue to ~90%

12. • an “enterprise is defined by what is left when
you’ve outsourced what costs more to do in-house
than elsewhere”

13. Why?

14. Why?
• as a startup

15. Why?
• as a startup
• you need expertise (Ruby on Rails, SEO/
SEM...)

16. Why?
• as a startup
• you need expertise (Ruby on Rails, SEO/
SEM...)
• to move fast (recruitment takes time)

17. Why?
• as a startup
• you need expertise (Ruby on Rails, SEO/
SEM...)
• to move fast (recruitment takes time)
• make costs variable or use delayed payment

18. Why?
• as a startup
• you need expertise (Ruby on Rails, SEO/
SEM...)
• to move fast (recruitment takes time)
• make costs variable or use delayed payment
• leverage the brand of your supplier
(credibility)

19. Why?
• as a startup
• you need expertise (Ruby on Rails, SEO/
SEM...)
• to move fast (recruitment takes time)
• make costs variable or use delayed payment
• leverage the brand of your supplier
(credibility)
• make a defensive move (exclusivity contract)

20. when ?
• is cost of supplier < internal recruitment ?
• or is flexibility of supplier > internal recruitment?

21. Is your time
more
valuable
than the $
you pay?

22. Who?

23. Who?
• professional services: lawyers, accountants,
auditors, HR

24. Who?
• professional services: lawyers, accountants,
auditors, HR
• marketing: PR, SEO/SEM, creative agency,
media agency

25. Who?
• professional services: lawyers, accountants,
auditors, HR
• marketing: PR, SEO/SEM, creative agency,
media agency
• tech: creative front-end, mobile, back end, hosting,
infrastructure management, CDN

26. Who?
• professional services: lawyers, accountants,
auditors, HR
• marketing: PR, SEO/SEM, creative agency,
media agency
• tech: creative front-end, mobile, back end, hosting,
infrastructure management, CDN
• industry related : supplier for goods

27. Who?
• professional services: lawyers, accountants,
auditors, HR
• marketing: PR, SEO/SEM, creative agency,
media agency
• tech: creative front-end, mobile, back end, hosting,
infrastructure management, CDN
• industry related : supplier for goods
• G&A: telecoms, phones, travel & lodging, rent,

28. partners or suppliers?
• as a funded company, many will come knocking to
your door
• as an unfunded company, you will need to
convince them to work with you
• repeat business ?
• solvability ?

29. how: rules of thumb

30. how: rules of thumb
• get names from trusted advisors, or published
information (google, crunchbase, press...)

31. how: rules of thumb
• get names from trusted advisors, or published
information (google, crunchbase, press...)
• whenever possible, people with experience in
your field

32. how: rules of thumb
• get names from trusted advisors, or published
information (google, crunchbase, press...)
• whenever possible, people with experience in
your field
• always ask for 3 quotes : learn about market,
current prices, methodologies, deliverables - mix
proposals to get the closest to your needs

33. how: rules of thumb
• get names from trusted advisors, or published
information (google, crunchbase, press...)
• whenever possible, people with experience in
your field
• always ask for 3 quotes : learn about market,
current prices, methodologies, deliverables - mix
proposals to get the closest to your needs
• it’s not only about price, but professionalism +
people + flexibility

34. don’t be greedy

35. don’t be greedy
• it’s not about price paid, it’s about results to be
achieved in your timeframe !
• leave money on the table in negotiation

36. don’t be greedy
• it’s not about price paid, it’s about results to be
achieved in your timeframe !
• leave money on the table in negotiation
• remember: suppliers have to WANT to work with
you
• flexibility in payment, produce great work,
bring great people

37. if you pay
peanuts,
you get
monkeys

38. HOW?

39. HOW?
• Ideally, work with specialists in each area
• consider them as an integral part of your team

40. HOW?
• Ideally, work with specialists in each area
• consider them as an integral part of your team
• but don’t over-stretch yourself managing them
(contracts, steerco...)
• try to standardize contracts
• try to standardize steerco, operating
procedures, tools

41. HOW?
• Ideally, work with specialists in each area
• consider them as an integral part of your team
• but don’t over-stretch yourself managing them
(contracts, steerco...)
• try to standardize contracts
• try to standardize steerco, operating
procedures, tools
• some large companies use >400 suppliers; go for
15-30 max

42. what to ask for ?

43. what to ask for ?
• clear objectives, clear resources, clear schedule
• who does what and when ?

44. what to ask for ?
• clear objectives, clear resources, clear schedule
• who does what and when ?
• SLAs
• escalation + termination clauses
• use your own lawyer and contracts when
possible
• contracts have to be symmetrical, sue when
necessary

45. tips
• performance dashboards vs. agreed
deliverables or SLAs - always track them vs. budget
+ contract
• regular supplier meetings: they need to
understand/track your business as well (ex: bank) -
keep relationship as transparent as possible
• sign 1 year contracts first; your business will
evolve and you need to adapt

46. bringing it back in
• I would only bring in-house what is :
• core to your business (competitive advantage,
flexibility, speed)
• cheaper to do in-house mid-term
• Look at your budget, are suppliers more than 50%
of your expenditure? manage them with care

47. 5W
• why?
• when?
• who?
• how?
• what?

48. Q&A
• http://www.rodrigosepulveda.com
• http://www.slideshare.net/rodrigo1971
• http://twitter.com/rodrigo