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

NeoContext
Delivering Agile Offshoring

USF – 2/11/2010

Agile Offshore Development for
Startups
Jim Chiang
President and Founder, NeoContext

NeoContext Confidential 1

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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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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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Agility – turning learnings to ideas


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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.


NeoContext

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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Offshore Development Models


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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.


NeoContext

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.

NeoContext

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.”


NeoContext

Contact:
jim@neocontext.com
650-823-5070

www.neocontext.com


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

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