New Startup - How to outsource everything without losing control

prepping for downvotes...

I'm sorry, but thats a BAD idea.

You're saying you want to outsource because your new idea is outside your main competency. And I get your reasoning, but it's the reasoning of the inexperienced.

If you want to become a successful business you can either

1. Embrace the knowledge required to execute this idea, study hard as hell, get your hands dirty and work harder than anyone else to become good at this.
2. Drop this idea completely and do something that you actually know well.

The thing with offshoring is this – companies who offshore know their business BETTER than anyone else. That's what enable them to offshore. They know it so well that they can write specifications and requirements to the level of detail that someone else can actually do them. Believe me, that's very, very, very hard to do. So in reality, they're spending A LOT more time being in control, detailing everything, than someone who can keep it in-house (and thus being able to quicker change things that didn't turn out well).

I'm sorry for the harsh answer, I just don't want you to go down the inevitable road of failure. If you're idea is really that good, surround yourself with great people and learn this business for yourselves. If you bootstrap with equity for your partners, you'll stay leaner than you'd do with offshoring anyway.

I've been involved in several startups where the founders didn't know their market, technology or other vital parts of the business. It NEVER turn out well, unless they obsess about their idea, and really, really, get to know all the details about it. Outsourcing just isn't an option for you.

Outsource distractions. Email, phones, datacenter, break-fix repair.

Insource the core of your business. If your business is making software, do you want to be haggling with a contractor over scope, change orders, etc when you need to change something? Do your customers want to wait around for fixes when your are transitioning between vendors?

IMO, you want to control the quality and service factors that affect your customers.

My favorite example is dry-cleaning. I had my shirts done by the same folks for like 5-6 years. Then the owner got sick and his son took over the business, and outsourced his shirt service to a wholesale laundry. (and jacked up the price 8%) That's great, except my shirts came back over-starched, or they crushed the buttons, or ironed an ugly crease into my shirt. I can do a lousy job washing my own clothes for free, so why would I pay for the privilege?

If you are hiring staff in your own country you may be able to put in place some legal mechanisms. Depending on your jurisdiction you may be able have a non-compete clause as part of their employment contract. At a minimum you would want to make it clear that any work they do for the start-up belongs to the start-up.

Legal measures are not iron-clad, but they at least give you some leverage.

Another approach would be to outsource different parts of the business to different people so that no one person has everything they would need for the business.

What's wrong with your current startup, the one you already work on full time? I'd focus on one thing at a time. If you are no longer that interested in the startup you already in I'd find a way to gradually decrease my involvment in it and THEN spend most of my energy on the new idea.

Simply throwing the idea "over the wall" and hope the outside firm would somehow make it work would be just money wasted. And if they do figure it out you might find yourself at a sideline.

From my personal experience, if decide to outsource with a legitimate offshore company then you can be reasonably assured that they will have some professionalism to not duplicate your idea and run with it. In India, there are a ton of IT projects going on and I'm sure there are great ideas going around. But at the end of the day, you have to trust the other side and know that they have some integrity to get what you need done.

I have been working in IT as an architect for some time now and I have seen first hand the massive offshore work to India that is going on. To most of these offshore workers, it is just a job and they do not want to do more or take on more than what is asked.

If you are trying to hire small and not go with a reputable offshore company (there are many) and you decide to try and find an lone offshore contractor then I would say references are a must. I have also have personally pursued this route, but only because I had a reference to the person and I learned to trust them overtime. Plus I know how to run IT projects so determining the quality of the offshore resource was something I could easily do.

If you do not have a reference, then I would say it is a crap shoot... you could find a lot of so-so workers that will drag your time lines, costs up, and possibly cause you to question their loyalty (most likely). Or you might luck out and find a super star (least likely).

"If I outsource everything (and the idea is a good) how do I know the workers will not just take the idea and do it themselves?"

Great question and there are companies out there that are set up to specifically help entrepreneurs with the execution of their ideas and business processes. This is their core business.

The challenge to you will be to find the right company that will help you with executing on your idea and in order to find the right partner you need to properly outline the work that needs to be done, the results the need to achieve and what metrics you will be using to evaluate the results delivered.

I want to use my answer as a means to encourage you to move forward with your quest because if these companies steal ideas they will no longer be in business because it will hurt their reputation.

Keep it up you are moving in the right direction!

@John : Based upon your post, you suggested that you've had experience working with some reputable offshore web development firms. Would you be willing to list a few with whom you've had positive experiences (in terms of quality of work, communication and work ethic)? Thanks-Li Zhou

P.S. Sorry I do not know how to do the "sub"-post.

From experience, even if you are within your competency to complete the task yourself but simply want to speed up the time it takes to hit the market, you should still expect to spend a good amount of money to get the job done.

Keep in mind that you need to define your terms well with your contractors (be it in China or India), because as soon as they spot your weakness, they will try to raise up the price (like a smart business man would do).

From experience with negotiating with firms in India, my impression is that you need to at least hire a development lead in U.S. or within your proximity to monitor and help bring the project to completion. The contractors will often throw at you with their agile approach, which is nice, but it is also another way of saying "we don't know when this will be complete, because the requirement can change. Maybe it will take 3 months or more to complete, and by the way, we offer additional service if you go on hourly rate etc."

From outsourcing firms' perspective, it is just a contracted job to them, so code quality and unit tests aren't really their top priority. And worst of all, they may reject having your development lead involved in the assigned project. So by merely making clear demands early on, their response can be either positive or keep delaying until they drop out of the bidding all together.

At least in Texas (U.S.), we aren't legally allowed to hire foreign workers with hourly wage. We are, however, legally allowed to purchase a fixed cost solution. That often does not sit well with most firms that prefer hourly wage in agile development. So make sure your outsource needs meets the tax code in your country.

Lastly, especially if they know you need them, they will demand a 20% to 30% down payment. That is really only fine if they have a division or an established office within your country (i.e. U.S.A.). If not, you are truly at the mercy of their professionalism.

All these are my experience and my personal view, so yes your mileage may vary. It is not a horror story meant to scare you, but you need to be aware of all the trade-offs before spending the next 2 months sourcing a good contractor

If you want to stay lean and mean I suggest you understand your new idea as much as you can or partner up with someone who does before outsourcing. Outsourcing can't help you if you don't understand the foundation of that new business that you want to build.