Tuesday, June 05, 2007

Using Service Providers - outsource, don't abandon

I recently spoke at a Startup-U session on using service providers.

No entrepreneur has experience in all the areas needed to run a successful business. To get any business off the ground, you will need to delegate many tasks to service providers.

The general rule of thumb is that you should never outsource your source of competitive advantage. For this reason, most tech companies like to keep R&D in house.

However, it is also important not to lose sight of important business metrics by farming them out. In short, you can outsource tasks, but you can’t abandon them

In particular, while it is very attractive to outsource away all your finance and legal headaches, in reality, it is important to remain engaged. For example, no lawyer can tell you the right way to divvy up your equity.

Outsourcing a task doesn’t mean you don’t have to worry about it any more. Make sure someone is monitoring the tasks that you have outsourced to a service provider. If you don’t have experience with finance or legal tasks, find a board member or advisor who knows what they are doing and can help monitor your service provider.