Tech company startups are the darlings of the press and of venture capitalists. It certainly seems that tech companies dominate the list of “Unicorns” and top IPOs from the last few decades. Their pace of revenue acceleration (though not necessarily usually earnings) are breathtaking – at least for the few who make it “over the hump” to reach critical mass. But these are far from the only startup businesses where key IT decisions are needed.
In non-IT startup companies, the landscape of tech choices is different, although potentially just as impactful on the company’s chances of success. Tech isn’t their product, but in many cases it may make up a significant part of their engine (there is a spectrum of IT impact, of course – that’s one reason why “It Depends..”) Interestingly, from the myriad books on the topic of startups pumped out of publishing houses these days, very few touch on the interesting dynamics of tech decisions within non-tech businesses… So we thought we’d help fill the void a bit…
Myriad decisions are needed to tailor the strategy
Initial decisions set the foundation for the process. Some of the questions further down the page can be left undecided for awhile; on some of items later in this article, the answers can be changed later, but for these initial questions the closer you can get real answers the better off you’ll be:
- Near-Term Scale – Understanding the staff size of the organization at months 3, 6, 9, 12 is key to finding the right initial targets on a lot of questions about IT infrastructure, telecom, etc.
- Needs and Usage of Technology – are people working in the office, or mobile? Remote? Offshore? This has obvious ramifications to the initial plans, and together with the sense of scale, can give CIOs the right initial target on data storage strategy.
- Investor views and/or help – if you’re being funded by an organized venture capitalist or private equity group, the chances are that they have strong opinions on what your IT should look like, and it makes sense to listen and align with them for several reasons:
- They’re a more mature organization, likely with a variety of IT pros at their disposal
- They’ve likely thought deeper, longer about the startup than anyone else
- They’re writing the checks. Here’s a little startup tech Pascal wager: Consider if you “fight city hall” and you’re wrong, vs. if you collaborate and align to their counsel and you’re all collectively wrong… One possible economic/scale benefit from aligning to a mothership – they may be able to provide “shared services” to your fledgling company, if you’re running platforms that they also like.
Once these foundational questions are answered, the landscape can come into focus and we’re ready to answer more meaty questions. Wisdom on these questions and the approach taken early on will have an enormous impact on a startup company’s prospects, its ability to stay nimble and avoid technical debt.
- Do we Cloud? – this is an obvious choice for many startups because its flexibility, its avoidance of high initial capital outlays, and honestly having one less headache on the list which is already populated by many headaches. Our answer: IT DEPENDS. In 98% of cases, the cloud will absolutely be sensible for startups, but we caution CIOs not to just rubber stamp this without answering the questions above. Here’s one real-world example from our experience: graphic designers collaborating on huge inDesign files will need prescription medication if you make them store all those files on the cloud. The speed of light literally isn’t fast enough. So… it depends.
- Do we Plug and Play? – should we eschew custom solutions and use straight off the shelf SaaS software for an ERP, HCM, CRM with zero customizations? The proliferation of really good and really affordable options makes that so much more possible than it was just 5 years ago, (when for some functions the right answer for some startups might really have been “Let’s do it in Excel…”) The customization question is the PERFECT example of why IT DEPENDS on a company’s strategy, initial needs, the trade-offs of the tools they choose, etc. A strict answer that “startups shouldn’t do custom solutions” misses the potential power of technology for the company! YES, customizations create a risk of technical debt, but today’s PaaS platforms handle and maintain compatibility with them far more elegantly than fully custom software in the past. And most importantly, customizations might open the door to a cheaper solution serving the need and freeing up more cash for more important purposes. So… it depends.
- Do we standardize everyone? – interestingly this is a question we may surprise some people with. IT DEPENDS of course – so we’ll keep with the theme of the article… But we definitely lean toward standard PCs and (possibly) mobile devices – even though this smacks of “corporate bureaucracy” which is anathema to a startup culture. Guys, this is about security. We live in the era of breaches, and hackers are wise to the fact that startups are often the best/easiest targets – particularly if they are processing consumer data like SSNs and credit card numbers. Standardization means we can secure the environment with fewer systems and protections. But we said it depends, so there’s a counter-point to consider… If, for example, a company is planning to recruit a publishing team full of Mac experts, needs a particular CAD program which only runs well on PCs, and you can save enormous money giving customer support agents Chromebooks, the solution to the security challenge might be easier and cheaper than to force a standard which doesn’t fit a lot of the company. So… it depends.
- Do we outsource? – this is a topic on which we believe a lot of people understand intuitively that IT DEPENDS. Constancy/predictability of workload, specific skill-set needs/costs/availability, etc. can all swing the needle one way or another on this question. Interestingly, often the right choice on this one is clear as long as IT leadership has a business hat on and asks some basic questions. When outsourcing has failed badly, it was often due to myopia on the part of the decision makers.
- Do we offshore? – not the same question as the one above, although obviously it is far more common (for startups especially) to offshore in the context of outsourcing than with permanent staff. But it’s absolutely possible to answer Yes to outsourcing and No to offshoring. Guess what? IT DEPENDS. Here too, there is no one right answer guarantee to setup startups for success. If you’re looking for administrative help on very popular platforms, that is right in the wheelhouse for many offshore options. If you’re doing custom workflows for a residential property inspector, it’s real risk whether a programmer on the other side of the world can understand enough about the process involved to have that go right at all, much less for a price which will feel like a discount to onshore talent.
Hopefully by now the point has been made that IT DEPENDS on a company’s strategy, positioning, size, growth curve, ownership structure, what the right strategy for IT would be.
Success in a Startup is Like Building a Tent
We like the analogy of building a tent for standing up a startup.
- The strategy options articulated above can be considered the blueprint; getting these right ensures that the tent will actually come together with the right parts
- Putting the tent together in the right order is equally important to ultimate success. Getting the “long poles” into the tent first is key, as is ensuring all the right poles and fabric are laid out.
- Choosing what NOT to include is as important as what TO include, particularly in early stages. Getting the “blueprint” and “parts list” decided for each phase as early as possible will help focus efforts on the right phase at the right time, with purposeful decisions about what to defer and/or for what components of the platform an “interim” solution is the best option early on
- We suggest waiting to build EVERYTHING that you can wait to build in order to a) prioritize “MVP” (minimum viable product) needs first and b) to avoid creating platform components that have to be reworked if (more likely when) the startup’s processes change. In particular, automation can normally wait until your customer & transaction volumes are increased and you’ve proven out the processes performing them manually. Be RUTHLESS: if it’s not needed for you to open up for the first handful of customers, DEFER IT
This is where CIOs (or expert IT consultants) earn our money. The swing in potential growth and success is significant between a company where these decisions and execution have been made well vs. one where a cookie-cutter ditto-mark approach has been taken. It’s not just in Tech startups that Tech can make a huge difference, but everywhere, where the right IT strategy depends….