Comments on: VC’s and the Offshoring of Keiretsu http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/ Thu, 04 Dec 2008 18:27:54 +0000 http://wordpress.org/?v=2.2 By: Fraser http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-49 Fraser Fri, 17 Feb 2006 08:16:32 +0000 http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-49 I suspect the problem of finding quality workers who are "product" rather than "service" will right itself over time. If one treats the BPO industry as a product, and allowed it to have the traits of a traditional product, I think it would be fair to say that the BPO "product" is still at an early development stage. Over time we'll see the "product" develop as the market for the product's benefit grows and matures. In fact, I think we're already seeing this. 4 years ago the idea that an oursourced firm could offer valuable input on a business process other than transcribing/customer service/... seemed far fetched. The industry has made great strides beyond this and I think it's a fair assessment that going forward the trend towards more advanced/valuable input will continue. Products like iRise that Eric mentions will help lower the barriers to this happening and as these products develop the traditional challenges will fall, and the ability to add product development overseas will increase. Especially when VCs create a positive relationship with a BPO firm - investing time and money in the relationship rather than just plugging a name into a rolodex. (aside: does anyone use a rolodex anymore? Or better yet, does anyone who is advanced enough to be leading the outsource charge still use a rolodex? It's late, and I'm tired :)) I suspect the problem of finding quality workers who are “product” rather than “service” will right itself over time.

If one treats the BPO industry as a product, and allowed it to have the traits of a traditional product, I think it would be fair to say that the BPO “product” is still at an early development stage. Over time we’ll see the “product” develop as the market for the product’s benefit grows and matures.

In fact, I think we’re already seeing this. 4 years ago the idea that an oursourced firm could offer valuable input on a business process other than transcribing/customer service/… seemed far fetched. The industry has made great strides beyond this and I think it’s a fair assessment that going forward the trend towards more advanced/valuable input will continue.

Products like iRise that Eric mentions will help lower the barriers to this happening and as these products develop the traditional challenges will fall, and the ability to add product development overseas will increase.

Especially when VCs create a positive relationship with a BPO firm - investing time and money in the relationship rather than just plugging a name into a rolodex. (aside: does anyone use a rolodex anymore? Or better yet, does anyone who is advanced enough to be leading the outsource charge still use a rolodex? It’s late, and I’m tired :))

]]> By: Fraser http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-101312 Fraser Fri, 17 Feb 2006 07:16:32 +0000 http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-101312 I suspect the problem of finding quality workers who are "product" rather than "service" will right itself over time. If one treats the BPO industry as a product, and allowed it to have the traits of a traditional product, I think it would be fair to say that the BPO "product" is still at an early development stage. Over time we'll see the "product" develop as the market for the product's benefit grows and matures. In fact, I think we're already seeing this. 4 years ago the idea that an oursourced firm could offer valuable input on a business process other than transcribing/customer service/... seemed far fetched. The industry has made great strides beyond this and I think it's a fair assessment that going forward the trend towards more advanced/valuable input will continue. Products like iRise that Eric mentions will help lower the barriers to this happening and as these products develop the traditional challenges will fall, and the ability to add product development overseas will increase. Especially when VCs create a positive relationship with a BPO firm - investing time and money in the relationship rather than just plugging a name into a rolodex. (aside: does anyone use a rolodex anymore? Or better yet, does anyone who is advanced enough to be leading the outsource charge still use a rolodex? It's late, and I'm tired :)) I suspect the problem of finding quality workers who are “product” rather than “service” will right itself over time. If one treats the BPO industry as a product, and allowed it to have the traits of a traditional product, I think it would be fair to say that the BPO “product” is still at an early development stage. Over time we’ll see the “product” develop as the market for the product’s benefit grows and matures. In fact, I think we’re already seeing this. 4 years ago the idea that an oursourced firm could offer valuable input on a business process other than transcribing/customer service/… seemed far fetched. The industry has made great strides beyond this and I think it’s a fair assessment that going forward the trend towards more advanced/valuable input will continue. Products like iRise that Eric mentions will help lower the barriers to this happening and as these products develop the traditional challenges will fall, and the ability to add product development overseas will increase. Especially when VCs create a positive relationship with a BPO firm - investing time and money in the relationship rather than just plugging a name into a rolodex. (aside: does anyone use a rolodex anymore? Or better yet, does anyone who is advanced enough to be leading the outsource charge still use a rolodex? It’s late, and I’m tired :))

]]> By: Daniel Popov http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-48 Daniel Popov Thu, 16 Feb 2006 23:42:49 +0000 http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-48 Fraser, flattery works for all! :-) I am really enthused to see that something I have been thinking about is already being done - namely incorporate offshoring into the VC's "arsenal". I am going to be conducting a survey of VCs in the near future as part of my research and I am definitely going to try and follow up on this trend. The one thing that this entire business model does not address and something that, according to case-studies of US-based high-tech startups offshoring to India, is the difficulty of hiring talanted workers in India - the workers that are 'product' rather than 'service' oriented and will fuse with the US part of the product development team, contributing originally, rather than simply punching out code. In my experience the 'no-name' firms in India have had a lot of problem with finding and retaining workers - acceptance rates are below 50% (after an offer has been made) and annual attrition can be in the same ballpark. Perhaps what needs to happen is to distinguish between the start-up that already has a beta product and a product development strategy that can be fragmented and the seed company which is still working on its beta. (Although the latter is probably not seeking VC money yet...) The devil is in the detail - principles of offshoring development can be great but it seems that ultimately each start-up will face its own, unique problems with this strategy and a VC must be flexible and experienced enough to help/advise/guide the entrepreneur. (So if the VCs merely get a BPO guy's name into their rollodex, this will not work) Fraser, flattery works for all! :-)

I am really enthused to see that something I have been thinking about is already being done - namely incorporate offshoring into the VC’s “arsenal”. I am going to be conducting a survey of VCs in the near future as part of my research and I am definitely going to try and follow up on this trend.

The one thing that this entire business model does not address and something that, according to case-studies of US-based high-tech startups offshoring to India, is the difficulty of hiring talanted workers in India - the workers that are ‘product’ rather than ’service’ oriented and will fuse with the US part of the product development team, contributing originally, rather than simply punching out code. In my experience the ‘no-name’ firms in India have had a lot of problem with finding and retaining workers - acceptance rates are below 50% (after an offer has been made) and annual attrition can be in the same ballpark.

Perhaps what needs to happen is to distinguish between the start-up that already has a beta product and a product development strategy that can be fragmented and the seed company which is still working on its beta. (Although the latter is probably not seeking VC money yet…)

The devil is in the detail - principles of offshoring development can be great but it seems that ultimately each start-up will face its own, unique problems with this strategy and a VC must be flexible and experienced enough to help/advise/guide the entrepreneur. (So if the VCs merely get a BPO guy’s name into their rollodex, this will not work)

]]> By: Daniel Popov http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-101311 Daniel Popov Thu, 16 Feb 2006 22:42:49 +0000 http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-101311 Fraser, flattery works for all! :-) I am really enthused to see that something I have been thinking about is already being done - namely incorporate offshoring into the VC's "arsenal". I am going to be conducting a survey of VCs in the near future as part of my research and I am definitely going to try and follow up on this trend. The one thing that this entire business model does not address and something that, according to case-studies of US-based high-tech startups offshoring to India, is the difficulty of hiring talanted workers in India - the workers that are 'product' rather than 'service' oriented and will fuse with the US part of the product development team, contributing originally, rather than simply punching out code. In my experience the 'no-name' firms in India have had a lot of problem with finding and retaining workers - acceptance rates are below 50% (after an offer has been made) and annual attrition can be in the same ballpark. Perhaps what needs to happen is to distinguish between the start-up that already has a beta product and a product development strategy that can be fragmented and the seed company which is still working on its beta. (Although the latter is probably not seeking VC money yet...) The devil is in the detail - principles of offshoring development can be great but it seems that ultimately each start-up will face its own, unique problems with this strategy and a VC must be flexible and experienced enough to help/advise/guide the entrepreneur. (So if the VCs merely get a BPO guy's name into their rollodex, this will not work) Fraser, flattery works for all! :-) I am really enthused to see that something I have been thinking about is already being done - namely incorporate offshoring into the VC’s “arsenal”. I am going to be conducting a survey of VCs in the near future as part of my research and I am definitely going to try and follow up on this trend. The one thing that this entire business model does not address and something that, according to case-studies of US-based high-tech startups offshoring to India, is the difficulty of hiring talanted workers in India - the workers that are ‘product’ rather than ’service’ oriented and will fuse with the US part of the product development team, contributing originally, rather than simply punching out code. In my experience the ‘no-name’ firms in India have had a lot of problem with finding and retaining workers - acceptance rates are below 50% (after an offer has been made) and annual attrition can be in the same ballpark. Perhaps what needs to happen is to distinguish between the start-up that already has a beta product and a product development strategy that can be fragmented and the seed company which is still working on its beta. (Although the latter is probably not seeking VC money yet…) The devil is in the detail - principles of offshoring development can be great but it seems that ultimately each start-up will face its own, unique problems with this strategy and a VC must be flexible and experienced enough to help/advise/guide the entrepreneur. (So if the VCs merely get a BPO guy’s name into their rollodex, this will not work)

]]> By: Fraser http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-47 Fraser Wed, 15 Feb 2006 18:21:04 +0000 http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-47 <a href="http://www.ventureweek.com/blog/2005/09/30/software-simulation-start-ups/" rel="nofollow">Here's a link to Eric's post on iRise</a> "These change orders can be reduced (by up to 70% iRise states) by providing overseas developers with an iRise model of the software that needs to be built. The iRise model allows the developers to “use” the start-ups’ software via the simulation in the iDoc which gives them a much better idea of what they need to build." As offshoring moves from simple tasks (customer support, transcribing, ...) to more advanced business processes and functions a significantly sized market will be created for allowing these complex ideas to be effectively communicated. iRise has done a great job of this, and I imagine every area of business that is being offshored will have a similar player emerge. What will be interesting to see is if VC's take an active role investing in these companies to help their other portfolio holdings. Here’s a link to Eric’s post on iRise

“These change orders can be reduced (by up to 70% iRise states) by providing overseas developers with an iRise model of the software that needs to be built. The iRise model allows the developers to “use” the start-ups’ software via the simulation in the iDoc which gives them a much better idea of what they need to build.”

As offshoring moves from simple tasks (customer support, transcribing, …) to more advanced business processes and functions a significantly sized market will be created for allowing these complex ideas to be effectively communicated.

iRise has done a great job of this, and I imagine every area of business that is being offshored will have a similar player emerge.

What will be interesting to see is if VC’s take an active role investing in these companies to help their other portfolio holdings.

]]> By: Fraser http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-101310 Fraser Wed, 15 Feb 2006 17:21:04 +0000 http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-101310 <a href="<a href="http://www.ventureweek.com/blog/2005/09/30/software-simulation-start-ups/"" rel="nofollow">http://www.ventureweek.com/blog/2005/09/30/softwa...</a>rel="nofollow">Here's a link to Eric's post on iRise"These change orders can be reduced (by up to 70% iRise states) by providing overseas developers with an iRise model of the software that needs to be built. The iRise model allows the developers to “use” the start-ups’ software via the simulation in the iDoc which gives them a much better idea of what they need to build." As offshoring moves from simple tasks (customer support, transcribing, ...) to more advanced business processes and functions a significantly sized market will be created for allowing these complex ideas to be effectively communicated. iRise has done a great job of this, and I imagine every area of business that is being offshored will have a similar player emerge. What will be interesting to see is if VC's take an active role investing in these companies to help their other portfolio holdings. http://www.ventureweek.com/blog/2005/09/30/softwa…rel=”nofollow”>Here’s a link to Eric’s post on iRise”These change orders can be reduced (by up to 70% iRise states) by providing overseas developers with an iRise model of the software that needs to be built. The iRise model allows the developers to “use” the start-ups’ software via the simulation in the iDoc which gives them a much better idea of what they need to build.” As offshoring moves from simple tasks (customer support, transcribing, …) to more advanced business processes and functions a significantly sized market will be created for allowing these complex ideas to be effectively communicated. iRise has done a great job of this, and I imagine every area of business that is being offshored will have a similar player emerge. What will be interesting to see is if VC’s take an active role investing in these companies to help their other portfolio holdings.

]]> By: Eric Olson http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-46 Eric Olson Wed, 15 Feb 2006 15:49:31 +0000 http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-46 Definitely an interesting phenominon. I profiled a US company a while back called iRise. iRise has developed software that allows developers to create a very effective model of the software they want to build. There are a couple benefits to creating this model: 1. Allows the entrepreneurs to bring something to the table in initial meetings with VCs. 2. Allows the entrepreneurs to send a detailed model of what they want to offshore developers which cuts change orders by a large margin (iRise claims 70 percent) and therefore cuts development costs. Reason number two is why I am writing this comment. A number of VCs have invested in iRise to aid their offshore development efforts and their portfolio companies alike. Looks like VCs are really trying to solidify this model and continually make it more cost effective. Definitely an interesting phenominon. I profiled a US company a while back called iRise. iRise has developed software that allows developers to create a very effective model of the software they want to build. There are a couple benefits to creating this model:

1. Allows the entrepreneurs to bring something to the table in initial meetings with VCs.

2. Allows the entrepreneurs to send a detailed model of what they want to offshore developers which cuts change orders by a large margin (iRise claims 70 percent) and therefore cuts development costs.

Reason number two is why I am writing this comment. A number of VCs have invested in iRise to aid their offshore development efforts and their portfolio companies alike. Looks like VCs are really trying to solidify this model and continually make it more cost effective.

]]> By: Eric Olson http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-101309 Eric Olson Wed, 15 Feb 2006 14:49:31 +0000 http://disruptivethoughts.com/2006/02/14/vcs-and-the-offshoring-of-keiretsu/#comment-101309 Definitely an interesting phenominon. I profiled a US company a while back called iRise. iRise has developed software that allows developers to create a very effective model of the software they want to build. There are a couple benefits to creating this model: 1. Allows the entrepreneurs to bring something to the table in initial meetings with VCs. 2. Allows the entrepreneurs to send a detailed model of what they want to offshore developers which cuts change orders by a large margin (iRise claims 70 percent) and therefore cuts development costs. Reason number two is why I am writing this comment. A number of VCs have invested in iRise to aid their offshore development efforts and their portfolio companies alike. Looks like VCs are really trying to solidify this model and continually make it more cost effective. Definitely an interesting phenominon. I profiled a US company a while back called iRise. iRise has developed software that allows developers to create a very effective model of the software they want to build. There are a couple benefits to creating this model: 1. Allows the entrepreneurs to bring something to the table in initial meetings with VCs. 2. Allows the entrepreneurs to send a detailed model of what they want to offshore developers which cuts change orders by a large margin (iRise claims 70 percent) and therefore cuts development costs. Reason number two is why I am writing this comment. A number of VCs have invested in iRise to aid their offshore development efforts and their portfolio companies alike. Looks like VCs are really trying to solidify this model and continually make it more cost effective.

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