Question: When we talked about hiring, as a follow up, what about outsourcing? In the last 5-6 years, U.S. companies have also started to invest heavily on the ground in India and China. All large companies have big operations there now. How should startups approach?
Dr. Fernandes: In my first company about 15 years ago, we did have laboratories. We learned that they burn a lot of cash in the U.S. So after that, we decided we would not have laboratories. After all, what do we do as managers? Manage the research. You have to know what the pricing is. Then choose the right laboratories that have the expertise to the work. We now have all our work done outside. We only have offices, we do not have laboratories. We find the right person to do the work under contract to us and we own the IP.
They can be in China, in Japan, they can be anywhere in the world. We work with people all over the world. And the wonderful thing with Skype, is you can easily communicate and even see the lab. We have laboratories working for us 24 hours a day in China, in Japan, in India - they are working while we are sleeping. It's a great way to run a business and we have made a lot of progress with that. The nice thing is that all nations are accepted. They don't look down if the work is done in China, in India or anywhere else.
Dr. Wang: Really depends on the stage of your company and business model. Maybe you have an idea in the high tech area, early on, you will be in technology or product development. At that stage, you need to focus on making something that will work rather than considering China or India. Later on, when the product is ready and customer is responding, it is a natural to consider operational efficiencies outside the U.S.
I would caution you in China - IP protection is a serious issue. Time and time again, it is tough to win IP fights in China. There are ways to get around it - for instance, just send one component to China. Don't "give up" your IP. This is critical issue for any high tech company.
Ms. Ueng: I've seen in various situations companies have assumed that if they outsource, they will automatically save money. In some situations, they've had to take back to the U.S., because there are hidden costs in outsourcing overseas. You have to make sure you have the right manager in place here who has the cultural understanding to manage the outside group - is Chinese, or Indian, or has experience with the culture. Otherwise, the hidden costs can outweigh the hard cost savings. That is what I have seen on the outsourcing of technology, QA, or software development.
As far as non technical outsourcing, what I often get asked to do is to serve as an outsourced or interim resource. That happens for a lot of reasons. As Frank was alluding to, it can be very hard to find the right person, but the client still needs the work done. Also, they may not yet need a full time headcount. So often times, we're asked to come in on a part time interim basis, and really get to know the situation and culture of the client. We then help the client find the permanent leader through my connectivity locally, regionally, or sometimes nationally (depending on where they can hire), and find that right person that has the competency and just as importantly, the right fit with the founder and the team. This outsourcing happens a lot, not just with the marketing function, but also the financial function and others as well.