Never Outsource Your Core Competence

My friend (Hasan) asked me a question yesterday “Why don’t you outsource the development of your website?“. My answer was “No, never”. But, why ?

I think many entrepreneurs in Kuwait believe they can simply outsource their website to a website development company and things will go great, following the famous Kuwaiti saying ” عط الخباز خبزه – Let the bakery make the bread“, well I disagree. Still for some type of businesses I think outsourcing is not a bad option. So the question is “when should you outsource and when should you build your website in-house?

Professor Chris Doran, X Mckinsey and the best professor in HKUST, taught us a frame work called Core vs Context.

What is Core? The activities you must excel at to deliver value to your customers.

What is Context? Everything else you need to do to stay in business!

Anything Core you should keep in-house, anything Context you should outsource. For example, Porsche (the car manufacturer and a company that seeks perfection) will never outsource designing and manufacturing the engine, however they are happy to outsource tires and mirrors. Apple outsource the whole manufacturing of the iphone, but they will never outsource the design or the Operating System because they consider them as Core.

Core gives you a competitive advantage over your competitors, it’s the department where you hire the best people, it’s why your customers love you and it’s where you should innovate all the time. In Context you need to automate, minimize cost, standardize and stay efficient. In Core you should outperform your competitors, in Context it’s OK to match your competitors.

Prof. Chris Doran also advice us to keep in-house all activities that might change in the future from Context to Core.

The lesson from Chris Doran works for both big established companies and startups. However, I think there is one more important reason to keep the development of your website in-house if you are a startup. In a startup you are still full of assumptions, you don’t know how’s your customer reaction is going to look like and you are not sure if anyone is really paying for your product (unless you follow my previous post :)). You’ll be changing and modifying the whole time, if you think your product will be the same after you go live and get feedback from customers, then you are dead wrong. You’ll modify and improve the whole time both as a Product and as a Business Model. When you work with a development company you don’t have the luxury of making these changes and adapting quickly to your customer needs, rather you’ll have a contract that you need to follow no matter what happens.

I know that many people don’t have any experience in website development (similar to my situation for example) or don’t want to hire a programmer full-time to do that. I think the best way to go is to get a partner or a Co-Founder that is a developer him-self (Hello, Jose. How are you today?) or get some friends to act as mentors or advisors for everything technical (Thanks @mrmmm and @jalduaij for your continues help). I believe most web based Startups should consider their website as Core and should have their website been developed in-house sooner better than latter.

Other type of businesses that don’t depend 100% on their web or App to deliver their value proposition, might consider outsourcing their web development to a development company. However, I don’t think many startups fall in this category anymore.

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5 Comments

  1. Hasan AlSaleh

     /  September 11, 2012

    Hi Abdullah,

    Thank you for the fruitfull answer where you clarify the difference.

    I agree with you ans I belive that sometimes even if it is a critical part of your activity, if someone is offering a better service than what you can get in house, it will be much better to outsource in order to enhance and improve your product or service.
    Moreover, a deep study should be done before siging the contract to make sure you cover all the points you are searching for and you require as an outsource customer, in additional to that you can leave the outsourced service required specified in certain area with open limitation and determined by a period/ number/ or any suitable unit for your sector.

    As many companies specially startups and companies under establishment require certain services but not as a full time or for a long time, they can corporate and outsource their expertise from each others as per their agreed contracts or agreements.

    At the end, it is also depend on many factors as well such as the company vision and strategy, budget, technology and others to decide.

    Sorry to make it long article 😉
    Regards,
    Hasan

    Reply
  2. Dont you think that the product you sell online IS the core? rather than the website, which is consider the venue where u display your products?

    Reply
    • Great question. Yes, you are right. If you are selling physical products that you produce such as Shoes, Sofas or even cell phones, then your core is your product and you can outsource your website. However, most Startups these days focus in building a website that provide a service such as 6alabat.com, Yabeela and Sheeel. These businesses have their website as their Core, no website no business. I believe this type of Startups need to develop their website in house.

      Reply
  1. The best advice for first time entrepreneurs by leading entrepreneurs

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