If you know how to manage the risk, working with startups is worth it
It's about partnership and managing expectations
By Johanna Ambrosio | Computerworld US | Published: 14:00, 06 October 2012
IT leaders say they enjoy working with startups, but doing so successfully requires understanding the level of risk, managing that risk and setting reasonable expectations. That was the consensus during a panel discussion among four IT executives held Wednesday at the DEMO show here.
"I love startups, but you have to look at what you're doing and understand who you're working with" and where the startups are in their development, said Cindy McKenzie, senior vice president of enterprise application services at entertainment conglomerate Fox Group, in an interview after the panel. "I've had issues with startups going out of business. At one, the founder of the company died and they walked away from us."
A number of startups were acquired and the new owner retired the product that Fox was using, she added.
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Even so, McKenzie said, she wouldn't have made different choices; the risk was worth the reward. IT leaders said the biggest benefit of working with startups is access to leading-edge technology that solves their business problems more quickly than they could by building something internally.
Sasan Goodarzi, CIO of Intuit, said he also learns from the startups that his company has either acquired or worked with over the years. "There's a reverse integration and reverse mentoring - there's a mindset of passion, urgency, speed" at which the startups move, he said. "We try to integrate that" into the broader Intuit corporate culture, he said. "Most large companies move too slowly."
Tom Soderstrom, chief technology officer at the NASA Jet Propulsion Laboratory, said, "You can go to a startup and see how we'll be doing IT in two years." One example is the co-working phenomenon, he said. "Startups don't need offices - they work at Starbucks. We're getting there, with more mobile and configurable workspaces," he added.
Big data is an area where the executives said they are open to working with startups. Ricardo Angel, senior vice president of General Electric Energy Financial Services, said the company is looking to mine data to better understand how to maintain its IT gear and other systems via mobile devices, especially in climates or locations "where it's difficult for people to go." Another longer-term goal is to continue to learn about making the machinery GE sells to customers more robust and require less maintenance.
Intuit's Goodarzi said he's looking for help in defining patterns that could be useful to the company's customers. "We want to help accountants save time, help small businesses grow" and be able to help a farmer in Iowa or a roofer in Philadelphia implement best practices based on what has worked for similar companies.
He's talking to "a couple" of companies in this niche, he said. "We call it: Data for the little guy."
Fox, too, is using Big Data tools, some from startups and others from more established firms. There's an initiative to track the studio's top 5,000 end customers, McKenzie said, "So we're working with a variety of vendors," she explained. This includes sentiment-analysis vendors as well as Hadoop suppliers and others.
Do your homework
If your goal is to get to market faster via a startup's technology, make sure you "do due diligence," McKenzie said. "There are a lot of things they may not know how to do - a contract, for example. Everything can be more cumbersome," since it's unchartered territory for a new company. One of the things that makes startups so nimble can be a lack of process, but that's something most larger organisations require.
Also, IT leaders will likely need to train the startups on how best to work with them. "I can't tell you how many times I get an email saying 'I'd like to show you my product - are you free for an hour next week?' " said JPL's Soderstrom. "There's no way I can do that - I'm already triple-booked with meetings."
A much better approach, for him anyway, is to request a 15-minute Skype video session. "Talk to me, find out which problems I'm trying to solve."
McKenzie agreed. "They have to talk about the business, same as we do. I can't talk technology to my internal customers." One startup came in to pitch her a certain product for a specific situation. But when she saw it, she knew it would be better for something else. "So we had a back-and-forth; we modified his original idea."
Something else to work on with a startup, Soderstrom said, is the amount of time and number of licenses you can use to test the product or service. "In my world there's a very long sales cycle, so giving me one unlimited license for a month is useless," he said.
Instead, "give me four licenses for six months." That allows him to show the product to others in his group - and beyond - which generates some excitement and demand for the product or service.
At some point, though, you just need to jump in, said Intuit's Goodarzi . "We look at the startup's technology, the gap we have internally and whether it will be a cultural fit," he said. "But you just have to lean forward and play offense. Be thoughtful and manage risk, but don't spend too much time on it."
Where the startups are
Large IT organisations have a lot of vendors, including startups, beating down their doors to show their wares. But there are other ways to find up-and-coming tech companies, including attending shows, such as DEMO, that feature them.
Many venture-capital (VC) firms - in New York and Silicon Valley, especially - specialise in backing tech startups. Sometimes these firms will come in to talk to you if you invite them. Or check the VC websites regularly and see which startups they're working with. Likewise, tech incubators at universities and other locations around the country are good sources.
Fox's Cindy McKenzie said she goes to legal-oriented trade shows in addition to the traditional computer-oriented ones; her company uses a lot of legal software and she sometimes finds vendor partners there.
Back at DEMO, some of the other startups strutting their stuff:
- Evtron Cell: High-density storage platform that fits 120 hard disk drives into a 7-inch space - a standard 4U server slot - with air cooling. Increases storage capacity in data centers while reducing cooling and power costs.
- Traffic powered pumps, compressors and crashers: Momentum-powered systems to provide power off the grid.
- Compute Qloud and Storage Qloud: Cloud services powered by renewable energy.
- Eco-Green Data Safe: A disaster-proof safe that holds all standard rack-mounted computer equipment - protects servers and reduces energy via liquid cooling.
- Nubefy: An IT service management platform that facilitates building IaaS (infrastructure in the cloud).
- Omnicloud: Deploy, run and scale apps directly from your desktop. For developers of all levels.
- Trinity Cloud Procurement and Bidding: A procurement and bidding platform for supplier discovery and product management.
Other types of business tools
- Segovia: Excel-based reporting appliance that can incorporate and join a variety of data sources, including relational data, NoSQL, flat files and, of course, Excel files.
- OrbitFront: Users are loaned products they want to review. Contributors receive 10 percent of the revenues from each purchase made because of their review. OrbitFront collects 10 percent of revenue from each sale.
- Consentsys: Helps businesses collect money by giving customers flexible and easy payment options they can afford.
- CodEnforcer: Cloud-based source code quality checking and improvement. Inserts recommendations for code improvement directly into the source code. For C, C#, Java, PHP.
- Stampsy: Publishing platform for the iPad that makes content creation easy in a new presentation and ad format. Results can be shared via social networks.
- Wiresurfer: Online marketplace for the best telecom deals for small and medium businesses; updated daily, no fees.
- Zeppelin: Promises "business insights based on social media" - intended for teams of business users ranging from 5 to 30 people.
- GivingTrax: Cloud-based service that helps track donation requests, corporate giving and results.