Outsourcing for the Right Reasons

Marty Cagan argues that many companies outsource for the wrong reason, namely cost savings, when they should outsource to assemble the right product team. He notes that Silicon Valley's high living costs push talent elsewhere, and points to strong talent pools across many regions. He cites a distributed team and the virtual organization MySQL as examples of success. He stresses that productivity differences among individuals can far outweigh apparent financial savings, so the team's composition should drive location decisions.

01Key takeaways

• Outsource to build the right team, not to cut costs.
• Look beyond your local talent pool when expensive cities limit who you can hire.
• Productivity differences among peers can be far larger than salary differences, so value skill over headcount.
• Distributed teams are harder to manage but can unlock talent a centralized company cannot access.
• Keep headquarters roles that need close executive alignment, while considering remote placement for others.

02Key sections

Outsourcing for the wrong reasons

Cagan observes that outsourcing results are mixed and that the core problem is usually motives, not process or language. He argues outsourcing should be about getting the right people rather than saving money.

Talent beyond the local market

High living costs in Silicon Valley mean desired hires often cannot afford to live there, so companies must look to regions such as Eastern Europe, India and Australia. He highlights the value of specific individuals over location.

Distributed teams and virtual organizations

He cites a team spread across several countries and MySQL as a fully virtual organization that taps global talent. Managing such teams is hard but can enable outcomes a centralized company could not reach.

Productivity outweighs cost

Cagan notes productivity can vary up to 20X within the same job class, so a small team of proven people can beat a larger, availability-based team. This gap can dwarf perceived savings.

Where product roles are heading

Some work such as customer service, QA and engineering is already moving away from headquarters, and he sees full product teams, including product management and design, going remote as well.

03From the post

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Summary and takeaways written by PM Atlas; quotes are short excerpts. © the original author.