I attended the SDForum Quarterly Venture Breakfast with PWC yesterday and there was a lot of talk about capital efficiency from the VC panel. Capital efficiency is nothing new, but under the current economic scenario all the VCs seem to be chanting the same mantra all of a sudden.
There was a recent popular blog post by Fred Wilson, a VC and principal of Union Square Ventures titled Capital Efficiency Finds Its Moment that brings this into spotlight. He says:
When capital is scarce, smart people figure out how to do more with less.
This is really what most all technology executives are trying to figure out today. It is really about how to think long term, how to ride out the downturn, but at the same time come out at the other end with innovative products in the marketplace that will not only ensure your company’s survival but help establish you as the leader.
Globalization of your engineering organization could be one of the ways to achieve capital efficiency. This is nothing new, everyone is familiar with engineering outsourcing and offshoring. But the key question is how efficient is your global engineering organization. Be it engineering outsourcing through a partner or your own captive centers, are you acheiving the desired results? Are you attaining the innovation and performance that a local team would have brought vs going offshore?
My take is that you should consider your global engineering initiatives very carefully. It is not about cost/resource/year but performance and outcomes. Do not setup or expand your captive or outsourcing partnership if the outcomes are not guaranteed.