Sawickipedia

DIY/NIH: The Economics of Abundance and Startups

Fred Vogelstein’s interview with Eric Schmidt presents an interesting story about classic DIY/NIH impulses that comes from engineers and developers - in this case Larry and Sergei desire to build a financial system themselves instead of buying one from Oracle.  At every startup I have worked at this desire comes up.  Developers are builders and they like to build things and more importantly they like to know how things work which they often feel comes from building things themselves.  And as a business guy, you will often find yourself wanting to hit your head against the wall as your dev teams want to build things that should just be bought.  For instance at a fomer company, the devs tried to build their own CRM system.  Let’s just say that Salesforce.com is currently the CRM system being used there.  Lesson learned.

At some level hearing the Google story is encouraging to hear that what I have experienced with developers is not unique.  But it’s interesting how a lot of the innovation in the web 2.0 ecosystem absolutely flies in the face of the developers’ natural instinct to build it themselves.  Numerous VCs and entreprenuers have talked about how its easier and cheaper then ever to do an internet-based startup because you can outsource so many elements of the business - accounting software, CRM, hosting, email, storage and even CPU hp thanks to Amazon’s Web Services.  And in startups where resources are scarce (and money even scarcer), you have to leverage whatever cheap, outsourced alternatives you can so you and your team can focus on building the nugget of IP and value that makes all those back-end services unqiue to your customers.

Today only in enterprises where abundance is king - and Google certainly qualifies much like Microsoft in its hey day - can you even think (however irrationally it likely will be) about building or doing things yourself.  It will be interesting to see how the excess of profits that Google enjoys plays out in terms of building enterprise value or whether Google’s cultural bias to build things themselves ends of wasting billions of dollars of enterprise value.

Personally as I embark down my own startup paths, I can certainly tell you that I am big fine of the innovation in outsourcing and plan on outsourcing as much as humanly possible.