It's hard to argue that technology startups aren't sexy. They get all kinds of media attention, especially when investors give them a vote of confidence; they have the potential to make millionaires of people in one fell swoop, and sound business plans are typically optional (as are, most of the time, profits).
As a CIO or senior IT leader, you may come across compelling products and services offered by startups. But should you bet any part of your business or operation on them? As it turns out, there are both risks and rewards when it comes to working with small, flexible and disruptive companies. Here are five points to consider before your business turns to a startup.
Pro: Startups Tend to Be Disruptive
The fruit of that disruption can be valuable for businesses. The idea for startups often revolves around taking an existing process or product that's "broken" and fixing it in a systematic, replicable way - and often in dramatic fashion.
Think of some common business-related startups. Expensify saw a need to reform and recreate the often terrible process of submitted business expense reports for reimbursement. It created a system where employees can take pictures of receipts, have them imported directly into an expense report (even the amounts and descriptions on the receipts are read by optical character recognition technology), and submitted for approval. This saves hours of manually creating spreadsheets or taping paper receipts and mailing them to corporate accounts payable departments.
TripIt started because airlines and travel agencies were terrible about being able to put coherent, cohesive itineraries together for frequent travelers. TripIt makes assembling your confirmations and other travel documents a cinch by letting you email those receipts when you get them. TripIt scans them, puts them into a highly readable, accessible single itinerary and then monitors your plans for changes. It disrupted a very inefficient process.
Amazon started Amazon Web Services because it knew spare computing capacity, available by the hour and scalable as demand warranted, would be highly desirable for all sorts of business. It disrupted the process of buying expensive servers, storing them in expensive data centers and using expensive IT administrators to manage those machines, all by making it as easy as clicking a few buttons and entering a credit card number to access compute resources that otherwise cost hundreds of thousands of dollars to actually own.
In other words, startups are often attractive because they find a way to solve complex problems or make inefficient scenarios much more efficient. There may be a significant payoff in using a startup's product or services in terms of both money saved and efficiency and productivity increased.