A strapdown inertial navigation system (INS) requires the reference velocity form a log during in-motion gyrocompass alignment. However, the outside lever arm exists since locations of the log (located on the bottom of a ship) and the strapdown INS (located in the compass cabin) are different from each other, which would lead to errors of reference velocities that are brought into gyrocompass alignment. In order to study the effect of outer lever-arm on gyrocompass performances, we deduced the expressions of velocity errors aroused by the outside lever arm in the cases of pitch, roll and heading changes. Meanwhile, we constructed the relationship between velocity errors and gyrocompass alignment errors. Furthermore, we obtained effects of the outside lever-arm on gyrocompass alignment. Theoretical analysis and simulation showed that the outside lever arm could lead to level and heading misalignment errors for gyrocompass alignment which increase with amplitudes of sway and turn as well as length of the outside lever arm.