OutsourceSurvival.com

This article discusses the 4 different business models used by outsourcing companies. Each of these has distinct advantages and risks. Which one is right for your next project? Read on and find out!

This is the second article in a 2 part series. You can find Part 1. The ‘3 Flavours of Freelancers’ here. It discusses the features and risks associated with the different types of freelancer.

Part 2. The 4 Flavours of Outsource Service Providers

So much choice... Does it really matter?

This article discusses outsource companies, as opposed to individual freelancers. Hiring a company to do your work can offer some significant advantages over a freelancer, but it does come at a cost.

Outsource Service Providers- General Information

Before we dive into their respective models, here are some of the general pros and cons of using a service provider/company instead of a freelancer.

Pros

• May apply more rigorous development and project management systems to the work, lowering the risk of failure
• May be able to offer a range of professionals. Diversity of skills allows for multiple tasks to be carried out simultaneously
• Scalability, can often add more people or remove people at short notice
• May appoint project managers or project leads to manage the team for you. This gives you a single point of contact and a single point of accountability if something goes wrong
• Can ‘crank out’ large quantities of work in very short period of time. The easiest way to get bigger projects done FAST!
• In-house infrastructure such as hosting/development environments can reduce your costs in the short term

Cons

• Less visibility of work (you’re likely to have groups of people doing your work, without knowing who they are or their skill sets)
• A greater tendency to ‘black box’ work. That is, hide the work from you until it is ‘finished’ in their opinion, and then ambush you to signoff on the project on the due date
• Can have trouble with communicating requirements because of ‘Chinese whispers’. Often there is a single representative appointed to act as a go between, screening you from direct interaction with the people doing the work
• Some companies are skilled at extracting more money for less work. Particularly if they control development environments, you could find yourself held to ransom by an unscrupulous provider
• May get lower skilled labour assigned to your project, resulting in lower quality output (the classic bait and switch)
• Larger companies may be less committed to your success if they have a high volume of work. One bad review can be buried very quickly, and may be less expensive than fixing the project. Sucks if it’s your project they decide to cut their losses on
• Jack of all trades mentality. ‘We’re experts at everything’ attitude can result in generally poorer quality product, and many companies are reluctant to admit which areas they are stronger or weaker in

Where do they come from?

Online, Outsource Service Providers come from just about everywhere. Like freelancers, they tend to be predominately from developing nations; however unlike freelancers, a large proportion of providers have created ‘local’ presences particularly in the US and UK. There are also a lot of locally based companies that do the opposite to compete in this space. In addition to their local business operations, they create a business unit offshore and send work there to be completed at lower cost, whilst charging you a premium rate.

Below, we’ll discuss the 4 distinct models that I’ve come across are:

• Type 1: Standard Full Service Providers
• Type 2: Specialised Service Providers
• Type 3: White Label ‘Full Service’ Middlemen
• Type 4: White Label ‘Hands Off’ Middlemen Read the rest of this entry

This article discusses the different models used by outsource service providers and freelancers. We will talk about the different types, as well as the pro’s and con’s associated with each. These differences can have a major impact on the success of your project, and it’s important that you select the right one for the right situation.

This is part 1 of a 2 part series. You can find ‘Part 2. The 4 Flavours of Outsource Service Providers’ here.

Note: to my North American friends.. I apologis(z)e for the repeated spelling of flavoUr… I just can’t give that up to U

Part 1, The 3 Flavours of a Freelancer.

More flavours than you care to know about

If you jump onto one of the many outsourcing/freelance websites you could be forgiven for thinking that all outsourcer’s are the same. Sure, there’s an obvious difference between a solo ‘freelancer’ and a company; some have a logo and a website, some don’t. But there are differences that run deeper than that.

Why should you care?

As we’ll discuss, if you want a successful outcome on your project you need to understand who you’re hiring and how they work. This will affect the:

• quality of their work and what they can offer,
• work they can do well, and what they will likely do poorly,
• how they interact with you,
• price they are likely to demand,
• ‘value for money’ that they can offer.

As always, I’ll start with a list, and then describe each in detail. In my descriptions below, I’m talking from my personal experience, and I’m not dealing in absolutes. So you may find someone who has all of these qualities or they may have none. I’ve broken the article into 2 parts, as it was a little on the long side. So here’s the list:

Article Part 1. 3 Flavours of Freelance Providers:

• Type 1: Casual Freelancers
• Type 2: Sleepless Professionals
• Type 3: Fulltime Professionals Read the rest of this entry

This article is for those who don’t have a technical bone in their body, and feel intimidated by the prospect of hiring some guy in India (or wherever)to do it for them. Aside from convincing you that ordering a website IS like ordering a hamburger, this article will give an outline on what you need to know to build your own website.

There is a common misconception that if you don’t know how to muck around with code, you don’t know enough to outsource the building of a website. Let’s just burst that bubble right now- it’s easy. Anyone can do it. Yep anyone, even if you’re still not sure what a blog is, and you think .NET is just a web address

A Website is like a Burger

mmm weburgerlicious...

Ok, here comes my food analogy… it’s late and I haven’t eaten dinner. Bear with me it should eventually make sense. The premise is that you don’t need to know how your favourite hamburger is made to order it or enjoy it. Likewise, you don’t need to know what’s in the guts of a website to have a freelancer build it. In fact, just like with food sometimes it’s nicer not to know. Blissful ignorance can be a powerful thing

However, just like buying a hamburger, it’s up to you to decide what fillings, buns, and sauce you want. Those decisions are your responsibility. There’s nothing worse then waiting for someone to order when they haven’t worked out what they want. They fumble around, change their mind, and keep everyone waiting. Often they’ll ask their friend or the person serving them ‘what should I get?’ Desperately seeking to dodge that tremendous commitment and get someone else to make the decision… then in the heat of the moment, they order something they didn’t really want. Don’t let this be you when it comes time to build your site. Read the rest of this entry

There are literally hundreds of websites now where you can hire individual freelancers or contract to full service outsourcing companies. Your choice could make or break your project. So how do you find a good one?

This article is part of the series “How to Find a Great Freelancer Online”.

In this article we will discuss the best websites to find a high quality freelance or outsource service providers. These are the sites that I’ve used, or had personally recommended to me by other entrepreneurs. I consider these to be the market leaders for services, and I really don’t think there’s much need to look further. Just like I don’t really need more then 1 or 2 eBays… the same idea applies.

Without further ado, here are my top 4, in order of preference:

• www.rentacoder.com
• www.guru.com
• www.elance.com
• www.odesk.com

If you think I’ve missed an important one let me know and I’ll add it!

Want to blaze your own trail?

Suppose you don’t like the above four, what should you look for generally? These are the features you want as a minimum: Read the rest of this entry

By far the best way to manage change, is to not have any… but we all know that even with the best planning and the simplest task there are bound to be a few holes. 

Sometimes it may not even be you that causes the change- it could be your freelancer. So we need a way to keep it organised, and reduce the risk that the project will spin out of control.

In this article I’ve included a few examples of how things can break, and at the bottom is my current system for managing change in *any* small or medium project.

Read the rest of this entry

This is a brief discussion on controlling change within a live outsourcing project; in particular, ‘reducing scope’, or removing or simplifying functionality. This was a topic I was completely unfamiliar with when I first got into using freelancers. Over the course of a 12 month project, small uncontrolled compromises compounded each other, and in the end ‘broke’ many of the business objectives. Expensive rework, flawed functionality and a system that didn’t work as expected were the price I paid for inexperience.

On a smaller project, a few corners cut here and there may seem like no big deal, and sometimes they aren’t. On larger projects (starting at several $K), or projects that extend over longer periods of time (weeks/months) small reductions in functionality or simplifications of requirements can really start to have a negative impact on your finished product.

Why would you want to cut corners?
You’ve done your plan, you’ve worked out what you need, you’ve found a freelancer who has agreed to do the work. The obvious question is why would you want to cut anything out? Well from my experience, once a project (software in particular) gets underway a couple of things happen that will force your hand.

Your outsourcer for the first time actually takes a good look at your requirements. If you’re not careful, up until this point they’ll have been giving your requirements lip service. It seems totally crazy to agree to a project that isn’t understood… but that’s the way many do it. They’ll have been focussed on the sales effort, and will have committed only very limited resources to actually understanding your requirements. Now all of a sudden they’re responsible for building it and payday is guaranteed… all they need to ensure is that they can turn a profit on it. Read the rest of this entry

In a recent post on  Entrepreneur’s Journey blog, Yaro has an interesting discussion on being a successful entrepreneur. To (crudely) summarise the post, his point is that to be happy and successful you need to have positive patterns of behaviour. Do what you know you should be doing, and positively reinforce that behaviour (think positively about the actions you’ve taken). Check out the link to read it in full.

I read this post and it struck a cord. This is a battle I am currently waging, and one that I am winning for the first time in my life. I used to believe that fixing my behaviour would make me more successful. However, I now believe that behaviour is a symptom, not a cause. If you are struggling to fix your behaviour, you are probably focusing on the symptom and aggravating the cause.

Ok, so what does this have to do with outsourcing?

Both a lot and nothing Like many entrepreneurs I have a… shall we say ‘peaky’ personality. I experience high-energy high-productivity highs, and low-energy, low-productivity lows. For the last 6 months I’ve taken the conscious effort to ’smooth’ this out, by being more disciplined in how I think about things; in particular problems and challenges. I’m not bi-polar, but I’ve discovered that I do have some thought processes that promote ineffective behaviour.

DISCLAIMER: I am not a fluffy-wuffy touchy-feely kinda guy.

I am a big fan on the power of being positive, but I’m not into new age fluff. However, I recognise that I struggle to sustain ‘positivity’ and am prone to fall off the wagon. As part of a long search for a solution, I picked up a book called Learned Optimism: How to Change Your Mind and Your Life written by a renowned psychologist Martin Seligman.

Without sounding like a vegetable-kissing-tree-hugging-hippy, this book has dramatically improved my life. It will help you understand your cognitive thought processes- it is not fluffy, and will not have you chanting-positivity or star jumping at dawn. It does give you a great set of tools to apply discipline to your thoughts. Read the rest of this entry

This article is a brief introduction on understanding supplier risk for outsourced projects. There are a lot of issues only just touched on here, but we’ll cover risks in more detail in future discussions.

You may have heard of the corruption scandal that has rocked the Indian IT scene over the past few weeks- the near collapse of Satyam (I think they’re negotiating a lifeline at this point). They’re a multi-billion dollar company who provide software and outsource solutions to the worlds biggest companies. You can read about the scandal here. Basically it seems that the founder and managing director fingered the books to the tune of $1.5 billion USD. Now there’s a lot of jobs at risk, some very upset shareholders and clients, and a big bruise on India’s international image. Many commentators have likened it to the Enron scandal that rocked the USA, a shining example of corporate greed and irresponsibility. If you’re not familiar with the Enron collapse you’ll find all you need here.

But what impact does it have for small business outsourcing?

Whilst it is a huge scandal, it is of very little significance if you’re considering outsourcing. If you mention outsourcing overseas to  your friends they may now respond with ‘No way man! Didn’t you hear about Satyam?’.

It has again stirred up the perception that overseas companies are somehow worse than the similarly dodgy businesses you can find at home. But those perceptions come and go… 10 years ago it was ‘India is going to steal the world’s IT jobs’ (which obviously didn’t happen :)), now it’s ‘Can we trust them with our customers and our money?’.  The same news outlets discussing corruption in foreign businesses this week, were discussing corruption in US financial institutions last week… so it should all be taken with a big grain of salt. Then there’s also the shady practice of ‘Pheonixing’ that is a problem in Australia and the UK (explanation here).

If anything, I’m more concerned about what this whole sad mess says about the accounting firm auditing the Satyam accounts. If you can’t trust the auditors to get it right… who can you trust?

Anyway, getting back to outsourcing..

No safety net means you need to manage risk carefully…

For the purposes of Internet based outsourcing, it is a timely reminder that suppliers of all kinds can do the wrong thing, whether they are across the street or across the globe. Anyone who’s been caught out before… like me… can tell you that having a water tight contract or government regulations on your side doesn’t fix the problem, and doesn’t make spilt milk any less spilt. If you naively believe that these things do offer protection from a supplier failure (like I did), one day you may be unpleasantly surprised. My advice, don’t ever sit on your thumbs thinking that the contract terms will ultimately be your safety net or that government regulations will protect you from a failed supplier.

When you outsource overseas, you will be without even these simple protections… Want to go to Croatia to dispute a $1000 contract? (yeah right) Are you familiar with consumer protection laws in Pakistan? I’m not I believe this is a good thing for the small business owner however. The realisation that you are playing without even the illusion of a safety net helps you stay focused on getting an effective outcome, and being careful about how you manage the project risk. One thing I recommend you always do is never, ever, ever, ever, pay in advance!

Good project management is the answer to problem suppliers. It will protect you, by minimising your chance of failure. And one aspect of that is planning what you will do if things do go wrong; so that if your project does go haywire, you can act quickly and decisively.

Always have a Plan B.

In your planning, consider the risk of total failure of the project or outsourcing company. If you’re using an individual, consider the ‘hit by a bus scenario’. What will you do if they stop responding to phone calls or email? What if a dispute arises that is simply not resolvable? You need your Plan B. Consider:

• what is the likely impact on your business/customers?
• what is the likely impact on other projects you may have running?
• who can pick it up and complete it? What needs to happen for that to occur?
• if it’s a work in progress, can you get access to what’s already completed?
• if you can get access to it, is it even useful to you? (it may not be!)
• is partial completion likely to mean total failure? If so, is there any way to structure the project into useful ‘chunks’ so that total failure is less likely or less significant? (more detail on this in future posts)
• can you afford to cut your losses, dump it, and walk away if need be?

Special note for software projects: If you’re paying someone to do a web or software project, insist on access to source code before payment. This means you can have it checked and verified (which is particularly important if you are not a coder monkey yourself!). They will not be happy to do this unless it is planned for and negotiated upfront, but it is the best protection on larger projects.

By taking these things into consideration, you can structure the project to limit your risk. For example, you may insist on daily or bi-weekly status reports. Or, you may decide that you’ll give half the work to company A, and half to Company B. Or you might appoint a manager from a different organisation to independently monitor performance and report to you. And remember, all of these controls are only minor cost increases, labour is quite inexpensive depending on where you are hiring from. But they do need to be considered during the planning.. not on the fly.

If the project is so important that there is no viable ‘plan B’ (it’s a ‘make or break’ piece of work) use project milestones to limit your exposure, and stick to them doggedly. Don’t release payment until your carefully considered milestones are met or exceeded (and independently verified if you can’t do this yourself). At least then you may get out with your shirt if the worst case scenario does occur.

Set a Stop-Loss…

This strategy is a similar concept to using a Stop-Loss when investing. It is the predetermined point in time at which you declare the project failure or are at an increased risk of failure should you no longer contribute money/time. Before the project is underway, you should (unemotionally) determine the success/failure criteria. Usually, you’d do this using project milestones. If the project can’t achieve a milestone within a particular cost/timeframe then the project is cancelled. Limiting your losses.

Doing this while the project is in play is difficult, as you’ll often have a very optimistic freelancer telling everything will be fine“just wait until next week…”. Combine this with the undesirable feeling that you’re going to lose money, and it becomes very easy to let the project run and run. So make these decisions during your planning, and if it eventuates stick to it.

The idea is to save you from your own blind optimism… if things have gone very badly and are getting worse, probability is NOT favoring a turnaround. It is unlikely that tomorrow is the day that everything will ‘come good’; that the quality issues will go away, or that the freelancer will miraculously start following instructions. It is therefore foolish or wasteful to continue burning time and money. If you have planned for this unlikely and unfortunate occurrence, then you’ll have a well considered point at which you will shut the project down. This will save you time and money, and should mean that you should still have the resources to finish it with someone else, scrap it and start again, or move on to something else entirely.

Despite the gloomy discussion, it’s been my experience that most projects work out just fine or are recoverable if you practice good project management. And this blog will give you the tools you need (eventually )

Welcome to a shiny new blog about making the most of outsourcing/freelance services over the web. I’ve been talking about getting this together for over 12 months now, and I’ve finally taken the first few steps.

This blog is primarily targeted at small business users of these services, not providers (as I am not a provider I can’t offer much in this regard). I’m going to cover a pretty wide variety of topics, but in a nut shell I’ll be including:

• how to use web-based freelancers within your business;
• project management (with an outsourcing twist);
• process oriented business improvement, including strategies for efficiency and automation of activity;
• profitability improvement for small business (including recession proofing);
• entrepreneurship and small business issues.

The first articles to go up will be on the basic concepts and implications (as I see them) of using outsourcing as a business tool. Then I will start to delve more deeply into common issues such as management, value, quality, culture differences etc.

I am aiming to post fresh articles everyday. A bit of a slog with no readers, but hopefully I’ll survive the solitude I appreciate feedback, so if you have any questions or comments please leave them on the blog or shoot me an email. I hope to reach a stage where I can engage readers like you in dialogue. As anyone who has a blog knows these early stages are like talking to yourself, entertaining at first but there’s only so much silence you can take without going a bit loopy

Thanks for reading, more to come!

This blog is intended for people considering or curious about outsourcing (freelancing) within their business. It is primarily targeted at web based outsourcing, but will touch on other business, entreprenurial and project management issues. I aim to provide material that will support small to medium projects with budgets ranging $50 to $100k. This blog is not for large corporate/government projects with bloated governance structures, it is about being lean and getting the work done quickly, reliably and at the lowest possible cost.

About Me

My name is Hugh, and I am writing from Australia. I’ve been regularly using freelancer’s from a diverse range of nations including India, Pakistan, Croatia, Russia, Indonesia, Serbia, and China for around 3 years in my own business activities. I’ve started this blog because of the numerous requests and discussions I’ve had with both business people and professionals curious about using freelance or outsourced service providers, particularly those based overseas.

I have a background in business analysis and have worked for both large government agencies and small businesses. I have qualifications in ITIL and PRINCE2 methodologies… which will flavour a lot of my posts. I am passionate about process and profitability improvement for small business, because I know so many owners and entrepreneurs that work too hard for the money they earn. I hope that this blog can help a few entrepreneurs out there to make more money with less time and effort, by working ‘smarter’ not harder (horribly clichéd I know )

I’ve also lost a lot of money on failed projects over the years, so I hope that my bad experiences will help you have good ones. And like any good entrepreneur I’m hoping to leverage my experience to turn an eventual profit

My aim is to post fresh articles everyday. A bit of a slog with no readers, but hopefully I’ll survive the solitude I appreciate feedback, so if you have any questions or comments please leave them on the blog or shoot me an email.

I’m still getting everything setup, so it should all start to take form over the next month or so.

All the best,

Hugh