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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

Welcome to Part II of how to use customer feedback to select a freelancer. This article covers how to analyse and vet customer comments, as well as how to do a simple web background check.

This article is part of a series on How to Select a Great Freelancer Online.

You can find Part 1 here.

Read the recent positive comments

Don’t just take an average rating as your guide, jump in and read customer comments. In particular, find jobs that sound like yours and see what customers had to say. Were they ecstatic or just so-so? Check the English quality in the posts, if you find recurring grammatical errors, or strangely recurring comments. Not everyone is an English major, but sometimes these little things can help you identify falsified comments, or at least suspect ones.

Customer’s Seem to Have a Positive Review Bias

Be aware that customers are often coerced, begged, cajoled by their freelancer to leave favourable comments. The freelancer may also try and use their personal relationship with the customer as leverage to ensure that ‘minor issues’ are left out of reviews. Some flippant examples…

“Look how hard we worked for you, it COST ME money to finish your work!”

“Hugh my friend, it has been an honour to work with you. I will leave excellent feedback for you. I would be privileged if you would do the same!

Why mention this? Are they bad people for trying to sway your grade? No… it’s just business. A bit of a gentle squeeze can add a few points to their average rating, and a few extra dollars in their pocket.

The point I want to make is that glossy reviews are more the norm than the exception. Average providers with charismatic ‘front men’ will have very similar high positive ratings, to technically excellent providers. You need to look very closely to see the difference.

An average quality freelancer will provide a worse experience then an excellent one; but they’ll do a better job convincing you that there were good reasons why you had trouble! The fact that there is a positive bias in customer reviews is another reason why outsourcers with bad ratings should generally be avoided. Read the rest of this entry

This article follows on from ‘Why you should consider outsourcing – PART 1’ which you can find here. It discusses how outsourcing can offer your business a low cost, low risk avenue for achieving scale and labour efficiencies.

Nobody makes their own toilet paper.

It’s cheap, it’s commoditised, it requires a multi-million dollar infrastructure investment to make it, and you have to sell tonnes of it to cover your costs. Why would you want to go to all that trouble when you can pick it up at the supermarket for a few cents a wipe. If someone told you that you should make it yourself to save a few bucks on the cost of a roll at the supermarket, you’d think they were nuts right?

Have a think about what services you or your business consumes.

Are they commoditised? Are you consuming your limited infrastructure (office/house space, IT equipment, phone lines etc.) to produce goods or services that someone else could do more cheaply, because they have a volume, skills or infrastructure advantage that you don’t. If it’s done on a computer, or requires a phone line there’s a very good chance that you can achieve efficiency savings just by outsourcing it.

I know of dozens of business owners and entrepreneurs that stubbornly make their own toilet paper. Here are a couple of examples:

• a mechanic that made his own website. Looks terrible, puts an unprofessional face on the business and doesn’t generate income (as any business site should)… but he did save a few bucks by making it himself… or so he thinks. He bills his customer’s around $70/hr for labour, but values his personal time at $0/hr? Can’t help but think that given his long work hours, it represents several evenings that would have been better spent with the kids!
• a medium sized manufacturer who has created their own labels and packaging. Looks pretty cheap, and they wonder why they have problems convincing customers to pay a premium for their goods;
• a plumber that runs his own web marketing campaign. Does a good job… but the grunt work could be more effectively done by someone else for pocket change. He could be free to bill more hours or spend his off time relaxing instead of working.

Consider:

• Why pay someone $50 to do something when it can be done faster and better for $5? Even $3?
• Why spend hours of your personal time and energy on a task that someone else can do cheaper and better than you, and requires only a fraction of your attention?

If your business is profitable, you have even more reason to consider outsourcing. Once you’ve started to make money, it’s time to stop valuing your time at $0,  and start focussing on the essential activities that only you can do. How can you better spend your time to make more money, help more people, or have more spare time (or whatever your particular goal is). Chances are you have better things to do then spend 4 hours on something you aren’t skilled at, aren’t paid for, and causes you to put off work you’ll have to catchup on.

Now, obviously it’s a little more involved then just saying ‘I’ll get someone to do it cheap’ but the above points are at the core of why you should consider use of freelancers within your business. If someone can do it cheaper and better then you, it would be crazy to do it yourself right?

So my question then is, are you making your own toilet paper? Read the rest of this entry

This started out as 1 article, but started to get a bit on the long side, so for your convenience I’ve split it into two parts. Part 1 discusses purchasing power, whilst Part 2 discusses scale and efficiency advantages.

Successful outsourcing creates LEVERAGE and UNLOCKS your time so that you can focus on the things important to you.

Off load the junk, low value activities or the things that you don’t have the skills or resources to do efficiently. Doing this frees you to apply more resources (time/money) to the important activities within your business. And that means increased profit.

In this article I’m going to discuss the leverage advantages of using freelance providers. What do I mean by leverage? I’m talking about Purchasing Power + Scale + Efficiency. I’ll discuss these in the context of outsourcing below:

Purchasing Power: You’re actually a lot wealthier than you think…

If you’re reading this from the US, UK, Australia, Canada or any one of the first world nations your local currency has a lot of purchasing power. If you’ve ever travelled overseas you’ll know what I mean, $60 a night for 5 star accommodation, meals and drinks? You won’t find that at home!

Buying locally with your local currency means you only achieve 1 to 1 relationship; your dollar is worth the same to you as the guy that you’re giving it to. But shop overseas and you can achieve 1 to 20 ratio (or more), because your currency is worth more (relatively speaking) to the guy you’re giving it to. I’m not an economist, so I’m not going to try and get into the details of this effect, but to summarise; it works because of the relative wealth and economic stability of your country compared to that of another. Wages, living costs, food, standards of living tend to be proportionately lower in the less wealthy nation, and this has a direct impact on the cost/value of labour (what people will charge for their time and skills). For example, it costs less to put a roof over your head and food in your stomach in India, so the minimum price you can afford to charge for your time is less. Makes sense right? Read the rest of this entry