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A Look Behind the Outsourcing Curtain

It’s hard to search for any company without finding an outsourced alternative. Though a user of outsourcing (I feel like I’m at a recovery group meeting) in the past, there were some hard lessons learned along the way that I thought would be helpful to share with you.

Before we start, the assumption I’m working with for this post is that outsourcing implies off-shore or out-of-town. We can explore the same analysis to what we like to call ‘local-sourcing’ (finding a local, outsourced alternative that is in your time zone/language/area code) in a later post.

Another assumption is mainly dealing with outsourcing web development/design and not content writing or other freelance ventures.

First, here’s are a few of the common reasons people outsource:

  • Technology has made the world smaller
  • Too expensive to hire people locally; “Man, it’s only $20/hour!”
  • Need to deliver a finished product for a client but you know their budget won’t allow them to do it without finding cheaper development

Let’s pick apart the reasons:

It’s a Small World After All

There is the notion that because there are great tools like GoToMeeting.com or Skype or countless others, we somehow think that experience is the same thing as being able to sit face-to-face and describe a project or convey the complexities of an issue. For some larger companies with expensive conference calling technologies that might be the case. For Joe Small Business, not so much.

Here are some things to consider:

  • You have to factor in the time change. You might have to be in your office for a 5a call so you can catch your development team before they leave for the night
  • Any urgent requests will have a minimum turn-around of 12 (more like 18) hours so if there are bugs found after a roll-out or any issue that needs urgent attention, you’re out of luck
  • There is significant time involved in communication on your part
  • Some countries have spotty Internet connections so that could be a factor in server transfer speeds, email exchange and communication.

Save Money By Going Off-Shore

This is where the wheels come off a bit. Think about this scenario a bit:

You need a project completed that will take a local developer 200 hours to complete. Their rate is $125/hour. The estimate cost is $25,000 for the project. In comes Outsource Option B. Now that 200 hours of development is at a lower rate (let’s say $25/hour). Your cost is now $5,000. Wow! Great! I’m in! But wait…there is PM time, Account Manager Time, Testing & QA time, Documentation Time. All of a sudden the 200 hours is 350 hours bringing the total to $8,750. Still quite a savings. But then the kicker. How much is your time worth? How much time will it take to communicate, test, run the project? Will is just be you or will there be others in your company involved? Let’s assume 2 people working on the project. Let’s also assume their hourly cost breaks down to $85/hour. They have to spend about 40 hours each working on preparing documents, meetings, calls. Now you’re at $15,550.

All in all, you might save some money, but there are a lot of variables considering the number of people involved, the support once the site has launched, the potential travel, the intangible “I’m so stinkin’ annoyed with this project” cost that all play a role in and need to be factored into the actual cost of that job before buying in to the outsourced sticker.

How Badly Do You Want The Job?

Let’s face it, for most it all boils down to cost. Either the customer is trying to get something accomplished within a certain budget or you’re trying to provide something cheap enough to get the gig. Outsourcing sounds like a great option as it allows for overhead to be lower thus reducing the overall cost of the project to a level someone is willing to pay. Don’t compromise. For yourself and for your customer, the outsourced option needs to be heavily weighed beyond the price. There should be full disclosure as well as clear expectations when going that route. Sometimes the better route is to help the customer get more realistic in their expectations/budget and not try and squeeze in something that will probably result in a losing venture for all involved.

“I disagree, I had a great experience with outsourcing!”

Great! So have I, in many cases. For great Joomla custom development I have worked with a wonderful company in Minsk, Belarus, called Belitsoft. I even travelled to their office for a large project and worked for a week together. Great company, great leadership, great future. One major dilemma still exists – they’re in Minsk, Belarus, I’m in San Diego, CA. As great as the partnership has been, there have been those times that we have been really in a tight spot as something was discovered Friday afternoon PST without any option to fix before Monday.

What’s the solution?

I believe at worst a hybrid of outsourcing and local-sourcing is appropriate. Find a local company (hence local-sourcing) to partner with and maybe have small elements outsourced beyond that if necessary is ideal – someone you can sit across a table with from time to time or brain-storm on a white-board has its place. It is definitely cost effective to find outside help for projects, but take caution in the distance you are willing to go.

Overall my encouragement is to analyze the entire project and time required both on the development AND the communication.

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