Mr Lewis

Event Report – Outsource Offshore 10-Mar-11

From the Churchill Club event of 1oth March 2011

With

Pete Williams – Founder, Preneur Marketing
Alex Levashov – Principal, Altima Interactive
Linh Hoang – Owner, Red & Black Solutions

Notes by Brendan Lewis

What are we talking about here?

In simple terms, outsourcing offshore means you can:

  • Build an validate web based business quickly and cheaply – e.g.   Have the idea, knock up a wireframe of the website, and have it produced in a week  by people being paid less than $15 hour.
  • Become vastly more productive. – For instance , spending an hour per day per person, managing people doing your work for you at a lower rate, means that you could be profitably producing 64 hours of “your work” a day.
  • Have a VA (Virtual Assistant) at $6ph in the Philippines rather than a PA (Personal Assistant) at $30 ph in Melbourne.

Firms in the western world, e.g. Australia, the US, the UK, Canada are using foreign workers every day to perform tasks cheaply (e.g. bookkeeping at $4ph being resold at $200ph).  www.ODesk.com (a website for finding and managing outsourced workers) has had US$2.6B of revenue go through it since it opened its doors.  It currently has around 1M freelancers in 250 countries offering their services.

Outsourcing offshore isn’t just accessing cheap labour though, its about what Tim Ferris calls Geo arbitrage.  Accessing:

  • A global talent pool.
  • Workers in different regions who will work whilst you sleep.
  • Workers who have full time jobs, but may wish to supplement their income and have available capacity.
  • Workers who will work for a much lower rate than locals.
  • Workers in countries where currency fluctuations currently make their rates cheaper than yours.

So its not just the $4 an hour crowd, you could be paying part time workers $500 a week.

Web based recruiting and management tools like:

  • http://www.odesk.com/
  • http://www.elance.com/
  • http://www.vworker.com/
  • http://www.remotestaff.com.au/
  • http://www.onlinejobs.ph/

and many others are being used every day by Australian entrepreneurs, professionals and SMEs.

What Options do you have?

You really have 3 of options.

  1. Outsource a project or task to a freelancer.
  2. Outsource a project or task to a company.
  3. Outsource operations by build your own team of part timers or full timers.

Depending on what you want to do, your approach to selecting and managing people will be different.

The question was also raised, “when would you use a crowdsourcing site like 99designs.com in preference to outsourcing offshore?”  The answer was it depends what you want.  Crowdsourcing is generally a lot more expensive (although still cheaper than engaging a local) however you will get more design options, new ideas and fresh approaches.

You really do need to have:

  • Clarity of thought about exactly what you want to achieve.
  • Develop the skills to manage the relationship you want.
  • Be prepared to experiment,  learn, and get better.

Normally anyone who starts the process simply trying to get $4 an hour workers will get burnt through poor quality work and not recognising the risks that are inherent at the price point.

On selecting Suppliers

Selecting the right supplier can be difficult.  Some overarching points.

  1. Expect to make mistakes and learn, not get it right first time, so try some small non-critical tasks first.
  2. Don’t expect perfection.  If the resources were good at design/marketing/reading your mind, its unlikely they would be working for $4 an hour.
  3. Hire for existing skills, not for someone you need to teach how to do the job.  However when you are employing permanent staff, you need to grow them with training.
  4. Keep your promises – these people are concerned you will try to rip them off.

In terms of specific supplier  selection advice.

  • Start with simple, non-critical tasks until you get good at writing briefs and selecting people.
  • When you post your job you will get lots of responses and many won’t have even read the details of the job.  Therefore add something like, “write Banana in the first line of your response”.  If they don’t, ignore them.
  • Maybe split your tasks into two pieces and select 3 people to do say, the first 10% then select one to complete.  At this price it doesn’t matter there is doubling up.  Lots of mini tests when selecting, avoids heartache downstream.
  • Remember you can post a job but only invite one person to do the work if you want to test them further and still take advantage of the off-shoring website’s features such as payment escrow’s.
  • Avoid anyone who provides a generic response.
  • Always use people with a high rating.  But remember that people are comfortable adding positive feedback and are reluctant to add negative feedback so pay attention to the number of jobs that do not have feedback recorded against them.
  • Get sample work from all of your short list.
  • The supplier’s portfolio may look wonderful, however if it’s a large company, be wary – you may get the junior assigned to your project.
  • Consider outsourcing a portfolio of work to a consultant who then manages the outsourcing for you.
  • Consider outsourcing work to company, rather than an individual if you want something like cutting edge SEO knowledge.

On Countries

The following experiences on countries for outsourcing to was offered.

Just because its overseas, doesn’t mean its inherently more risky.  You are just as likely to get ripped of in Carlton as in China

China – not particularly risky, just difficult to communicate with. Some great software engineers and designers.

India – Very formal British style English that sometimes can be difficult to understand.  Low cost.  Indian software engineers are very good but can be difficult to deal with and are very pushy.  Some of the panellists would not deal with Indians at all, due to the high incidence of scams.

Pakistan – Considered to be much easier to deal with than India, but similar apart from that.

Philippines – Low cost assistants with good American style English.  Roughly the same time zone as Australia

Spain – Has some great designers, but not particularly cheap.

Ukraine – The Ukraine has excellent technical universities and consequently very high quality software engineers.  In general terms dealing with people from the Ukraine was considered less problematic than dealing with engineers fro Russia.

USA – Has some great designers and software engineers, but not cheaper than Australia.  The chances of running into a scammer are high.

Payments & Pricing

Choosing Fixed Price versus Time & materials is complex.

  • Buyers generally love fixed price, but the supplier then wears the risk and prices higher  accordingly.
  • Buyers generally hate time and materials as they wear the risk, but they generally get the project a lot cheaper.
  • Different skills are required by you to manage a fixed price project (scope creep) compared to hourly rates (briefing effectiveness).

As a general rule:

  • Outsource a task = Fixed Price.
  • Outsource repetitive tasks = Piece Rate.
  • Outsource operations = Time & Materials.

When outsourcing a large, fixed price contract, Milestone payments are the norm.  In general terms 25% and 25% on completion.  Other payments will be matched to delivery of relevant milestones inside the project.  e.g. 10% on sign off of the detailed design specification.

A good method of determining whether you have the right price is to post a job at two different prices and see whether the number of applicants drops off.  e.g. Post a job at $2,000 then post it at $200.  If you only get say 25% of the applicants you know that $200 is too low, if you get the same amount of “real” applications, then you know $2,000 is too high.

Don’t expect to get the best prices when you start out.  See it as a learning process, and you will be able to access better prices as you become more skilled in selecting, briefing and managing outsourced suppliers.

Payment methods should always be discussed up front because the transaction fees will be material to the supplier these lower rates.  e.g. O’Desk charges a 10% commission.  It can be extremely difficult to pay people if your bank won’t talk to their bank.  Paypal however is a common solution.  Recruitment companies can be used as payment intermediaries if you are using one.

How to manage offshore projects

The three key skills of an effective outsourcer are:
1. They do their research and no exactly what they want to achieve.
2. They learn how to manage outsourced teams.
3. They see the process as a learning curve, they practice and get better at out-sourcing.

So how do you specify your website idea, when you are not an IT professional?

If is a simple website:

  • Create simple layouts (wireframes) of every page in PowerPoint or keynote, or take photos of drawings and send them through.
  • Draw out the work-flow by hand (and photograph) or with a tool and send via email.
  • Use partially free tools like http://www.jingproject.com to record the computer screens you like the look of, with your audio commentary – and send the resultant video off.
  • Make sure you go through design samples of what you like and don’t like.
  • Focus on the outcome or results, not the process.

If it is a complex website:

  • Hire yourself a project manager or architect to work with you to write up the spec.
  • Create a detailed specification as possible.
  • Use tools like
  • A good developer or development company will deal with inadequate briefs by asking lots of questions. They also do this if the brief appears not to make sense. (e.g. build facebook, why would you do this?)

How to Manage Offshore Staff

Offshore staff need clear simple instructions on the performance of routine and non-routine tasks.

At the end of every day, Pete gets an email that says 5 things.

  1. What did you set out to do today
  2. How long did you estimate it would take and how long did it actually take?
  3. What didn’t you achieve and why?
  4. What do you need need from me and by when?
  5. What are you planning on doing tomorrow?

Two great iPhone based tools for responding to emails on the fly or giving directions when you are out enjoying yourself are  www.Dictamus.com and www.SayItandMailIt.com  Both allow recording then email with recording attached, to either  a default address or selected email address.  Dictamus also allows the recording to be automatically FTP’d or sent to DropBox.

Minimising problems

When developing a relationship with a potential O/S staff member, the following process helps.

  1. Select someone to perform a task.
  2. Post another task, but invite only them.
  3. Hire them part time.
  4. Hire them full time.

Accept that if anything goes wrong, its your fault for not briefing properly and not making the system full proof.  Really good people (designer/developer/marketer) won’t be available as they will be living in the USA making $125K+ p.a.

Understand what regular tasks you wish to outsource to someone.  Otherwise in week one they will work 40 hours, week 2 they will work 2 hours, week 3 you fire them.

Don’t allow access to your personal email, instead  setup forwarders or share a separate IMAP folder with your Virtual Assistant.

Don’t give anyone access to your credit card – instead issue a Visa debit card that you can top up with the amount that your VA needs to have, and you are comfortable losing if things go wrong.  http://mycanvascard.com offers this service.

Organisations such as oDesk automatically handle things such as IP ownership and Non-disclosure Agreements.

Rather than getting someone to implement new software for you, use the “share your screen” option in Skype to have them talk you through the implementation.  That way they don’t get access to your passwords.

Change your passwords regularly.

Let your offshore staff in on the big picture so they feel comfortable (they are also nervous about being ripped off). Invest in them via training to create loyalty and a sense of team. There is plenty of cheap online training around at places such as www.learnable.com

And those links again were…

Web based recruiting and management tools like:

and many others are being used every day by Australian entrepreneurs, professionals and SMEs.

Use partially free tools like http://www.jingproject.com to record the computer screens you like the look of, with your audio commentary – and send the resultant video off.

To manage a complex website, use tools like

Two great iPhone based tools for responding to emails on the fly or giving directions when you are out enjoying yourself are:

Use Visa Debit Cards from organisations such as http://mycanvascard.com/

Offering cheap online training from resources such as www.elarnable.com builds staff loyalty.

– end –

blewis

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