Getting Outsourcing Right

I wrote this guide for my Founder Institute class. Many students will be outsourcing for the first time and I want everyone to get it right.

Others can also benefit from it. Feel free to share your thoughts. I will add them here.

Who Can Benefit

This guide is for individuals or small firms who

• Want to outsource small to medium level projects i.e. budget of less than $25000. 
• Their core competency is non IT. 

Bigger firms:

• Should have in house IT people
• Outsource less complicated project requirements. 
• Should also ensure that in house IT people manage remote team(s) and give them constant direction, follow up with them.

Where To Find Talent

Depending upon size of the project, options range from friends to outsourcing company. This is in order of precedence, best first.

• Your friends: If you need advice on IT project and know a good IT person, approach them. Don't forget to treat them with pizza ;)

• Marketplaces: Elance, oDesk etc are marketplaces where you can find both individual and companies to outsource. They have controls in place to protect interests of both parties. Small companies or first timers should use these.

• Outsourcing Firms: You can find many from the marketplaces. Try to avoid them or filter them based on the following section.

How To Select Talent

Try not to select outsourcing firms: In a service oriented business like software outsourcing, they are middlemen. Efficiency increase and cost savings can only be done by cutting down middlemen. If you must hire them, make it a point that you have direct access to people working on your project. Marketplaces are full of talented individuals. Try to form your own team. It will require more effort initially but it be more fruitful.

Don't select lowest bidder: Outsourcing is not just about cost saving, it is also about finding competency which you don't have in house. Worst mistake people make is to select lowest bidders. They get burnt pretty heavily. Select lowest bidder but have filtering criteria.

Setting filtering criterion:

1. Check ratings
2. Important: Also check, how often applicant is rated. Many a times people chose not to rate if job was bad. Rate of rating is a hidden filter that you should have in mind
3. Check both negative and positive feedback

Once you follow this next step is to interview some people who you think have right potential and have made the right bid. If you are non technical, ask them general interview questions or take help from someone who can evaluate candidate's skill.

Important: If you have no idea about interview. Ask the candidates to take tests in the domain that you are looking expertise for or hire someone who can take interview.

How To Manage Project

If you don't have in house IT talent, best way would be to hire a freelance project manager based on the points listed above.

• Make sure your vision is clear to everyone in the team
• Everyone understand their responsibility
• Communication channels are open
• Have heartbeat meetings at least once every three days

Things Not To Do

• Frequent follow up and pestering: Make sure people concentrate on working rather than sending you reports.

• Being non communicative: You will have to ensure that you are there when guidance is required.

• Being non listening to problems: Don't have a "I hired you" attitude.

In A Nutshell

• Try not to outsource directly to companies
• Always outsource through a marketplace
• Don't fall in the cheapest trap
• Take help in selecting a team if you have never done that
• Have filtering criterion 
• Interview
• Hire a project manager if you have no idea about IT and project involves multiple roles
• Have your development iterations prepared
• Follow up
• If things are not working still, seek help from friends, others who have outsourced

Hiring Notes

1. Someone with four out of four good ratings may be better than someone with 10 good ratings out of 40 projects and no ratings on others. 
2. Consider new candidates too based on following
1. Work history outside marketplace
2. Initiative taking i.e. if a) open source contributor b) have multiple pet projects