Outsourcing can save you 60-90% of costs

We all know that you can save a boatload of cash by outsourcing.  But, outsourcing is scary and risky because you have to deal with overseas companies who you have never met.  Only god knows what they will go to you — or if they will leave you high and dry.  The truth is that companies in America are very likely to cheat you and leave you high and dry. You might be able to sue them here, but getting taken for a ride is no fun on any side of the Pacific!  Outsourcing involves more skill when managing work and choosing companies.  There are cultural differences, geographical differences, and time differences.  It is harder to meet with your overseas counterparts in person, and harder to talk to them on the phone.  So, is it worth it to do offshoring, nearshoring or outsourcing?  If you plan on mastering the skill, you will save 69-90% on related expenses and I say — JUST DO IT!

Costs are deceptive – willingness to work is  a factor
It is baffling comparing costs when outsourcing tasks.  I have seen programming companies that charge $15 per hour and others that charge $180.  The irony is that the company that charged $180 refused to do business with me, and the company that charged $15 per hour took me on, and then refused to finish projects.  Those who say, “You get what you pay for” are simply wrong.  The reality is that you get people who either refuse to function or can’t function unless you shop around and find people who actually do function.  A rate of $15 per hour is not a real rate if you refuse to complete work — or if you say that the work is complete when you never started.  A rate of $180 per hour is equally meaningless when you refuse to take on new clients.

Definition – A REAL RATE is a rate that someone charges who is actually willing to work on a regular basis for that rate without putting you on hold for two months while they are busy with another project. Don’t compare rates unless it is a REAL RATE! And there is no way to tell what a real rate is unless you have tried out a company for 3 months and seen how they function.

Hour padding – adjust for slugginness and dishonesty

Many employees and bosses do hour padding. They will add on hidden costs, or say that something took longer than it did.  Koreans do “Reverse hour padding”.  In Korean culture, you lose face if it took you too long to do a simple task.  Koreans are notorious for learning to be the fastest and the best at whatever they try to do. My experience is that if a Korean does one hour of work, they will charge you for 45 minutes.  While, someone in India might take 2 hours to do the same task and then bill you for four.  The Korean might charge $125 per hour and accomplish the work relatively error free.  Hour bill would be $100 for 45 minutes from the Korean in my imaginary example.  Meanwhile in Hyderabad, your Indian counterpart will be finishing their samosa and finishing the two hours which they will bill four hours for and submit a bill of $60 for work that is far from being up to specifications.  So, after all is said and done, the Koreans are still more expensive  on a “by the job” basis. But, the error rate will probably be less which saves you management time.  Therefor, your total expenses including management time are EQUAL when you compare a $15 per hour company and a $125 per hour company in this silly example — make sense?

If you work with companies and have a sense of how long particular tasks should take, you can guess how much hour padding they do, and you can keep a log book of what their REAL hourly rate is.  Additionally, you can consider various factors to give them an OVERALL SCORE

                                Hourly Rate  Adj Rate       Follows directions          Page speed         Consistancy  
Sun Myung & Co           125                100            80% rate                         Fast pages             A                

Chakrapati & Co              15                  60            40% rate                           Slow                      D        

Krishna Infosystems        25                  40            70% rate                        Medium speed     B+

AKA Infosystems           150                  120          80% rate                         Great                   A          

In my example above, Krishna Infosystems (a fictional company) doesn’t have the lowest published price.  But, their work is more efficient and less “padded” than their other Indian counterpart.  Additionally, they do a better job following directions. When all is said and done, they would be your ideal company to hire.  Their rate is cheap, they don’t cheat in any detectable way, and they follow directions relatively well.  No programmer that I have ever met has a 100% rate of following clear written directions

Mistakes are costly

If you hire a programmign company to do a task, and they do it in a way where pages load slowly. You might have to have them recode much of the work.  This is very costly, not to mention the lost revenue that you encounter as a result of your slow pages.  If you hire companies that make mistakes, you are looking at very big costs.

What to look for first when hiring an offshore company to attain cost effectiveness.

I tend to have a “what does it really mean” attitude when people quote their prices.  If they quote too low I will think they are incompetent. If they quote too high, I will wonder if they are really, “all that”.  What I am looking for is much more involving questions that effect overall cost efficiency:

(1) How hard do I have to crack the whip to get you working.  Do you start on your own, or do you ignore me?

(2) How fast do the pages you create load. If it is too slow, then the work is almost useless.

(3) How consistant are you about getting work done?  If you have a competing big project, do you put me on hold?

(4) What is your rate of following directions.  I have seen 20% to 70% in real life.. 40% being the minimum to not get fired.

(5) How much do you pad your hours or cheat? (at this point it is actually a much smaller concern than points 1, 2, and 3)

(6) How much work do you get done per hour?  Do you do 30 minutes worth of work in an hour?  It is all relative to my past experience how I define how much an “hours worth of work” really means.

(7) Do you return calls… ever?  If you do, then I don’t believe that you are a real computer programmer.

(8) Is there a project manager involved? Is he/she/it a complete fool, or a competent professional who is, “on the money”.

(9) Can you handle really complicated and sensitive tasks?

There is a lot to analyze when trying out new companies.  I would try out a handful on a small project, each for three months to see how cost effective they really are.  Remember — if a company refuses to lift a finger, then they are not cost effective, and they are not EFFECTIVE at all.

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