What I’ve learnt about outsourcing so far
Startups with limited resources may be tempted into outsourcing to cheaper places. I’m sure you’ve heard horror stories of entrepreneurs who spent a fortune building an idea in India only to discover a rat’s nest of badly written code that doesn’t scale. Then there are great successes who utilise an outsourced team to access huge resources at low cost and grow quickly.
Posse is my first tech company, and I like to draw on advice from a wide range of qualified people. Outsourcing, it seems, is one area where everyone holds a different opinion. I’ve tried almost every different outsourcing model — some were successful, some disastrous — and we’re about to build a significant second team in Manila. Here are some of my stories and what I’ve learned along the way.
1. Outsourcing the development of a minimum viable product.
When I started Posse, I wanted to get a site up as soon as possible to see if the model worked. I had no technical expertise and didn’t know how long it would take or how much it should cost. I didn’t have enough expertise to hire my own developer so I outsourced to a dev shop in Sydney who then outsourced much of the work to their team in India. I paid for a part-time product manager and part-time graphic designer in Sydney and around six full-time developers in India. It cost approximately $50,000 per month and took around three months to get a minimum working site live.
This got us going, delivering a working site within three months. It wasn’t great but worked enough to prove that the model had legs, enabling me to fundraise for the next stage.
But the approach was flawed and I wouldn’t recommend it. Having a team of part-time developers in Sydney meant that no one was focused on the project. A startup struggling to devise a new model needs focus and commitment. I wanted smart people who’d wake in the middle of the night with brilliant ideas for the site design and implementation. But for them, we were a one- or two-day per week project. No-one cared that much, the design was poorly conceived and riddled with bugs. The code was sloppy; it wouldn’t scale, and was abandoned when we put our own team in place. It had to be.
2. Partial outsourcing of development.
As soon as I closed our first funding round, I hired a CTO to run the development of our product right here. To develop as much as possible on the available budget he decided to hire two other developers in-house and outsource the rest to a different team in India. The Indian crew were a dev shop that built products to spec. We spent around $15,000 per month on the Indian team; that gave us six full-time developers including one who managed the rest of the team. The entire tech team (Sydney and India) cost around $40,000 per month.
This approach worked slightly better as our Sydney team was more focused on the product design. We started running regular user tests and developed agile processes, and the Indian team were quicker and more responsive in our direct dealings with them.
Again there were drawbacks. The Sydney team spent a lot of time writing specs for the team in India. It’s impossible for a technical spec to cover every decision that the implementer has to make. For every major definition in the spec there were a hundred micro decisions left to the Indian developer. We’d never met them; they didn’t speak good English, or understand the business problem we were trying to solve. So, they often came up with wrong decisions. For instance, they programmed the events database so it displayed events from furthest in the future first; closest to the current time last. This makes no sense if you’re looking for something to visit next weekend. The quality of the code wasn’t great and the site was slow as a result. Developers would take longer to fix it because of the “shortcuts” they’d taken in the past. The Sydney team members weren’t proud of the product, they were bored writing specs and we couldn’t build an innovative engineering culture as a result. After about six months, we hired a new team, notably led by Alex North, and brought all our development in-house.
Me with Kaye and Jenny in our Manila call centre
3. Outsourced sales and database management.
One of the biggest lessons I learned from the music site was that we needed a scalable sales process. I looked for a way to streamline the client on-boarding process so it could be done by anyone from anywhere at low cost. Now, when you recommend a shop on Posse, a call centre in Manila contacts the store owner, lets them know you’ve recommended them and asks if they’d like to list on the site. We obtain their details and design a hand-drawn Posse storefront, converting 95% of the shops that people list, and the entire process costs us $3 per store. We now have over 35,000 merchants on the platform from all over the world.
The process works incredibly well for us. We started by calling the stores ourselves, managing the whole process from our own office. Once we had the script working to a point where one caller could onboard 100 stores per day, we outsourced the job to a call centre in Sydney. They own a call centre in Manila and planned to get the processes running in Sydney first. Once they could obtain the same result as us they’d train up their Manila team to take over — at a much lower cost. Within a month we were ready to start handing over to Manila and a month after that we had a team of two callers, two graphic designers, one database researcher and one manager on the job for a total cost of $5K per month.
Manila floods almost every day at this time of year
4. Building our own team in Manila
Now that we’re growing, we’ve decided to launch our own team in Manila. I went over there last week to scope out the scene and investigate different approaches. I learned about Manila’s thriving startup scene and was shown two of the largest startup incubators, packed with enthusiastic entrepreneurs and engineers building their own products. I was surprised to hear how many startup competitions, hackathons and meet-ups there are. Google has just leased a five-storey building and plans to open a major office there. It felt a very different culture from India, where developers seem to work more for pay than for passion. Another advantage of Manila is that English is the main language of their education system, so communication isn’t a problem.
During my time in Manila I found a lead developer, an office and a recruitment company who’ll help us assemble the rest of the team. For around $20,000 per month we can employ six engineers, four callers, a database and customer support person, a graphic designer and a manager. We’re building the team in partnership with the Sydney company we worked with to outsource our callers, and aim to have the whole operation up and running in November. The team will compliment our in-house development, design, community management and sales team in Sydney; we plan to send our lead designer and two lead engineers to work with the new team in Manila, at least for the first month or two until they get going
Encouraging a great Manila developer to join our team
Through trialling different methods of outsourcing and learning from others who’ve done it well, I value the time and effort put into getting it right. My trip to Manila was eye-opening: I never visited the Indian teams and as a result thought of them as existing in cyberspace, rather than as real people. I never took the time to understand who they were, their motivations and challenges — I just became frustrated when things didn’t work perfectly. I never thought of them as being part of our team.
In a startup, every team member makes an impact and a team member in another country is no different. Now that I’ve spent time in Manila, met the people who make the calls to retailers, and engineers we’re looking to recruit, I’m determined to ensure that the Posse culture is the same for our Manila team as it is for our Sydney team; we’ll all be spending a lot of time there to make sure it works. I’ll write back in a few months and let you know how it works out!
If you’ve outsourced successfully or unsuccessfully I’d love to hear your experience and tips in the comments below.
Hi Rebekah! Great post and so full of info – Thanks for sharing!!
Thanks for the great post Rebekah! If you have any tips around how you track team motivation I’d love to hear them – how do you know if you’re doing enough? I thought your post on celebrating small wins was great – is this the main way you keep everyone motivated? Or are there smaller ongoing initiatives that are key as well?
Thanks,
Mei
Hi Mel,
It’s tough to do well and I’m still learning how to keep the team fired up. I find taking the team away for a few days every 3 months has a great impact. I’ll write a blog on this soon! Thanks for the idea
Rebekah
Great insights into outsourcing, thanks for sharing!
Thanks for sharing, such valuable information for any start-up. Really appreciate that you included $$ amounts as well, which is often left out.
Great blog and I agree with it all.
We setup an engineering team with a partner in Manilla. The team there work alongside our in-house development team. We find it best for the outsource team to be focused on a single system rather than swapping between development on the different systems, as our in-house development team does.
Great insight ! Thank you!
How do your Sydney and Manila team work together ? How did you as a non-tech founder get funding? I’m also a non-tech founder and I keep getting told a team isn’t a single founder w an offshore team but at least two co- founders , one of who can be the technic visionary
Hi Theresa,
I’ll write a blog on being a non-tech founder soon. Thanks for the idea!
Rebekah
Thanks Rebekah for being so forthcoming and sharing your experiences – I have recently started my own startup and your advice/learnings are valuable and insightful ..I only wish I’d read them a year ago
thanks so much Janet! Glad you you’re getting something out of it
What an inspirational post, Rebekah. I’m so glad you found our country, specifically Manila, enthusiastic and passionate and chose Filipinos to become your partners in business. You’re doing outsourcing right! Good luck with your company. How’s everything now?
Rebekah, good to hear your story and it seems your successful path in outsourcing is similar to ours. We don’t outsource the job, instead we scoured LinkedIn and a found great developers (even an ACM World Finalist) in Vietnam, asked them to join us as full-time employees, of course the pay range is one third of an Aussie dev. of the same caliber.
Nice one! I didn’t consider Vietnam but makes sense that there are smart and talented people all over the globe. You’ve just got to invest time in looking for them.
Great post Rebekah. The other place that you might want to consider is Indonesia. The hackers and designers there are very talented. The place doesn’t have quite have established outsourcing ecosystem as Phillipines or India, but it’s getting there.
Very insightful post Rebekah. Thanks for giving back to the startup community in such an authentic way, I hope to do the same.
Thanks for sharing Rebekah. Your experience mirrors mine in terms of having a fully outsourced development team in India. It was a woeful and stressful experience for me even though I have a tech background. (Before anyone accuses me of bias – I am of Indian origin). A lot of it I think can be put down to lack of my experience on what outsourcing truly entails. We brought the whole development onshore to Melbourne and it stayed that way till recently. We now have a mix – most of the development plan & complex coding is done here in Melbourne and we use oDesk to source some outsourced talent ranging from technical document writers, programmers to even recruitment on our behalf. The team is spread over Australia, India, China and Philippines. Would love to hear more about your visits to the US and where to start connecting with other startup entrepreneurs when you first go there.
Hi Rebekah,
Great to get to know about your career, company and your blog. ‘Very’ informative with actual numbers. Hats off to you, Ms.
In this write up you stated the following ‘facts’:
“The Sydney team spent a lot of time writing specs for the team in India. It’s impossible for a technical spec to cover every decision that the implementer has to make. For every major definition in the spec there were a hundred micro decisions left to the Indian developer. We’d never met them; they didn’t speak good English, or understand the business problem we were trying to solve. So, they often came up with wrong decisions.”
“Now that we’re growing, we’ve decided to launch our own team in Manila. I went over there last week to scope out the scene and investigate different approaches. I learned about Manila’s thriving startup scene and was shown two of the largest startup incubators, packed with enthusiastic entrepreneurs and engineers building their own products. I was surprised to hear how many startup competitions, hackathons and meet-ups there are.”
Then, here is your ‘conclusion’:
“It (Manila) felt a very different culture from India, where developers seem to work more for pay than for passion.”
I am sick to my stomach, Ms.
Your writing is absolutely brilliant, I should give you that. But, your information synthesizing absolutely stinks. By now I am pretty sure you would have guessed what I am getting at, which is simple:
You have not visited India. You did not meet with any of the developers in India. But, you found the nerve to paint a country of more than a billion people as: “…culture from India, where developers seem to work more for pay than for passion.”
For your information, I am proud to say that I am Indian. Always will be even though I carry an US passport (my adoped motherland) now. I earned one engineering UG degree in India, one engineering PG degree in US, and another business PG degree in US also. Needless to say, unlike you, I have firsthand experience on both sides of a technology company coin, namely, the technology and the business sides.
Never never never underestimate how difficult it is for a business person to explain the business purpose of a company whether the listener is a VC, techie or a sales rep. If you are finding it difficult to explain your business, admit it, since it is evolving, you do not know all the details yourself, how can you expect a bunch of programmers listening to you over phone, going over your half baked specs and reading your emails to ‘know’ what you want?!
Looks like there are VCs willing to open their wallets listening to someone with just an ‘idea’ and nothing more. Good for you. Rest assured that there are very many others who have already built not only prototypes but also working applications with a bit of a revenue stream which could be called ‘real’ companies. These are engineers; with working ideas. You identify yourself as an ex-band manager. Even though management and people skills are important in a technology company manager, that alone is not going to be enough to get work done from an engineering group. Rather than saying that you filled your shortcomings in technology by hiring an experienced technology manager (Alex North), you found fault with a whole country; and, I am so very sad to point out, its culture.
In another article “How being a female tech founder is different” you wonder if you being a woman handicaps you. To some extent it might. But, when it comes to dealing with techies, whether or not you know technology would be a much bigger influence compared to your gender. It is the actual technology people, the engineers, who are going to be more gender, color, ethnicity, etc. blind than the VCs, the money people who are predominanty White males. Let me give you an example: Satya Nadella, the Indian who became the CEO of Microsoft, ‘in my opinion’, owes his promotion to the techie founder, Bill Gates, being blind to the many factors I listed above. In my opinion, if not for Bill Gates being a techie who ‘sincerely’ values a fellow techie, Satya would have never become a CEO.
Just take one Indian company, Infosys, as an example. NY Times columnist Thomas Friedman sincerely believes that its founder CEO Nandan Nilekani is a smart man. Trust me Rebekah, a bunch of Indian techies with bundles of passion and determination alone brought it to a level of multibillion multinational corporation.
I found so much pleasure reading your very honest, right from the heart articles with actual numbers and names. As you said you are managing other people’s money now and have lots of responsibility riding on your shoulders. It is time you seriously consider hiring a Media/Public Relations manager. They would teach you how to tread lightly, and, more importantly, carefully. Your article “The Surprisingly Large Cost of Telling Small Lies” got published in The New York Times. You have arrived Rebekah, and, my sincere heartfelt Congratulations to you! Trust me, these PR people would also help you catch ‘large’ lies too, especially before they make it to publications as renowned as NY Times.
Rather than giving you all kinds of examples of India and Indians being passionate, I invite to visit us in India and see for yourself. We would be delighted to host you. I am sure you would find us to be as passionate and dedicated as Rebekah Campbell.
Subbiah
when you go to india through outsourcing company,its contracted like sheep-shearing once was. ” get em in and get em out” . I have lived in australia long enough to know that lot of Australians are working for pay and not ..passion.. as you put it. I dont go to GP doctors in Australia because they have sheep shearer mentality.
A lot of Australia is still run with 60s mentality (white Australia policy)…..” the world has caught up with australia..but still many australians go about with their 60s ” white australia ” policies. Generally a Phillipino would stand very little chance of getting job in many Australian workplaces of today.Yet you seem to extremely pleased with their ..passion..for work. why?…Rebekah you are smug and glib.
( Im not an India supporter. Lot of stuff wrong with India . But India does have lowest costs in many things and that keeps me optimistic for change )