Outsourcing - too successful to waste on teams of less than 50 people

Posted by Andy Singleton on Feb 14, 2008 6:35:00 AM

We hire from all over the world, but we don't get much talent from India. This week I went to a panel discussion about outsourcing and got a clear explanation why. The jobs that I work on are startup product builds with 4 to 10 team members. Those jobs are just too small to motivate an outsourcing company to assign good people. They save the best people for the biggest customers, which is exactly what I would do.

How bad is this problem? We qualify individual developers by hiring them for a week or two to work on real projects. When I pick individuals for this paid trial process, they succeed about 70% of the time. However, when I run trials with developers proposed by Indian companies, the trials succeed less than 15% of the the time. This happens even after I clearly explain my desire to find the best people, and my qualification process. If the trial does succeed, about 40% of the time the person who did the trial turns out not to be available. It's "just kidding, we want you to work with a more junior person." As a result, I quickly learned not to accept trials from Indian companies. The odds of finding someone good are too small to justify the effort. If you are hiring less than 20 people at a time, a larger outsourcing company is going to give you crappy talent, and your project will crawl.

Heare are some points from the panel organized by the "Technology Indian Entrepreneurs":

  • 10 people is the minimum economic size for an outsourcing deal or a "captive" offshore office.
  • Outsourcing deals are often planned in units of 50 people. Financial services firms may employ thousands. [note: This type of large-scale outsourcing is a phenomenally successful business in India, which is why hiring in India poses unique problems].
  • Outsourcers want to build their teams by hiring, and they will resist subcontracting in favor of taking the time to hire and train an employee. They encourage the client to have a single "partner" rather than multiple suppliers. [note: It may be less expensive that way, and it certainly rigs the game to grow the outsourcers business, but it is slow.]

A woman asked "Can you tell me how to manage a distributed team, with multiple centers, in an agile scrum process." A rustle went up from the crowd, and the moderator said "If we could do that well, we would all be rich." So, apparently that's the outer edge of the state of the art. That's what we do here on the Assembla site, and some of us do it pretty well.

Our trial results tell me that India is a uniquely difficult environment for staffing small jobs, and I can see three reasons for that.

1) In India, the best people want to work for the biggest companies and the biggest brands. One person told the story of a recruit for Airvana, a hot networking startup, who wanted to get married. The bride's parents forced him to take a job a Lucent, a much bigger and more famous company, but certainly not hot. There are thousands of small Indian development companies that will respond to your inquiry. I have tried many of them.  It's not easy to find individual contractors and small companies composed of the best and the brightest.

2) Bigger companies can get bigger deals. A salesperson at the event told me that his company, which claims to serve smaller ISV's, expects a $250K/year minimum per customer. For that price, you get a 5 person team. And, they aren't going to give you the good guys. "It would be crazy to take that guy away from a team working for Yahoo, where they are paying for 50 guys!"

3) Indian companies tend to charge the same blended rate for everyone on the team. So, they are highly motivated to give you the cheapest person that matches your buzzword.

I'm glad I'm using the global recruiting to find the best people available in the world. For a 5-10 person team, we get much better people, and much faster results.

Are there any Indian outsourcing companies out there that want to argue with me, send me your best guys, prove me wrong? Let's hear it.

 

Topics: distributed development, software business, staffing

Written by Andy Singleton

Working on Continuous Agile and Accelerating Innovation, Assembla CEO and startup founder

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