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When should you look at outsourcing or relocating and how to manage it all?

10th Apr 2013
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At any startup entrepreneurial venture, the first hurdle to overcome is the lack of resources - lack of funds, lack of manpower, lack of time. One of the best ways to overcome this is to outsource or relocate the work elsewhere. But this is not a perfect or permanent solution.Outsourcing or relocating usually comes with the negative connotation however, in the startup world, it could be a lifesaver.

In the recent events at Yahoo! andWalmart, working offsite has been curtailed. Though seemingly draconian, there are many merits of forcing everyone together.People working in the same space have frequent interactions that are more likely to create better ideas and bond together for greater camaraderie.

Yet at the same time, when the staff is working away from the office, there are its advantages. There are increased cost savings from cheaper wages, lower utilities and a more efficient workforce that need not clock in to be idle. This practice also creates staff welfare for those who have family needs.

I have found that in my experience in managing one local and three overseas offices, the perfect balance is that I have to work with a combination of onshore and offshore.

At the beginning of Dropmysite/Dropmyemail almost 2 years ago, the whole development team was based in India. As a one-man founder bootstrapping the business, this worked to my favour. The obvious advantage is that I saved money on hiring a team of workers for much less.

On top of that with India being 2.5 hours behind Singapore, this favourable time difference effectively extended my day. In the morning, I will conduct business deals and meetings. While in the evening, the team would be return from their lunch and I would concentrate on building product through Skype.

Within 6 months, everything went well. I signed up a CTO and built the Minimum Viable Product (MVP) that backs up websites in a simple and elegant manner. I easily saved tens of thousands in manpower costs. With the MVP, I pitched and secured the funding required to scale up.

With some cash, I started having a local team of developers, as I needed the product improvements to be instantaneous. Now with two teams of technical workers being in different locations– there were constant confusion, communication issues and lack of control. At this stage of the business, I do not need low cost workers, I needed more proficient talent and I ended the contract with the Indian team. The local team was churning out updates and improvements at breakneck speed and things were looking up.

Following that, my lead technologist decided to go back to Argentina for family reasons. He promised that this can still work well and there was an abundance of highly skilled developers yearning for work there. This was an unwanted development but he has consistently delivered good work so I decided to trust him and give this long-distance relationship a chance. After all, just like the Indian team before, by combining the work hours of two teams the developers will be working around the clock. A few ace developers joined the Argentinean team and it was smooth sailing.

However, idealism faded rather quickly. For the next few months, the 12 hr time difference started to take its toll. Meetings were impossible to schedule and both teams were exhausted. As the business was expanding exponentially,things were changing too fast for adaptation. As our focus was still partnerships around Asia, a team halfway around the world would work on them. Work delays were rife as they were already 12 hours late upon receiving the assignments.

Needless to say, the Argentinean experiment had to end, just like the Indian one before. The office was closed down and we brought one of the developers over to Singapore.

What I learnt from my attempts to outsource and relocate is that we need different hubs of development where people can align priorities. The lessons are to:

1. Have your specific teams in one place.

Specific functions should be grouped in the same office and time zone. There will be no miscommunications or time lag in getting urgent work done. Also, brainstorming sessions are easier to coordinate to create better products.

That being said, it may not be necessary for different function teams to be together. Front office teams (i.e. sales / marketing) will need to be in their home market while the back office (i.e. IT / operations) can be anywhere.

2. Each function team must be clear in what they are doing

Beyond stating the obvious, the teams must be given clear directions and key performance indicators (KPIs). There is also a need to hire workers who are self-starters and need less direct supervision. This applies to local and overseas teams so despite the distance and time zones, the business will move forward.

3. Grant standalone piece of work

For overseas team, grant them work on a per project basis. This is so that they will not need to rely on other teams to proceed. The offshore work will be completed parallel to that done onshore.

Also, if the overseas team isn’t pulling their weight, their involvement is contained. Other projects will not be contaminated with their inefficiencies or inabilities. Hence, it will be easier to replace them.

4. Daily communication/alignment

There needs to be constant two-way communication between teams. Overseas technology development teams will have to make frequent reports back to the home base. The lead tech officer will have to ensure that their work is currently aligned to the direction the company is heading.

Communication is also required between the functions. Besides tech teams having to speak to each other, the sales people have to be aware of what they are up to so to keep clients/partners informed.

5. There is a time and place for outsourcing.

At this moment, Dropmysite / Dropmyemail is keeping core functions and technical development in Singapore. We have business development staff in India / Japan / US. Also, we have outsourced side projects like our mobile app in Japan with GMO Cloud and a new communication backup tool to be done entirely in Vietnam.

Outsourcing work is a great way to kickoff a tech startup to save costs but it is unlikely a long-term strategy. Once the initial project is completed, it will be better in the long run to have a local office. You can still consider separate projects to be outsourced. Know the right strategy to execute at the right time.

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