By Randy Rayess W’13, Co-founder of VenturePact
Editor’s Note: Recent VIP company VenturePact has released a free ebook, Outsourcing 101. In this blog post, they share some of their outsourcing insights from the book. You can download the complete book here.
The advent of technology has made outsourcing accessible to businesses across all levels. More small and medium-size businesses are outsourcing their tasks to talented professionals across the globe. However, some companies struggle to answer the question: Why do companies outsource?
Focus on Core Competency
It can be difficult for a company to do everything in-house as resources and labor hours are often scarce. At times, it doesn’t make sense for a small business to hire a full time development, legal or design team. By outsourcing, a business leverages expert knowledge, focuses on their core competency, and can accomplish things more rapidly.
Stretch the Budget
Small businesses often have budgetary restrictions and can leverage the lower cost of living outside of the US to save money. Also by outsourcing, businesses avoid the hassle and challenges that come with full time employees, including fixed costs, more office space, and insurance.
When enterprises experiment with innovative projects they often prefer to outsource instead of hiring a full time team. This is because they do not want to go through the whole process of hiring and firing a team if the project fails. Many firms prefer to outsource at the beginning and then, if successful, build a larger in-house team that works alongside the outsourced team.
Around The Clock Work
If North American firms outsource to countries in Eastern Europe, the Middle East, and Southeast Asia, then the time zone difference allows work to be accomplished around the clock. A US company can send off work at the end of the day to the outsourced firm. A word of caution: In order for this process to work, there must be clear communication and preferably 2 hours of overlap so that each side is clear on what has been done. Otherwise a question will inevitably come up while the other team is asleep, which can slow down development.
Scale Teams Quickly
It is easier to scale software teams outside of the US because there is a larger supply of tech talent and the demand is lower. This means that a firm that wants to quickly build out a software development team can do so with fewer problems when hiring abroad than they would have in the US. Startups trying to augment their team abroad should not hire over ten people straight away. We recommend starting with a small team, and once the small team understands the business then they can lead and hire a larger team. Of course if the company is looking to build a standalone product or is an enterprise then they can scale the remote team a lot faster. Large enterprise projects require many people but the key is to have great project management and communication within and between the teams. You should be careful though with hiring remote teams—it’s important to have a very strict and optimized selection process for who you hire to make sure that you select the best people.
Outsourcing can be very powerful, especially if you know the best practices. Outsourcing 101 is an ebook by VenturePact that answers some common questions, including how to select developers, when to outsource, how to structure a contract and how to navigate the global talent marketplace.
Bio: Randy Rayess W’13 is the Co-founder at VenturePact, a marketplace that connects companies to prescreened software development firms. Randy has worked in private equity at SilverLake Partners and at startups in machine learning, transaction processing and statistics. Randy completed a Masters in Systems Engineering at the University of Pennsylvania and a Bachelors of Science in Economics with concentration in Finance and Statistics from the Wharton School. You can reach out to him on Linkedin or Twitter.