By Andrew Neitlich

The right and wrong way to manage outsourced talent

By Andrew Neitlich

I am working with two development teams in the USA. Both utilize off shore talent. Both charge low fees for off shore talent, and high fees for their own time as project managers. The ratio is about $1500 per week for their time vs. $300 per week for an off shore resource.

So as a customer my incentive is to cut off the expensive talent, if I can.

In one case, that is easy to do. That’s because the project manager isn’t doing much more than passing my comments about the site on to the off shore talent. There is no value added advice, architecture development, etc. If anything, direct communication would be more efficient and effective, so I could even make the argument that the project manager is costing me value rather than adding it. In fact, I bid out completion of the project to an off shore resource I know, and his bid came in at 1/10 the price that it will take me to complete the project as it is currently structured.


In the second case, the project manager troubleshoots, provides business and technical insights, removes and replaces underperformers, and more. He does provide value. Even in his case though, eventually the project should sustain itself so that he is no longer needed, or so his role can decrease. But he knows this, and is helping us get to that point as part of his model, with sophisticated collaborative tools and by developing a platform that a non-technical person can manage. And, should our business take off, we will need to increase his role to continue to build the product out. This seems to be the right way to set up and manage a team.

I think that the key to combatting outsourcing is by serving in this project management role. But you have to be sure you are much more than a conduit back and forth between the two parties (client and off shore resources). You have to really provide some value, or you will be cut out.

  • Outsourced project management is a difficult service to provide – and that’s why many contracted PMs go the easy route, exerting as little effort as possible. This is a less risky route for them to take, but as you’re finding out, it’s frustrating from a client’s perspective. The obvious result is negative relationships.

    Project management is a complex art that’s hard to quantify, but when it’s done well, the PM’s value really shine.

    Being a good PM is less about managing timelines, deliverables and budgets – to me, it’s focusing on building and fostering relationships between human beings. That’s how you get the best work possible, over the longest period of time.

    Project Management solely via IM and email, while a neccesary evil in some cases, is inherently flawed in this regard. When you’re working with an iterative or agile development methodology, it’s even more awkward. You really do need that personal contact to figure stuff out.

    I, for one, prefer to chase down projects with face-to-face communications: where people can interact and I can make decisions based on real reactions, emotions and interests. If I can’t get that, I spend a lot of time on the phone in conference calls.

    Perhaps I’m too old school, though :)

  • If you outsourced talen in #1 can do the project for 1/10th of the price you’ll probably end up with 1/10th of a project.

  • aneitlich


    Sorry, but you are absolutely incorrect here. Actually I will get a better project.

    Why? Because life is not fair.

    I have found a fantastic developer who is happy to get $400 to finish the project, and who has impressed me with outstanding work on previous projects to date. Compare that to similar development team charging $4000, and who can’t seem to get simple changes right the first time.

    There is not a 1:1 ratio of results and pay, certainly not in a global economy.

  • I find it amusing that basically what you preach is just honest business. The first manager is likely just going to try to decieve you the whole time into thinking that he is more valuable so as to extend his contract with you for as long as possible where as the second manager is actually taking steps to improve your product as well as remove his necessity towards the product. So ultimately the second manager not only won’t lose sleep over shady business tactics, but will also end up with more clients and quite likely hired by you again. (Not to mention not getting stuck with the same redundant task forever)

    Perhaps you should start marketing yourself as a business therapist. Good stuff.

  • bebop

    I’m in the process of establishing a business that will offer offshore business consulting services. I’ve run the numbers and I know I can offer my customers the same “regurgitation-of-repackaged-common-knowledge-wrapped-in-self-importance” that the MBAs at Accenture and the like provide, for 1/1000th of cost.

    In all seriousness, the most important lesson here for anyone in the web development or programming game, is to get out now. To quote the great Bruce Springsteen “Foreman says these jobs are going boys and they ain’t coming back to your hometown” Get into Marketing, Consulting, or become a PM. Or leave the industry entirely.

  • I’m in the offshore project management business so I was interested in this topic. I wasn’t sure what the point of this blog entry was, or exactl what you mean by ‘combatting outsourcing’, but it seems that you are really stating the obvious here:

    If you are paying for domestic project management of an offshore team, the project manager should provide enough value to justify their fee. Sure, but isn’t that a painfully generic observation?

    If your project manager is billing too much, get rid of them. I offer a blended rate for managed services in which I only bill the developer hours, but include project management for the project. This is very effective for most projects, although some projects need long periods of dedicated project managers (during weeks long requirements workshops, etc.) and we bill accordingly.

    As for managing your own technical team, I’ve watched so many marketing/mba types try to do that and the vast majority of them come back. In many (but not all) cases, a development team cannot be effectively managed by someone without a deep understanding of the development world as it pertains to a real developer doing real work. Sure, some developers are great and can execute small projects directly with a client – but in my experience the larger and more complex projects need a technical project manager and they usually fail without one.

  • bebop:

    How do you become a solid online marketer, consultant, or PM without first becoming a programmer or developer? To say anyone in web development should get out now is outrageous. Although the late 90s brought a bust to the “dot coms” – web development is far from a get rich quick idea. It applies to every business, in any market, in any region minus remote communities in Africa (which Jeffrey Sachs would even argue against).

    When I go to a Christmas party, there is not one person in the room that could not one day be my client. Now, can I properly consult or manage said projects without having an incredible amount of experience on the development side? Sure. But it will become very apparent to prospects that I need a lot of expert opinions from my outsourced talent before I can provide a proper solution.

    There is a lot of outsourced talent for cheap in the world, but the fact is that they can’t reach your client base in your area. I don’t know about anyone else, but with a development background, a lot of client experience, and solid direction – my business is booming.

    So my advice: stay in this business – if stuff ain’t working, get some consulting done on your own business from experts in the field, revamp your business model, raise your rates, or call your customers more often asking if they need anything.

  • Etnu

    Why not just cut out the incompetent middle men and go straight for the real talent (if it truly is “real talent”).

    I generally find outsourcers (overseas or not) to be of extremely low-quality. The reason? Simple. It’s all about the lowest price for what you want. Cost cutting is more important than actually delivering useful products. Lack of communication results in poor delivery.

    Note: I’m *NOT* saying that there’s a shortage of talent in India, China, Russia, etc. Far from it. What I am saying is that outsourcing work to *ANYONE* results in gross inefficiency and poor quality. For certain things, this is acceptable (most people oursource their payroll, for example, because it’s worth the hassle to pay a few extra dollars per check cut, even if you could save that by hiring internal), but for core competencies, it is not. If you’re a web developer and are outsourcing your core competency, you’re WORTHLESS. Why would I go to you when I could just go directly to the people who’d be doing the real work anyway?

    Suggesting that people get out of web developement is a very good idea — not because it’s a bad career, but because it means there will be more demand for skilled people. Web development is not the same things as manufacturing, where it can ultimately just be done by machine. There’s a reason why companies in New York don’t hire workers in Texarkana, and they’re the same reasons why companies in New York won’t hire workers in Bangalore: because distance creates lots of problems, even in the web world. Outsourcing grunt work to low-cost suppliers (domestic or overseas) works fine, but, again, outsourcing core competencies is a recepie for trouble. An employee who puts tires onto cars has no intrinsic value to the company. They just put tires on, day in and day out. The same can be said of technical support and other low-end technical positions (computer manufacturers, repair men, etc.). Anybody can do these jobs; it requires little more than breathing. Developing quality software (desktop, web, whatever), on the other hand, does bring intrinsic value. Skilled engineers are always going to be in demand no matter what, for the same reasons why skilled designers, marketers, etc. will be.

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