The Web Developers Field Guide to Outsourcing
by: Peter Ferrigan
What is Outsourcing?
Whenever you hire someone or a group of people that are outside of your business to handle business functions. This can include, auditing, payroll data entry and work in Information Technology.
Outsourcing is essentially hiring a contract employee for your business. While the concept can be used for businesses and projects of any size the work involved is about the same. You will still need to manage your work and employees, answer questions, make sure that work is completed on time and within budget. This guide will explain how to do all of this. In the next section you will learn about the benefits of outsourcing your development work and what this means for your bottom line.
Not currently spending anything on web development? Doing it all yourself? Hi, my name is Peter Ferrigan and this was me 3 years ago. I used to do the same thing until I realized that my job was to smoothly run successful websites and build new online ventures. You can look at the passion for new business or the pure number value. Either way there are larger things that you could be accomplishing with your time. How much is one hour of your time worth? If you are currently working for someone else, the number is easy to place. If you are self employed, it gets a bit harder.
Starting out as a programmer, when my work load increased and I was self-employed I naturally assumed that I would continue doing what I was best at, programming. The change from programmer to Project Manager happened when I started to put a number value on my time. One hour of solid coding, how much could I charge for this? As the work increased and my life got busier things started being measured in smaller amounts of time. Instead of basing my pay on the entire project, I began to look at how many hours it would take to complete and then my average pay per hour.
Developer Fantasy Land
Let’s say you take a small job that will take you an hour to complete. For this work, your client, or boss pays you $40. So your wage per hour is $40. This is of course assuming that you have an unlimited amount of clients or a rock solid job, which is why these figures are used as just an example. So you are currently making $40 an hour at a rock solid job or self employed with a waiting list of wealthy clients. Life is good. You set $40 per hour as the cost for 60 minutes of your time.
Change your perspective just a little bit and you can see that there is lost opportunity. I read once that when investing in real estate you should avoid all contact with a hammer, paint and nails. Why? Your job should be a professional check writer, because time spent hammering or painting is time lost doing something more profitable. Actions such as looking for another house to purchase.
Regardless of your current title, I am sure you know there are larger opportunities in your field. Most of the time these opportunities are lost because you are too busy focused on mundane details rather then the bigger picture of what you could be achieving. Included below is an example of how outsourcing can benefit you.
Outsourcing for Increased Profit and Productivity
Back to developer fantasy land, you’re making $40 an hour. What if you could find someone to do the same work for $5 an hour? What if they were available 24/7 and could work while you were asleep? How much would your time be worth then?
If you could find someone to do the same work for $5 and you were charging $40. You would make $35 an hour right? That’s the common assumption for the starting Project Manager (your new title).
How much time would it take you to find the programmer, explain the project and check the work. Usually from my experience (for a one hour job) only about 10 minutes. So what is your total pay? $35 for ten minutes of work. We are still in fantasy land, so after you have hired someone for $5 to complete your $40 job you go to the next client on your list.
Another $40 project appears, you spend $5 and 10 minutes. This keeps going on 6 times. So in one hour you have made $210 ($35 X 6) as opposed to your previous $40 an hour.
You have just given yourself a 525% percent raise.
One thing to remember is that we are in outsourcing fantasy land where each programmer does exactly the right work; it is always completed on time and to your exact specifications. This of course does not happen all of the time. You will have some programmers cancel, others not respond and some might complete the work incorrectly. If you leave 20 min out of each hour to review and handle these issues, you are still making $140 / hour, 350% raise.
The best part is that outsourcing not only allows you to be more productive and profitable while you work, it also provides these benefits in the time your off work.
Let’s say you work just 8 hours a day, and no more (in fantasy land). This means that you are unproductive (on work issues) for 16 hours of every day. These 16 hours can start making you money. Let’s take a look at the numbers:
Stated before the average project that takes only 1 hour of your time can be done for $5 and 10 minutes leaving 20 minutes of every hour for exceptions. As you will be planning ahead for the next 16 hours this will take some additional time to prepare the work. Let’s give each project an additional 5 minutes to setup. This means each project takes 20 minutes: 10 to find explain and check work. 5 to plan ahead and 5 to cover mistakes. These 20 minutes are split between when you leave work and arrive the next day. We are going to outsource just 6 projects, which means this will take just one hour before you leave work and one hour when you arrive in the morning the next day.
Taking a wage of $35 per project this translates into $210 for 6 projects outsourced while you sleep. After this we need to deduct the $80 of time spent (2 hours) preparing the work and your total profit each night is $130. Over a year (without holidays) this is a $30,000 raise.
Of course the above example is just an example. I wish it were as easy as breaking down projects into 15 minute segments, and each segment only took 15 minutes. Also it’s important to note that no one is a machine. Unfortunately as your work increases, so does the number of people you need to manage. Without a reliable management structure in place this would also increase the number of delays and chance of error. Then there is the waiting list of wealthy clients, which for most developers, doesn’t exist.
So if you could be making $210 an hour during the day, and right now you are only making $40, not outsourcing is actually costing you $170 an hour of lost potential.
Outsource Today’s Work
The best way to start is to join a freelancer marketplace such as ContractList.com. These websites are broken into two sections; one for Project Managers (that’s you) and the other for Freelancers; this includes people who are skilled in programming, design, writing and other talents.
As a Project Manager on ContractList.com outsourcing your development work is broken into four steps: Signup, Post Your Work, Select a Freelancer, Payment and Feedback. Below you find a description of each step followed by the relevant link to complete this action.
Signup :: The first thing you will need to do is to signup at ContractList.com as Project Manager. This allows you to post projects, accept freelancers and make payments online.
After filling out the short signup page, a letter will be sent to the email address that you submitted. This is done to confirm that your address is valid and you are able to receive important announcements pertaining to your projects. [http://www.contractlist.com/wm.php?a=signup]
Post Your Work :: After signup, gather the project details together and login into your account. After login you will be taken to the Account Management page. Here you can see the information relevant to your account. To post a project, click the link ‘Create Project’ at the top of the page. You will need to fill in the Title, Project Type and description of the work that you would like to be completed. Later in the guide I will explain how setting the right budget lowers your cost, and which details to include ensuring you get the most qualified bids. [http://www.contractlist.com/wm.php?a=create]
Select a Freelancer :: ContractList.com is setup in a way that allows Freelancers to openly compete for your business. This known as a reverse auction, where competition actually lowers the bids instead of increasing them. Each Freelancer will be able to submit a bid (the cost for the posted work to be completed) and a time frame for the delivery of completed work. As there are hundreds of Freelancers on ContractList.com your project will receive multiple bids from people around the world eager to complete this work for you. Go through each Freelancer’s bid and select the person that you feel is best suited for the work.
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The Web Developers Field Guide to Outsourcing
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