There is pretty common misconception that technologically advanced start-ups have to be developed in-house. Proponents of this theory refer to IP breach riscs, poor quality of code and need to keep core competence in house. While the problems mentioned may have place, it is more problem of wrong approach to offshore outsourcing.
Recently I’ve read a great discussion about this topic at Silicon Beach group, I will quote Phil Morle, a guy from Pollenizer (start-up accelerator from Sydney) who made a great contribution to this discussion:

I believe there are two important dimensions for a startup: speed of learning and cost.
Speed of learning. The faster an engineering team can iterate upon measured customer impact of their work on the product, the more likely the product will succeed. This means that the team needs to understand what they are building and there needs to be systems in place to take action as the work develops. If your choice of team (local or offshore) depends upon a big spec, you are less likely to succeed. We have needed to:
- Implement common tools for fast distributed communication. Our weapons of choice: Jira, Confluence, Yammer and Skype.
- Implement processes for rapid communication. We have daily text huddles in Skype, weekly detailed sprint planning calls, weekly
sprints, continuous integration to staging servers with every commit, unit testing, feature flipping (http://code.flickr.com/blog/2009/12/02/flipping-out/)
- Spend face time. We go every 2 months to India but you may only need to go once. It makes a HUGE difference to get to know the people. You can work faster and with more honesty.
- Start every projects with a big session to describe what we are trying to build – what the goal is as well as some of our initial
ideas for execution…
Cost. Developing with an offshore provides a required economy for a startup. You can put on bigger teams to get things done faster. You can flex the team up and down to be responsive to the inevitably volatile world of your business. There are some things to be careful of though. I’ll say this, if someone is half the price and the work takes twice as long, that person is not cheaper.
Hiring an offshore team to anything material is a big commitment.
The worst mistake I have seen people make is:
- Look on the web or oDesk or Freelancer for a team
- Hire them based on price
- Send them a spec
- Wait for the deliverable
- And wait
- And wait
I’ve seen it happen a lot.
You can outsource the engineering effort but you can’t outsource the accountability for getting it done. Spend time on it daily… hourly, like the team is in the same room as you. Treat them as mates because its easy to think someone remote is an idiot and its probably because you don’t understand each other’s context.

There is not much can be added, probably expect that opion about developers from Eastern Europe, whick is quite pleasant to read since I specialize in outsourcing to Ukraine and Russia:

I think the quality of coders in Eastern Europe far exceeds India or the Philippines

So if somebody tell you that offshore outsourcing doesn’t work, the answer is ‘You just can’t cook it right!’.

I have recently got an extensive outsourcing  industry study, conducted this year by CEEOA. The research based on the data collected from 246 companies, working in 16 CEE (Central and Eastern Europe) countries. That is very long document with lot of useful information and today I write about what’s going on with rates.

The research notes, that rates declined a little during the end of 2008 – begin of 2009 as a response to GFC and a measure to retain old clients and win new contract in very hard economic situation, but later on start to gradually grow again.

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Presentation from Nick Marvin, CEO of basketball team Perth Wildcats about marketing and social media for sport clubs.

Obviously for Australian companies, Russia is not a traditional outsourcing destination. Why it make a sense to think about sending your IT project to Russia?

In the begin I’ll try to downgrade couple myths about Russia and then present some reasons, why Russia should be considered for software projects outsourcing.

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The cost is not always #1 factor in IT business, but of cause it is important. Below I will provide the short summary of salary expenses in such area as software development using Microsoft .Net technology.
So what salary expenses you should expect if you open office in Ukraine and employ the developers to work full time (do not forget that we are talking now only about the salary, that in reality just a part of expenses when you employ people – taxes, social security, vacations, sickness, etc)?

There are several factors that will affect the compensations and main 3 are:

- location. Kiev has the highest salaries; compensation in Kharkov, Donetsk, Dnepropetrovsk, Lvov and other big cities are lower, and what you pay in smaller cities is the lowest. That is the rule, but of cause it has some exclusions;

- qualification level and experience. Quite clear, the bigger the experience – the higher the salary

- position you need to fill. Related with previous but not directly. Team leader, senior developer get more than junior programmer

The very rough digits show the next picture:

- for the whole Ukraine salary for .Net developers starts from as low as $200 and finishes at $4000 as top margin. The median salary is $900

- if we take just Kiev we get a bit other digits: $250-$1200-$4000

Figures are monthly wages, after tax in US dollars.

I would say that it is hardly possible to find any decent candidate orienting on the bottom margin, I suspect that reporting bottom level salary may be possible in some internships for people without any experience only and for very reputable companies. If you want to find experienced candidate and do it fast you should offer salary higher than median.

Sources of information: different job and IT sites and own experience

How can you benefit from cooperation with me? I will be very brief, here are 2 simple reasons:

1. To save your time. I already know answers to question that you should dig long to answer.
2. To save your money. There are different ways to get the same result. Some of them cost more, some less. I can help you select the best.

I will not write long articles about why offshore outsourcing can be interesting for you. I guess, since you are here you already know it.

If not, there are some links in Resources section of my site that can help you better understand it.

What I can do is to make outsourcing more smooth and easy for you. Of course it will cost you some money, but I believe that benefits will outweigh the cost.

The task

I was contacted by customer who was interested to find developer for his project. Combination of required skills was quite rare: Actionscript 3 (Flex or Flash), PHP 5 (both on very high level) , both as OOP and some technical design skills. Also person should accept and enjoy work from home, has good communications skills and of cause know English well.

The process

There are many experienced PHP developers in Ukraine, not so many but some ActionScript developers, however to find person who knows both part of job well was not an easy at all. I and customer already started to develop ‘plan B’: find separate PHP and ActionScript developers.

However I have used all available ways and in around 2 weeks have found 3 candidates with enough formal skills. 1 candidate disappeared. 2 candidates passed tests goods and I assigned final interview between them and customer.

Both persons made good impressions to my client, he have thought some time and selected one.

The result

Client have got the developer he looked for, in his budget and advice from me regarding documents (contract) with him.

What are year 2007 trends ? Where are we go?

Recently I took part in the outsourcing industry conference. Beside other interesting things, I attended two speeches, dedicated to IT job market situation in year 2007 in Ukraine. Both reports were done by representatives of recruiting agencies, but the content differ quite significantly.

First lady, that represent IT department of big recruiting company working across former Soviet Union stated that salary growth was quite insignificant (in compare with previous years boom), she said 10%-20%. The idea of her report was that now, the other than salary factors become more and more important and quite often candidates prefer positions with lower salary but better other factors combination (like interesting project, carrier growth prospects, comfortable working conditions, etc). Also she stressed the such situation when current employer counter offer more and more often is accepted and candidate remains in the company where he/she already works. So in many cases the purpose of interviews for candidates is just re-evaluate his/her market price and make ground for negotiation with employer.

Second report, also from IT department head of quite big recruiting agency confirms the tendency of growing importance of non-salary factors, but at her point of view salary proceed to hike, having around 50% growth rate in 2007.

So where is the true? How big the growth was?

In my opinion the average tendency is closer to 1-st lady report, obviously salary continue to grow, but rarely so fast as 50% in year. Probably new players, that just entered the market and have to create the team fast have to offer higher than market salaries, but that is not the whole market. I would say that growth of salaries was around 20-30% in whole. Of cause for some positions it maybe higher, but not for all. I would conclude it from my own experience and taking in account available statistic.