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!’.

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.

The chart below shows average rates for CEE contries:

The average rates by country were calculated using the following formula:

10% of average rates for a Project Manager in the country;

+ 20% of average rates for a Senior Developer in the country;

+ 50% of average rates for a Middle Developer in the country;

+ 20% of average rates for a Junior Developer in the country.

Such weights correspond with typical project team consists from 1 Project Manager, 2 Seniour Developers, 5 Middle and 2 Juniour Developers.

Next chart will provide a more detailed information about rates per country, showing low and high rates:

I plan to publish more information on this topic on the nearest future.

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.

Myths.

1. Russia is very far away, so there is huge time difference between Australia and Russia.

1st part of the sentence is true, Russia is far, however due to it’s huge size there are many big cities in the Eastern part of Russia (Siberia and Russian Far East), where time difference with Melbourne, Sydney, Perth, Adelaide and other Australian cities is just 3, 2, 1 or even 0 (zero) hrs.

2.  Russian programmers don’t speak English.

English is a part of the standard education program in Russia for many years. An average Russian boy or girl studies English for 6-7 years in school and 2-3 years in University. While some Russian developers don’t have enough conversations practice, so indeed the level of speaking English may be not perfect, as a rule, developer, especially working in an offshore outsourcing business some time has a decent level of written English, an adequate for business and technical correspondence and IM communications.

3. Russian developers are crazy expensive, so outsourcing there doesn’t have much economic sense.

Such statement may be partly true if we are speaking about Russian capital, Moscow and possibly in some degree St.Peterburg. In other Russian cities, salaries of developers (and consequentially prices offered by Russian outsourcing companies) are far from being crazy. More specifically, rates starts from around $(US) 20 per work hr or sometimes even a bit less (we are talking b2b transactions) and rarely exceed $ (US) 40. That maybe not the cheapest possible rates in the planet, but far from being higherst as well and below I will write about benefits, that justify that rates.

Benefits.

1. Russia is already a very popular software development outsourcing destination for customers from Western Europe and North America. Russian software export industry total revenue reached $1.8 billion in 2006. Now Russia is #3 country in offshore outsoucring business (after India and China) with the share around 3% of market. So it is a big market, with large number of providers that allow smart client to shop around and select from many possible partners.

2. Russian education system is focused on technologies, since and engineering. Student teams from Russia gradually every year among the winners of ACM International Collegiate Programming Contest . That strong education system provide good supply of bright talents to software development industry. Russian developers are considered especially good in projects that require complex math and physic knowledge.

3. Business and general culture in Russia much closer to Australian in compare with Asian offshore destinations. In recent UC Irvine software outsourcing research culture factor was mentioned as being important for more than 2/3 companies using software outsourcing.

4. Russian companies manage to keep low (3-4%) annual employees attrition rate, that helps to avoid overstaffing and reduce risk of project delays.

5. Russian developers are used to think out of box and be flexible to adopt to changing requirements.

For additional information you may check that article It is written in 2006, so salary figures for Russian developers are not so attractive now, but in general there is a good analysis.

How can I help you?

With 16 years of experience of doing business in Russia and Eastern Europe and 10 years experience in offshore outsourcing I can provide you with qualified advice about possibilities that IT outsourcing to Russia opens for your business.  Contact me to schedule a meeting or phone/online conference.

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

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.

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.

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.

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.