In a game of high stakes, are you trying to save pennies?

Arnab Banerjee - VE's Assistant Manager, Content
By Arnab Dec 30, 2019
In a game of high stakes - are you trying to save pennies

So pretty much everyone is looking for Indian talent these days. Outsourcing has long ceased to be the domain of ultra large corporations looking to set up centers abroad. Today, thanks to the cloud, pretty much anyone can outsource their project or work abroad. So while you still have large captive units set up by large corporations offshore, the offshore outsourcing industry today is dominated by companies offering services to primarily small and medium enterprises all over the world. With so many competitors in the fray and a client base so versatile that the phrase chalk and cheese often come to mind, these companies often have to be inventive in their business models and pricing to attract clients. And therein lies the rub. Clients know this and are not afraid to play the field.

The cheapest isn’t always the best

Of course, under no circumstances am I suggesting that clients should not do so. Trying to get the best possible deal for your business is just business common sense. However, the emphasis here should lie on the word “best”, and “best” need not necessarily mean “cheapest”- a mistake made all too often.

There is a perception, largely as a result of aggressive marketing in this direction, that “talent in India is limitless.” The assertion isn’t entirely false either. India, with its huge and rather young population, is indeed blessed with a seemingly bottomless talent pool. However, as I have said before, competition has increased manifold and as a result there are more players in the outsourcing business, both seeking it and servicing it. This means, today there are more clients vying for the same talent as you, and there are more agencies looking to snap up that talent for you as well. Now competition is good. In fact, it’s great! Healthy competition ensures that everyone stays on their toes and the quality of work remains high. In outsourcing however, there are certain peculiarities. For one, the competition in a market like India, where the overwhelming majority is in the business of providing a service to the same markets, there are two realities that affect everything else.

  1. The seemingly unending talent pool is today finite. With two decades of boom, India’s domestic economy pulls in a fair amount of talent as well. So the cost of hiring genuine talent has risen somewhat.
  2. Many have realized that the financial aspect of outsourcing work to India is too lucrative to ignore, especially for SME’s including startups. There is also an absence of genuine brand names who service this cross section of the clientele. So this field is a veritable free for all, for all kinds of players, who keep undercutting each other in terms of prices, constantly driving the actual prices down.

Now, you might be wondering, how can two seemingly contradictory scenarios exist in the same economy? So, let’s delve a little deeper.

The offshore garage corporations

We will start with the second scenario. As I have said before, technology has ensured that even the smallest of clients and projects have takers in the offshore outsourcing industry. What used to be the exclusive domain of freelancers before is today swamped by boutique agencies and start-ups who exist to serve clients who are often even smaller. In fact, while previously logistical challenges ensured that there would be a lower limit to what was acceptable as business in offshore outsourcing, today many of these boutique companies have an upper limit. Many are located in tier 2 or 3 cities or occupy co-working spaces in the metropolitan suburbs. Many are even run from residential compounds or the proverbial equivalent of the American garage, basements! Naturally, their operational costs are extremely low and hence they are able to offer incredible rates to potential clients. So you will find people working for as little as $2 or $3 an hour. Undercutting the competition on price is their most potent and often only way to attract business. However, such “unbelievable” rates do come with a hidden price.

Talent has a price tag

I have been with Virtual Employee for around two years. I work closely with marketers, developers, legal experts, copy writers and designers almost on a daily basis. Yet, despite working with such a large cross section of domains, I am barely able to scratch the surface. We are close to 1500 people working in more than 150 domains. We operate 24/7. There is very little chance that I would ever meet all of us, let alone know them. And I am a known extrovert! I can be sitting across another fellow virtual employee at lunch and yet have no clue to what he/she does. The scale and the versatility of our talent probably makes us the biggest organization of this kind globally; and perhaps the only one resembling a brand name. I might be wrong, but then I am not keeping scores. The point is, for an organization that caters to such a diverse and often niche clientele, when I came on board, half the people working with me already had been in the organization for a better part of the decade. Wherever I looked, I saw people who knew each other pretty well. And many had never worked together at all. It’s just the time they had spent in this organization together that ensured familiarity. For an industry that sees 23% attrition on average, VE’s labors to barely 7%. It’s a stunning statistic. Since we have successfully been able to retain our talent, we have also been able to serve our clients better. There have been far less delays (than the accepted normal) in projects and employers (read clients- technically every client is an employer based on our model) around the world swear by the quality of service that they have received from Virtual Employee (as evident from more than 250 video testimonials we have received).

We are also one of the best paymasters locally in India amongst similar organizations, and have been so consistently for many years.

Trying to save pennies

When you outsource to India, when you seek out commensurate Indian talent that might have gone beyond you back home in the States or in Europe in terms of price or availability, you do so with the knowledge that I will save, no matter what. The minimum salary of a software developer in developed markets is at least $5000 a month. In India, $2500 per month puts you in the category of the rich. $1700-$2000 easily ensures an experienced and talented developer, which is what any established organization will charge. However, if you were to invite quotations, you would get some in the range of $850 as well, from a registered company with a snazzy website at that. And truth be told, many potential clients will go for the one quoting $850. We as a company though can’t and won’t ever try to get work quoting so low! Why, you might ask. Well, for the simple reason that while for $1700 you will definitely get a good developer, for anything less than that, let alone half that amount, you will only get a question mark!

As an organization we can promise savings between 50% to 70%. Beyond that, we will not have the capacity to hire the right talent. And since talent is our buzzword here, let’s pause and think what an $850 a month setup looks like. Unsurprisingly, while an organization like ours can scale up effortlessly in a matter of days, if not hours, these “mom and pop” variety companies find it extremely hard to add even one good developer to their setup. At such low prices, they are leaving themselves very little wiggle room, so to say.

The front end and the back end

Clients, especially small and medium sized clients, like to have control over their projects. They want to keep a tab on what’s going on, to ensure that things don’t move too far from the stated goal. It’s a terrific way of working, something which we as an organization pioneered. Today, many of these smaller players know this. They also know that the client will want to be thorough before putting his/her money into any venture and would want to talk to the talent. Most such organizations will be able to front someone really impressive during the initial interview phase. But that is all that is- it’s a false front. Such guys are known as the “front end”. Once the business is attained, someone far less qualified and experienced will be doing the actual work. These are your “back end” employees, people whose existence you will never know. And at even such low rates, you will still be paying for work that’s not worth half that amount. Since you are paying less than even the average rates, you will ignore a few errors here and there, until these errors pile up and the project is completely stalled or off the rails.

Identifying the ‘right’ instead of ‘cheapest’

While outsourcing to India, do not straightaway opt for the lowest available choice. Instead try and do some research about your potential outsourcing partners. Yes, an absence of brand names does make it difficult to pick based on trust that a brand name evokes. However, there are other ways to check out whether the company will be the one suitable to your needs or not.

Go through their website. Now you might say that everyone can have a snazzy website with nice things written in it. True. In fact, I have myself pointed out this fact earlier in the piece. However, there are a few things that you can still check.

  1. Do they have testimonials? How many?
  2. Are they video testimonials?
  3. Do the testimonials give details about the client? A genuine company with solid work under its belt will be more than happy to share the contact details of the clients who have given testimonials.

Talk to their sales team and find out about their business model. Not all offshore outsourcing firms have business models that will suit you.

  1. Decide on what sort of flexibility you are looking at. Are you looking for an option for a quick getaway? Many of these boutique (I call them “mom and pop”) agencies will have long notice periods for contract termination in the contracts. They need to. Many won’t survive another month if a client suddenly pulls the plug, playing with razor thin margins as they do.
  2. Do you want to have the option to ramp up on a short notice? While for some like Virtual Employee it is not a problem, smaller companies run on zero bench strength. They cannot afford to hire a resource and let him/her sit idle. Hiring quickly is also a problem since they are unable to match the kind of salaries genuinely good talent demand.

Decide what sort of data security regime and direct employee scrutiny you would want in place. A robust data security regime which follows GDPR requires extensive infrastructure. Effective employee scrutiny will also mean that you are interacting with the end resource directly. For companies playing with razor thin margins and having to fall back upon the questionable practice of “front and backend resources” that will pose a problem.

Trials identify the errors

Lastly, remember what I had said before? Talent is finite, even in a place like India. White collar talent is anyways scarce, unlike blue collar resources. A lot of our potential clients lose out on the ideal candidate due to the amount of time they take debating the cost-benefit part. By the time they do come back, the resource has been snapped up by another client and they have to restart the process all over again. Ultimately, premium talent is hardly ever idle. Yes, it is great that you are cautious. But there is a way to err on the side of caution without losing out on the talent. Ask for a free trial. Any good company will welcome the opportunity to show off their capability in a trial. We certainly do, because we end up converting almost every single customer who elected for a trial. If you are not satisfied, you can always move on without having lost a single penny. Now, isn’t that a much smarter way to be cautious?

So, happy hunting!

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