Software without Borders: Psst! Want the Name of a Good Offshore Vendor?

It seems like everyday you get a call from an outsourcing vendor that wants to develop your software. They compete in a crowded market and are desperate to get your attention. With all these choices, you’d think it would be easy to hire one. But it’s not.

In his book, The Paradox of Choice: Why More Is Less, author Barry Schwartz points out that too many choices can be bad for your brain. You think more choices (Bangalore, Brazil, Bulgaria and Belarus) will make you happier, but the opposite is true. Too many choices actually add confusion and will damage your sense of well-being.

Similarly in Blink, Malcolm Gladwell reports on the experiment of selling multiple varieties of jam in a California grocery store. Shoppers purchased more jam when offered only six flavors and less when they could choose among 24.

So how do you make a choice when you are faced with 2,400 different outsourcing vendors? It’s usually through a referral.

A CEO told me he was introduced to a Russian outsourcing company by one of his angel investors. The investors wanted the CEO’s company to start using offshore outsourcing to conserve cash as they develop their product.

The CEO thought it was a good idea too, and getting a referral from one of your investors seemed ideal. But there was something about the Russian vendor that rubbed him the wrong way. Their presentation lacked a consistent story about software quality. He was uncomfortable moving forward.

He also did not like making a major decision about outsourcing his software development with a choice of only one vendor. Even though the vendor came recommended by a trusted friend, the CEO wanted more choices.

And these are important decisions that can cost your company many thousands of dollars over time and months of wasted effort before you realize things are going wrong. One software executive told me he spent $300,000 for programming by a service provider team in India that never delivered any software.

Clearly a good referral can play a big role in reducing your risk of a bad vendor selection decision. The problem then becomes getting good referrals to offshore vendors. Here’s how some have solved this problem.

Personal Networking

Network with your peers to see what vendors they’re using. These are the people you know. And you can meet additional peers through professional software associations in your area.

I spoke to an IT manager in North Carolina that used this approach. He was referred to a vendor in the Philippines by a VP of engineering at a local meeting. The manager made contact and the vendor seemed OK. He then flew to Manila to check them out and to begin software development work.

He seemed happy with his choice. He was lucky. A vendor right for another company may not be right for you. Imagine flying halfway around the world and then not liking the vendor. It’s better to have several vendors to visit and compare.

Immigrants with Connections to Vendors “Back Home”

You can contact that Indian (or Chinese or Brazilian) guy you used to work with who is now working with a vendor from his home town. For example, an excellent programmer I worked with at several of my software companies here in Silicon Valley told me, “You must speak to my friends from St. Petersburg,” and he introduced me to an excellent programming team from Russia. They became my first offshore partner when I started my company.

But I also get calls from people I don’t know who want to introduce me to vendors in their home town. For this “referral” they want a piece of the action. How well do they know these vendors? How can they prove they’re any better than the ones I already know, or the thousands I can find myself online? These questions usually end the conversation.

Online Ratings on Job and Project Boards

Websites such as Elance, ODesk and RentACoder are most often used to find individual programmers and freelancers or for short-term projects. But many small vendors bid on projects on these sites too. It’s a good way for new vendors to build a track record with their first clients when just starting out.

The websites also feature an online rating system of the vendors the same way people rate sellers on eBay or books on Amazon. These ratings are a form of referral. But some people think these ratings are not a reliable indicator and are of limited value, especially if you’re looking for a long-term relationship (See my last column, “Outsourcing vs. Out-tasking”).

In any case, you can use these sites as a way to “fish for vendors” that you can evaluate. It’s one step above doing searches online with Google.

Make Your Final Choice Carefully

As you can see, your choices for getting referrals to reliable vendors are limited. That’s why we value a personal referral so highly. Often in life success is determined by whom you know, not what you know.

Beware of the “illusion of the ideal choice” through a strong referral to a single vendor. Like the referral the CEO received from his angel investor, you may not be satisfied. Maybe the referred vendor is acceptable. Maybe they’re even good. But compared to whom? It’s best to select after comparing several choices. And you need multiple referrals to do that.

People make good decisions by evaluating multiple choices using several key criteria to compare them. It’s amazing how quickly and unconsciously the human brain can make decisions. You know it as a gut feeling.

If you’re experienced with software development and outsourcing then you can trust your gut to make a final choice. But make your choice from among several options, not just the one vendor whose name someone whispers to you over pizza and a beer.

Useful Links

Barry Schwartz’s The Paradox of Choice: Why More Is Less

Malcolm Gladwell’s Blink




Steve Mezak’s article, “Out-tasking vs. Outsourcing”