UTOSC: Small scale outsourcing

In early October, I attended the Utah Open Source Conference. I’m not sure what outsourcing has to do with Open Source, but it was one of the more interesting presentations I attended.

Outsourcing, by Scott Lemon of HumanXtensions L.L.C.

Scott worked for Novell, and they had a development center in India, which is what got him into outsourcing. That was back in 2000. Since then, he’s refined his personal model of outsourcing.

Q: You suck! Are you taking our jobs offshore?
A: No. You are in control of your own destiny. You are in control of the value you create in an organization. People in other countries want the American dream that we’ve “pimped” to them. Those people are educated, hard working, etc.


  • Multiply your value by building a team
  • Multiply productivity and output
  • Increase your capabilities and income.
  • Scott + 3 locale developers and 7 offshore developers.
  • They run 2-3 projects in parallel.
  • They do $500K of revenue per year.


  • are the most critical aspect of a distributed team. Most people “suck” at communicating.
  • to make outsourcing work, you have to communicate daily or more.
  • they use Basecamp, Acunote, SVN and Skype group chat.

Email isn’t any good. You have to use good project and task management tools. There are delays in email. You can’t track tasks via email.

Acunote is good for larger scale projects than Basecamp, but they do use Basecamp for smaller projects. Their projects are anywhere between $20K to $150K.

Where to outsource…

  • Scott stopped using India because the people there do a ton of job jumping. Training goes out the window. No notice. No notification. They simply vanish and are gone.
  • Now he uses people from the Philippines for many reasons: 0. Based on the recommendation of people he knew — people that were familiar with the country 1. They’re fluent in English and don’t have heavy accents. 2. Their education system is excellent. Sun Microsystems took over their educational system by giving schools a ton of Computer Science curriculum. The students have a C/Java background, and they can convert easily to PHP, Ruby, etc. The people are very smart. However, they don’t understand the American social context as well as we do. E.g. they don’t do coupon clipping like we do. E.g. they don’t have loyalty cards.
  • Their wages: minimum wage is $1.11/hour. He starts his trainees at $1.30/hour. Then he bumps it up for the next six months. If they stay on longer than 6 months, he pays them double minimum wage. He tells his people he will increase their wages by 10 percent per year, or more if they really excel.

An audience member said: One thing to remember is that some countries devalue their currency. So, if you an overseas employee $1 per hour, that dollar has more buying power than we realize, in their own country, compared to our own.

Scott met with attorneys in the Philippines to write up legal contracts, and because he wants not to be arrested — he wants to abide by the law. He hires his people as contractors, because it’s so difficult to fire employees.

He found a real deal with Wells Fargo that makes it free for him to transfer payroll to a bank in the Philippines — because he already has a bank account and a mortgage through Wells Fargo. He uses WF for payroll as well.

He’s not saying that you have to outsource to the Philippines. Pick a place that works for you.

Who does he hire?

He picks recent graduates. He didn’t want the rent-a-coder model, but someone that works for him, and is committed to him or his company. He hires people outside of major cities! It’s far cheaper that way, and easier to find people. He has a lot less risk of losing that employee. Recent graduates are trainable.

He recently hired 5 guys. He told the candidates what tech he was hiring for. The candidates went out and learned the tech, and wrote demo programs in the technology that they could show up at the interview.

With recent graduate new hires, he can lay out a wage growth plan over ten years.

How did he do it?

He didn’t sit on Google trying to figure it out. He flew to the Philippines. He listed jobs in local job boards two weeks in advance. While there, he met with university professors, scheduled interviews and made offers.

Standardized tools…

  • Specific tools (he’s flexible about programming editors), and instructions on how to install them.
  • Coding style document. They enforce this.
  • Specific frameworks and languages.
  • Process is defined for writing and testing code in a specific test environment.
  • They define communication channels. This is critical.

Patterns of operation…

  • He pairs 2-3 offshore developers with one local developer.
  • He points his developers to past consulting projects to learn from — as templates.
  • Most of his new hires are productive in 6 to 12 months — meaning that they can get much of the work done without him having to architect the initial setup — because the devs are familiar with the pattern from previous projects.

A day in his life…

  • Wake up, code review
  • Respond, new tasks
  • Client meetings, coding
  • Write tasks
  • Dinner break
  • On line interaction
  • Go to sleep around midnight

He takes breaks on weekends. He does do things Sunday night, because that’s Monday morning in the Philippines.

His business doesn’t do the graphic design of websites — just the system and the infrastructure.

Scott seemed to think that Objective-C is a dead-end one-trick pony. He leverages Titanium to let his guys do JavaScript to develop iPhone and Android apps.

They do the testing of the apps. Customers pay for new features and maintenance. Customers get to hammer on a test server as well before deployment.

His contractors have to do their own taxes. He reminds them of this.

Q: What about the Philippine employees ripping off his intellectual property?

A: He worries about it just as much as he would with American employees. This is what contracts are for, and the legal system.

He uses Balsamic to prototype things. His offshore devs build his prototype into a product, and make it far better than his mockup. His devs are very capable and skilled.