It seems easy, but not all outsourcing providers are equal.
I get approached by outsourcing companies on a weekly basis. They see that I am a (working) fractional CTO. They see, via linkedIn and my blogs that I communicate. This makes me their ICP (Ideal Customer Profile), because they see me as a source of leads and work.
Almost all their outreach centers around how much money I can make if I give them a reference. Usually its 20-30% of the referred work.
For three years now I have taken these calls and turned them down. My reasoning is simple; conflict of interest. How can I provide advise and solutions if I am getting a payment from the referral?
Almost all these companies respond with (fake) confusion. Their sales and business development teams have heard it all before, but are stuck in a business model. So after 30+ of these Zoom sessions, I lead with my issues:
If you can pay me 20%, then your margins are crazy high. That margin must come from somewhere. How much are you paying your developers? (crickets…)
If you (outsourcing compamny XYX) fail to perform, how do I manage reputation risk? (crickets…)
I am often asked, why would I pass up on a $20,000 payment for simple referral? Its easy money.
I am a developer at heart. I have founded technology companies. I know how hard it can be to translate a vision into reality. It’s painfully hard. No matter how hard it is, it can be done. I have hundreds of world class CTOs in my LinkedIn network. Its possible, just not easy. It takes intent. It take rules.
My first rule is “No second class team members”! Never! This is a hard and fast rule for me and the teams I build. Even with a clear mission, its still hard to achieve. This means that on-shore and off-shore staff need to be equals. Equal in hiring, management and treatment.
Startups need hard working, honest and loyal tech teams. Making them first class members of team is a simple and easy way to build loyalty. When asked I tell them that building a team is like building loyalty. It takes time, and its the critical piece needed to give a team the keys to success; equity
How did Napoleon Bonaparte convince 600,000 French soldiers to march to Moscow (in the winter of 1812)? It was not because the camp food was amazing, the pay was not great. The French Grande Armée did not have an amazing retirement plan. Nothing about being a French foot soldier in Napoleon’s army was amazing.
But still his men followed him, willingly, into the cold, into war. How did he do it?
He did it with loyalty. His men wanted to be there. Developers achieve the most when they want to be there, need to be there, will fight to be on the team.
I have found that overseas developers are often treated like like second class members of team. During my team at Meenta.io, I worked with a team of amazing developers out of Costa Rica. Their voices on the team were never anything less then the voices of the company staff in the Boston office.
Pay is not enough. It was not enough for the rank and file French soldier in the 1850s, its not enough today.
A good job can change the world for an overseas developer. A great job can change the trajectory of their lives and their families. I have found that I get a very different type of team member, when I focus on the team member. When I give them trust, they trust me. When I pay well and insure they are protected the team.
If I do all these things, I am a decent employer (just decent). When I make sure they are first class members of the team, I am special, that generates loyalty. When I make sure they are receiving the bulk of the payment, without middlemen, then I generate loyalty.
If I use an outsource company that can offer me a 20-30% commission, then I know that the actual person on my team is getting a small fraction of that payment. Multiple people, who provide little or no value to my company are taking a cut.
The person I need the most is paid the least.
There are reasons for middlemen. Reasons the developers value. Middlemen are not bad.
I learned the hard way in 2021 when I started talking to another LATAM dev provider. I got off channel messages from my developers that they all knew the company I was speaking with. I learned why these companies have huge staffing turn over, why the best developers were not on their teams.
I learned why these developers were so good and why they had decided to with their local outsourcing company.
The new outsourcing company had a long and well earned reputation as ‘rent seekers’. I did not know this. It was a shocking eye-opener when my team gave me the inside track. Good developers avoid these companies. Weak developers have no choice.
1. Many outsourcing companies have turn-over problems. They know this turn over is a problem. Their business development teams are trained to address this in their calls with US and European customers. But. In the end they know that most companies will ignore signals in exchange for low cost labor.
2. Turn-Over rates add costs to any outsourcing solution. It degrades the value their work. Larger teams build this turn over and knowledge loss in to their contracts, resulting in more headcount. Redundancies.
After rejecting a number of these offers I have decided to change the script. I went back to basics and called the company I used to build Meenta. I called my former employees in Costa Rica. I found signal. Good signals. I found some good guys. And I found some approaches that make sketch outsource providers work, just without the conflict of interest.
I now get referred to US companies that do not have a strong technical lead. The outsourcing companies see my services as a way to condition ‘problems’ clients to make them ‘better’ customers. They know that a seasoned domestic fractional CTO can provides a value to both parties. A value that makes the entire outsourcing process a success.
It does not hurt that I have a US presence. That I work across a wide variety of clients and tech challenges. The client value the prespective and the ability to understand alterative options.
It does not hurt that I focus on no-code, low-code and AI tools. :)
The good news is that there are some amazing staffing solutions. There are good guys out there. Their teams love them. Their clients love them. They do not offer commissions for referrals!