Let’s say that your small business needs some programming work done and you have heard that outsourcing your programming needs overseas will cost you only a fraction of what it would in the U.S. So you go to one of the more popular outsourcing sites like www.elance.com or www.scriptlance.com and you start to look for the programmer of your dreams.

First off, some outsourcing sites give you the option to keep your specification requirements private as opposed to making them public for everyone to see. If the project you are working on is sensitive there is no sense announcing to your competitors and the world what you are doing. I highly recommend making your profile private and then inviting those firms that you are interested to bid on your project.

Here is what’s likely to happen… You are going to find an overseas tech company that wows you. First, they are going to have 100% positive feedback. Imagine that, how could you go wrong with 100% positive feedback. Second, they will have already conducted a good amount of business say at least $300,000 worth through whatever outsourcing site you are using. Third, this firm is going to sound very charming in all its initial conversations with you.

At this point they will throw out a bid on the project, you and the tech firm will most likely barter back and forth a bit before you find a number that you both comfortable with. They will submit an official bid through whatever site you are using and when you except the project will begin. Keep in mind, until you except a bid neither side is under any obligation.

At some point in the process you and the firm in question are likely to decide on three important pieces of information. First is the official project specification checklist, this is where things start to get a little “carved in stone.” Second is the official project time frame, such as this project will be completed over the next 8 weeks. Third is the payment structure, such as 6 equal payments when such and such milestone is hit. Here is where things often start to get messy.

Overseas outsourcing companies, in my opinion, are notorious for asking for more money during the product cycle. If you or your company decides to change the product specs in any way, shape, or form there is a good chance your overseas counterpart will inform you that the new specs were not in your original agreement and therefore will require extra funds. Here is the issue, it is almost impossible to anticipate every spec issue from the start. Chances are overwhelming that during the course of development and testing you will think of something you forgot to mention in the beginning.

The second major danger is the time frame issue. During the project development cycle, the ball (responsibility), to do the next bid of work is constantly bouncing back and forth from your court to theirs. They will do a bid of design work and ask you to check it out and tell them what you think. You will look it over and say “no… that is not what I had envisioned, I would like it more like this.” And the process will repeat. After design issues are taken care off the process will repeat once again with testing.

Most overseas companies have an advantage over you when it comes to the timeframe issue. Let’s say that they have 30 programmers working on their team and your company consists of a couple of workers maybe just you yourself. The outsourcing companies seem to like to offer what appear to be short time frames. Usually first time outsourcers think this is great news,” the overseas company is going to do everything for me one, two, three.”

However if they have more programmers on their side, then you have testers on your side (which is usually the case) they can usually bounce the ball back to you faster than you can bounce it back to them. If your project passes the deadline you are likely to hear, “Sir we have been working diligently on your project for the past eight weeks and have done our part, if you wish to continue with this project it will take more man hours and therefore require more funds.“

This article has just scratched the surface of outsourcing issues which beginners in the field of outsourcing should watch out for. This is part one in a four part series on the “Dangers of Outsourcing”.

The purpose of these articles is not to pass judgment on overseas outsourcing companies, in any way. The U.S. is the richest country in the world and many of the countries that are known for outsourcing are not nearly as well off as the U.S. The outsourcing companies are motivated by their desire to make a dollar just like the entrepreneur is.

If this article seems one sided, it is because the purpose of this website is to act as an advocate for the entrepreneur.