I'm thinking of starting an outsourcing business doing programming work. I'm moving to the Philippines next week and programmers are cheap, although the average skill level isn't as high as in India. I'll be running into a lot of potential problems and will likely get flamed for being stupidly inexperienced, but I'm willing to listen.

My background: I graduated with honors two years ago in mathematics from the University of Chicago (for the unfamiliar, it has the highest number of Nobel prize winners associated with it of any university in North America). At the time I wasn't sure what I wanted to do and started playing poker, but am now only a mediocre ssnl reg. I have no real work experience, although while in school I did do a lot of coding work in statistical packages and was very fluent in analyzing data. I also have some experience coding in C#, but as a developer I am nothing special due to inexperience, although in poker i think I'm just not talented, while I don't think i have that problem here. I'm applying to grad school for next year but in the mean time I want to try to set this up to generate some income and get business experience. I also may postpone going back to school in the event this becomes profitable (not holding my breath).

Questions:

How would I find work? I have no client base or proven experience. If I worked on a couple projects for free or for myself that might go some of the way. I've seen some websites that act as a portal for people with development work needed and people looking for such work so I could look there. This should be the biggest obstacle.

Is this a terrible idea? Should I just work on knowing as much as I can going into grad school instead?

Should I focus on one of either web functionality or database work? It seems these are the most in demand for freelance work.

I don't know how to run a business!? I think I should start by doing all work myself and then as I gain experience in what is expected I can hire one person, then two, etc. The cost will only be about $400/month/person. Think it is doable to learn to run a business building slowly like this?

Anyhow any advice would be appreciated. For various reasons I don't have to worry too much about my own day-to-day financial obligations but neither do I have much money to put in to this venture.

How do you plan on getting business? by undercutting these Philipinos who in all likelihood are more skilled than you and will work for $5 an hour?
I suggest you try to act as an intermediary between clients and the developers whilst in the Philippines.Try to pick up what you can from the developers you're working with.
Then start your company when you're back home.

agreed with thorn, the opportunity in outsourced coding is not doing the coding yourself but rather in leveraging the cheap labor

become a middleman skilled in writing technical job descriptions (and skilled in understanding what laypeople want and be able to translate that into an RFP) and dealing with the elance/phillipino workers, and sell your consulting services or simply repackage their work and sell at USA prices

i have used "normal" full price coders in USA for ~6 years now and just recently have hired elance coders and sysadmins to do some work for me. i'm paying 1/5th the price and getting better results. pretty amazing stuff.

Yeah the money play is acting as a middleman, I'd search and find the best coders/designers where you are and put together a respectable package that maybe be more expensive than going direct, but you value add peace of mind, and you can still undercut development in the more expensive countries. Key is you have to know how to spot good practice and implement a strong backbone despite using guys who may not be as good, which is more difficult than it seems.

You may get some Mom & Pop work but most larger companies shy away from independent outsourcing development due to little contigency from project failure.

i have a friend that spent a couple years finding outsourcing partners for india and then taking a middleman cut by finding them jobs and managing the project/relationship afterwards. he did ok, but he got tired of the constant coldcalling looking to find projects.

frankly, given his experience -- not all of which i've relayed here -- i'd be semi-shocked if you could come close to pulling this off in a year. he had a background in software project management from a big software company, some connections in the industry, plus connections in India as well as being one of the most social people I know.

ps. if people haven't heard of The Place Where Fun Goes to Die, would you really want their opinion?

I have been a poker pro for the last 5 years... I graduated with a degree in Computer Science... and one of my early "real-life" jobs was as a recruiter so hopefully I might be able to help you.

It sounds like you want to develop solutions in-house with the Philippines?

Art is correct about the money lies with the middlemen, but it's a rich man's game. Your margins are ridiculous, but obviously you are expected to pay consultants on time and you usually aren't getting paid by the companies for an additional 30-60 days. Do the math there and you'll see that only a handful of programmers are going to require a ton of cash on hand. So even though you are getting 25-35% margins, you need to find a factoring company or a rich partner. With a factoring company it's sort of chicken/egg debate as they will obviously have no problem giving you a short term loan if you can show margins north of 25%, but to get that money you have to afford to place the consultants.

But yeah, I think you're going to go insane if you try to develop in-house solutions with cheap labor. In programming the only thing worse than someone who can't produce is someone who produces sporadically. At least you know what to expect from someone who is 100% incompetent. It is common practice for many of the outsourced consultants to lie on their resume as well. I guess that's not entirely fair because it's extremely common amongst all programmers to embellish their skillset. That said, I can't tell you how many times I saw the exact same resume on my desk with a different name on top =\.

So in sum... if you want to develop in house solutions overseas I think you're going to have far more challenges than you ever expected. That said, why not do as you planned and start by yourself and add help as needed? At least that way you'll only have a few programmers to keep track of and it shouldn't be hard to spot the weak links.

If you are thinking of being a middleman (which it doesn't sound like you are), the money constraints are pretty large, and then of course you have the headache of dealing with visas etc if you want to send them back to the States.

Thanks guys the response were pretty helpful and interesting.

I think that generally speaking this is the best business model, but aside from the financial issues with becoming a middleman (I have to pay for the product before I get paid), I think the bolded part will be too difficult with no experience doing professional (non-academic) coding myself, whereas if I start by doing coding myself on very small jobs and then slowly hire more people (grow it in-house but very slowly to account for the steep learning curve due to my lack of experience and all the headaches of management) I think I may have a shot in conquering the problems with being inexperienced. I guess we'll just have to see!

PS @ Colbert: You're reminding me of my days spent where the squirrels were cuter than the girls and the only thing that went down on me was my gpa (not that I was really into girls<squirrels)

I guess one of the bigger problems would be that most really solid programmers know how to communicate with regular people and are comfortable managing the projects they work on.

It eventually gets to the point where they no longer need to cold call or do any type of advertising because word of mouth takes care of everything. If that's not enough for them they are smart enough to write their own programs to handle getting clients on freelance sites eliminating any type of need for a middle man.

If you go for the bottom of the crop type coders then you run the risk of ruining your name due to incompetence.

Coders are a weird to grade at the best of times, let alone using a random in another country. So subjective and dependent on many factors. You still pay for quality though so remember that.

Yep. I like to think of programmers as teachers. Assuming you went to a typical public school (K-12), think back and try to count the number of really good teachers you came across.

Out of the dozens upon dozens of teachers I've had I can only think of 2 teachers who really were well beyond the others. It wasn't personal bias either. They were the type of teacher who everyone liked.

Most teachers are pretty bad. They just read from their pre-set script and stick to it like glue. They won't deviate from it and sometimes they don't even know the material they are teaching.

A really good programmer will not only do a great job at actually programming whatever you want them to program but they will offer very solid insight on your business plan, go out of their way to give you options and alternatives, and explain everything in such a way that it's easy to understand and more importantly it makes sense. You can give them a broad plan and they will help you refine it if need be.

The cheap coders are generally sloppy robots. They will not do anything other than what you tell them to do. You need to give them EXACT instructions and hold their hand every single step of the way. Most of the time the code is written quite poorly too.

There might be bugs, inefficiencies and all sorts of horrible programming habits. It will be designed to spec (at best) and usually not flexible at all. This makes maintaining the project in the future a real hassle, especially if you happen to hire someone else to take over.

I've looked at some code from one of these $5/hour "other country" coders and it was a train wreck. I'm sure there are exceptions but wow is it bad. It looks like all they did was use Google and slap together random code from other people with no code design plan at all.

Maybe, but you can get solid work done for $15-22/hr offshore. Also, the lead (head guy in charge of the coders who is the liaison between them and me) is typically giving me the other big picture things you mentioned anyways.

I don't want to pay extra to have my coders build things I didn't ask for, or make it look pretty, or think about my business plan and second-guess me. Unless I also ask for consultation which is a different story, I just want them to build me something that does what I asked for.

Sure, but quality work costs a whole lot less in some places.

I didn't read the previous responses, but I just got back from SE Asia and saw several Brits who program doing the same thing you are doing. They hire people on contract on an as needed basis. You can network through Chambers of Commerces (the American Chamber was the worst, the German and the British the best). Also, as an expat you will most likely live in an expat community and it is much easier to meet and approach people for networking purposes in these environments. The Brits I met doing the same thing you did would advertise on tech message boards locally when they needed certain programmers to fulfill a job requirement. I do not think you're crazy at all. Technology is lagging in SE Asia but up and coming and I think you are in one of the best entrepreneurial environments there is. Good luck to you!

Just a heads up - there are no 9-5 or 8-5 jobs. Get used to thinking for four or more people in SE Asia. People may tell you they understand your expectations, but they won't and days may go by in lost work if you aren't specific and don't stay on top of it. When you give instructions, you may want to ask clarifying questions to make sure you are well understood. When it comes crunch time, local people will defer to you to make a decision rather than making it themselves. Be on top of it.

It's not paying extra for those benefits. It's knowing you can send them a non-technical list of things that need to get done and they will get it done even if it is not completely clear.

I guess I'm trying to say a good programmer will be able to eliminate the need for a "head guy" because the good programmer is capable of seeing the big picture (I touched on this in my above post).

Most of the clients I deal with really have no idea what they want when they say "I want to put my business online". They know how they want their business to be ran but they don't know what needs to be done online to make it work.

The cheap programmer is going to need a very specific exact technical list of what needs to be done otherwise it won't be done properly or even finished.

I guess a better analogy would be that a good programmer is capable of being an architect and a software developer while the crummy programmer can only churn out code (usually in a worse fashion than a better one).

It takes a pretty unique skill to transform a rough idea into a technical list of things to do and set it up properly in such a way that you're flexible and robust enough to handle future changes. This is something the cheap programmer cannot do (ignoring exceptions of course).