Sunday, August 4, 2019

Protect Your Small Business from Crooked Software Vendors in Emerging Countries

You are a small business owner ("you" "owner"). You have been successful in using the web in marketing your services, but the cost of your IT services keeps growing 30-40% each year, despite the much-needed switch to a Cloud platform.

You keep hearing how others have been saving a ton by off-shoring web development/maintenance services, leading to all of their IT services.

Yes, even smaller outfits have been outsourcing to vendors in emerging countries ("vendor") for a while. And I can anecdotally confirm that a well-researched exercise could save owners some decent money as well.

But, as an owner, what you may not necessarily hear is the negative ("dark" is more appropriate) side of off-shoring IT services. Here are some of the negative issues, usually unreported, you must be aware of:

1. Quality -- When you are dealing with a small vendor, you are essentially dealing with engineers and other technical graduates from 2nd and 3rd-tier (mushrooming and mostly export-oriented) schools. Given this axiom, you are getting significantly lower quality products and services from the get-go. By the time you figure this difference out, it might be a day too late, meaning you might be stuck with them for a while. Have you ever seen a Harvard MBA working for a local butcher? If you ever see one working for the butcher, he is probably developing a global franchise. The point is, do not expect to work with superstars there. Of course, the crooks may use a superstar to close the sale, but nothing more! 

2. Communication -- Though you will be reminded time and again that they are English-speaking, you will be lucky to understand every third word (over the phone), if not every third sentence. Now, couple that with their extremely poor tele-communication system (of course, to earn your business they will be bragging about their mythical world-class system!), and you are faced with the proverbial unintended consequences. Your primary business quickly turns into constantly pleasing ("begging" is more appropriate) them, just to get them to do something,  however substandard the quality might be. The stress will continue to mount, but you will be in denial that things would get better...

3. Time Difference -- It's a huge issue, particularly if you are planning to outsource to Asia. For example, after returning from lunch with a prospective client, you are ready to place a call to your Asian vendor to discuss a few changes to the existing client profile. As you are ready to speed-dial, you realize that its midnight there. Now you have to wait 12 hours to make the call. And, if you happen to hook up with a crook, you are now unimportant to them. Email communication (you'll receive replies once in a while) is the only way out. Though you got an excellent deal while signing up with them, it is now costing you an arm and a leg for each and every simple change you ask for. That's how the crooks operate. If you ever question them about the skyrocketing pricing, you will get tons of mambo jumbo - all structured talks from different sites where crooks of the world unite.

4. Due Diligence -- It's very difficult to conduct any meaningful due diligence of small vendors. While there are many ways to check the standing of a small vendor in the US (from D&B to BBB to Licensing boards to Trade organizations to Chamber of Commerce, etc.), there is hardly any such reliable source there, making it almost impossible to separate the honest from the crooks. It may so happen that due to change in ownerships, the honest ones are not-so-honest anymore. Moreover, the vast majority of crooks maintain fake references (and fake/shared sites) in the US as well. Clients may not stand by old recommendations either.

5. Hidden Cost of Apps -- In order to identify and separate the real ones from the crooks, you must try to zero in on the real pricing. If the first project entails developing a website, you must ask if the site would be mobile-friendly. Nowadays, most small business sites, including e-commerce sites, are mobile-friendly, without having to develop separate iOS and Android Apps. When a vendor insists on keeping them separate, you must be a bit careful. Often, the crooked vendors offer very attractive pricing on the initial website, followed by exorbitant pricing on the Apps. However, if the separation makes business sense, you must ask for the vertical pricing (site + apps), in writing and upfront (must be valid for at least twelve months), just to be in the know before signing any contract. 

6. Update Capability -- All other factors remaining constant, you must also insist on having the full capability and flexibility to update and upload news, data, video, etc. on to your new site. "Send us the changes and we'll take care of it" is a serious red flag. There are no free lunches so you must not walk into this trap. The cooked vendors use this trap to churn owners and it gets exponentially worse over time. Even if the vendor is honest, owners must realize that it's not a workable solution, as no business is all-proactive; they need to promptly and intelligently react to momentum situations as well (this is where the trouble starts, generally resulting from the time difference, frequency of updates, immediate availability of right personnel, etc.).

7. Employee leasing -- And this goes hand in hand with #6 above. Unlike here in the US, most emerging markets do not have clear-cut laws regarding temporary staffing and employee leasing.  In order to create a round-the-year income stream, the crooked vendors try to own/retain the update capability. Later, citing frequent and volume updates, they try to promote employee leasing. Needless to say, they package and market the very ordinary kind at the prevailing rate (with fake resumes, etc.) and simultaneously lease them to multiple clients. It is therefore critically important that the owners retain the full update/upload right from the get-go, without which it would be serious trouble - just a matter of time!

8. Local Legal System -- It is not easy to fight the crooks in their own territory; they know all tricks to play the legal system as well. When I played soccer, I did believe in 'it ain't over till it's over' but this concept does not necessarily work for a small business. Sometimes when the writing on the wall is abundantly clear, it's better to cut the losses short and call it a day. It could be a defeat emotionally, but a true victory intellectually. Smart business owners understand there is better use of the R&D capital, rather than wasting it on fighting some crooks overseas. Alternatively, this could a boon or a silver lining to bring the business back home and try out a real engineer who is manifold smarter and inherently more ethical.
9. Tip of the Iceberg -- It's imperative that you keep the relationship strictly at the business level, meaning the vendor should be treated as a professional services vendor; anything more personal than that will cause trouble down the road. If the relationship becomes friendlier than that, one sunny morning you may get a call/email (one of those rare occasions!) from the principal of the vendor firm indicating (actual email quote follows), "I have got a personal medical emergency in my family, and looking to arrange [$$] ... If you could help me in providing [$$] I can arrange (to pay it) back before 10th of next month." This could be the tip of the iceberg. If you become emotional and fall for this type of ploy, it will be the end of your business relationship with them. Forget about the loan, they will walk away from all unfinished projects, leaving you in total lurch.

Please be safe out there. It's not all that green on the other side!


Thank you,

Sid Som
President, Homequant, Inc.

Coming Soon...Sid's New Book:
Life, Logic and the Power of Nine (Branding)

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