In my last blog post, Why the Virtual Employee Model is Safer than Project Outsourcing , I looked at three key ways in which hiring dedicated Virtual Employees reduces your risk over project outsourcing, when it comes to offshoring.
Because you directly project manage a Virtual Employee, you retain control over your project. This ensures (more often than not) that you meet your deadlines/budget, have no ambiguity over the scope of the project, and don’t leave yourself vulnerable by putting all your “eggs with one vendor” (and thus, you do not pay through the nose for any post-project completion management or maintenance).
So, one thing is certainly clear. Not only is the VE model highly seamless, it is also true that the project outsourcing model is significantly more risky.
But what about the rewards?
If (yes, it is a big if) you outsourced a project and it was delivered to you successfully, would the successes or rewards be greater than those of attaining the same result with Virtual Employees? Or, in other words, if we could somehow magically look into the future and discover that the results of hiring a VE would be the same as the results of project outsourcing, would one model be more efficient at achieving that result?
If a project outsourcing service delivers precisely as per the terms of your agreement, then for complex and technical projects, the project outsourcing route, most certainly, is advantageous. Why?
The reason is that the project outsourcing model frees up your time, resources and focus. Say you have a highly complex software development project, which will take you one year to develop. If you project outsource it and it is successfully completed on your behalf, then you have saved yourself a year’s worth of project management and development.
The significance of such a win cannot be understated, for it prevents opportunity cost loss. In theory, project outsourcing is an entrepreneur’s dream. When you project outsource, you can pursue more opportunities simultaneously – a key ingredient for entrepreneurial success. Just imagine how much easier your life as a Director would be if all you had to do was simply explain what you wanted and after a certain period of time, you got exactly what you wished for!
In contrast, when you hire Virtual Employees, you retain project management control. While Virtual Employees reduce your cost more than project outsourcing (because you no longer have to pay heavy project management fees) and provide you with immense project agility (something we looked at in my previous blog post), they do not free you up from the burden of project management. Naturally, it will pull at your attention and your time resources.
This is why it is such a big mistake to hire Virtual Employees, if you do not want to ‘think about’ your project. Over the years, we have occasionally come across clients who would hire Virtual Employees, but then would have no interaction or collaboration with them – that is, they do not project manage them. This is a recipe for disaster. Unfortunately, because hiring Virtual Employees leads to greater cost-saving than project outsourcing, a minority of clients still hire Virtual Employees, even though they have no intention of project managing them.
One caveat that is worth mentioning here is that where the work is not complicated, clients can often still hire Virtual Employees even if they do not want to project manage their work. This is because where the work is not excessively complicated, clients can simply hire a senior Virtual Employee to do 90% of the project management on their behalf. This saves clients from having to fork out heavy project management fees to a project outsourcing company.
When project outsourcing works, it works exceptionally well. The rewards are incredibly high. And this is why so many clients are so strongly lured towards the model, despite its impracticalities. The issue with project outsourcing is not one of appeal or benefit, but rather one of pragmatism. While in theory, the economics of the model are excellent, in reality, the model, (for reasons explained in the last blog post) has a very patchy track record.
We find ourselves with a Risk vs. Reward dichotomy when comparing the VE model with the project outsourcing model. Your project has a very high probability of being successfully delivered if you hire Virtual Employees. But you will need to invest time and be a part of the process. When you project outsource, your chances of success are most certainly hit-and-miss. But if the project is successfully delivered, you have achieved your goal in the most efficient manner possible – that is, you have pulled off a business coup.