Can A Startup Do OffShore Development? Part 1

Posted 06.30.2009 in Blog

One of the first things I did at Zoecity was to build a new engineering team based in Malaysia. Zoecity’s headquarters is in Seattle but we have a satellite office in Kuala Lumpur, the capital of Malaysia. We started looking in January of 2008 and it took us roughly six months to fully staff our team. We were able to hire both senior and junior level engineers at roughly 1/4 and in some cases 1/5 the going rates in Seattle. What’s even more amazing was that we were also paying slightly above market rate in Malaysia. 

In this article series I’ll talk about the things we did right, the things we did wrong, and also the things we’re still struggling with. I’ll break it down to multiple blog posts so as not to make this article too long.

So let’s start with a high level picture first.

Contrary to popular belief, most issues typically associated with offshore development are easily resolved. 

Language and culture is not a major barrier. English is widely spoken throughout the world. The impacting power of English in mainstream culture through the export of American movies, music and TV, and the advancement of US-based computer and Internet technologies have created a global culture. Even in Kuala Lumpur, engineers here for the most part understand the nuances of American culture and language. As I’m writing this blog post, I’m sitting in my friend’s living room and her daughter is watching cartoons – American cartoons – courtesy of American cable networks – bringing an American context to this future generation.

Time zone is not a significant barrier either. Seattle and Kuala Lumpur has a 15-hour time difference. Seattle at 6pm is Malaysia 9am the next morning. The beauty of engineering “types” is they love waking up late (i.e. noon) and working late into the night. I myself thrive when the sun sets. And so our young “single” engineers in Seattle loved the idea of starting work late in the evening and working through the night. We also begin the week on Sunday evening and end the week on Thursday night. So Fridays and Saturdays are off and the engineers loved it!

Communication infrastructure is also good. The power of the Internet (and broadband) has truly made this world flat. E-mail is instantaneous. Instant messaging made it real-time. Skype made it real-time in voice and video. And it all came with the price of $0. It’s amazing how easy and affordable remote development has become today.

Here are the big picture items we think we managed well:

Alignment of Interest

My early career out of school was in consulting services. I did well and learned two very important things.

A consultant is incentivized to get a project completed to spec. He is not incentivized to make it usable. In other words, your project is only as good as how you spec your design. A consultant’s goal is to build what you tell him to build. Because he does not participate in the success/reward of the project, a consultant does not care whether the product succeeds. There is a major misalignment in the long-term objectives of the project.

A consultant is incentivized to “complete” a project, not maintain it. So a lot of design decisions are made without regard to the actual maintainability of the code, the scalability of the product, or the ability of the product to change across time. You are hired to complete a project. Then you leave and the full-timers take over. What you then get is a product that is designed for milestone completion and sign-off, not growth and usability.

When we launched Zoecity Malaysia, the first thing we did was to address the issue of misalignment. We decided that we needed full control of our engineering staff. It meant building a fully owned subsidiary. We decided not to outsource our operations to a local consulting company. We maintained full quality control from being able to hire the right people (and not limited to consultants on the bench). We avoided the typical bait-and-switch where the RFP was done by the senior consultant but the actual work was thrown to the junior entry-level folks. 

Trust

However, to have a fully own subsidiary, the task of staffing up was significantly more difficult. It took us more time (6 months) and it also meant I had to trust the buildup of the staff to someone local. I could not be on the ground 6 months away from Seattle. Malaysia is fortunate that it has quite a number of locals who studied in the US and worked for large US corporations. My first hire was a close friend whom I had known for more than 15 years, whom I trusted on two levels.

One, I trusted that she would not backstab me. In neighboring China, ethics is a huge issue. Many US companies there learned too late that business is cut-throat. Your employees upon gaining knowledge and understanding will not hesitate for a second to copy (or steal) your product outright and become your competitor the next morning. My General Manager on the other hand has my interest at heart.

Second, I trusted that she could do the job and do it very well. Here’s where exposure to US culture, education and work experience is very important. My General Manager qualified exceptionally on all fronts and I have been extremely blessed to have her manage our Kuala Lumpur office. The success of our Kuala Lumpur team would not be what it is today without Jin Shien. 

Once the alignment of interest and trust was resolved, we then focused on creating a lean and effective operation. I’ll talk about this in the next blog post.