Our company has been fortunate. We started in 1996 and immediately began growing at a healthy rate. The 'dot-com boom' only helped us to grow at an even faster rate. When the 'bust' hit, we were completely unaffected because we had a good group of very strong clients who brought us consistent business.When I first heard of jobs being outsourced to companies in India and other countries where programmers were paid a mere fraction of what they were paid here in the US and the media made a big fuss over how companies here were eager to do business with these overseas companies in order to take advantage of the lower costs, I will admit to being a bit concerned.However, I decided the best approach would be to treat them like Wal-Mart.What do I mean by that? Simple. When Wal-Mart builds a new store in an area one of the first outcries one hears is from the small business owners who insist that Wal-Mart will put them out of business with their lower prices and one-stop shopping.As a businessman, I took a hard look at that argument and immediately dismissed it. One should never try to compete with another company on what they do best - well, unless you know you can do it better. In the case of Wal-Mart, they offer low prices and one-stop shopping. Therefore, if I was a local competitor selling clothes, for example, I would not drop my prices one bit. That is a losing battle. Instead, I would continue to offer a higher quality of merchandise and better, more personalized service to my customers. I would do what Wal-Mart can't. And, in all honesty: they would not be a competitor because we would not even be targeting the same customers.So, I decided that the best course of action would be to continue to offer a better quality of service and better development to our clients than anyone else. This is what we had done for years anyway.However, at the same time, we were being inundated with several projects which were outside of our typical type of development; namely games. Game programmers are a different breed from application programmers and I was not certain of the longevity of these projects and did not want to hire short-term programmers in house. Therefore, I took one game that we had already created that I knew had taken 24 hours which, at our current rate of $90 per hour, was billed to the client for $2,160, and I bid it out to companies and freelancers around the world.They were given the finished version of the game to play with and complete specs to work with. I simply asked how many hours and what cost it would take to duplicate it.The responses were enlightening to say the least. From the US and many European countries, I received estimates ranging from 15 - 30 hours and costs ranging from about $900 - $1,500 with an average hourly rate of about $40.From India and other Middle Eastern countries, I received estimates ranging from 100 - 300 hours and costs ranging from $2,200 - $5,400 with an average hourly rate of $15 (the highest was $22). I was also inundated with emails and telephone calls from representatives of these companies hounding me to sign a contract and give them this project. It was quite an experience to say the least.About the same time, we were working with a client on several small game projects. They had given one project to an Indian company prior to giving us the new projects. While, they paid that company no more than what our price would have been, it took that company no less than 3 months to complete the game which was similar in nature to those that we were completing in an average of 10 days.I knew then what our course of action needed to be: don't compete. There is no competition. These overseas companies are not in the same league as us and they do not present a threat to the quality of clientele that we work with.More recently, because we have been actively hiring this year, we began bidding on projects on a well-known web site. The goal was to pick up a consistent flow of projects (1 - 30 hours each) which would keep our programmers busy.On this site, 95% of the bidders are overseas companies, even though some of them claim US addresses. Our approach there is largely the same: we don't try to compete at all. We find that the projects we bid on, there are generally equally as many bids higher than ours as there are lower than ours and we claim the highest hourly rate BY FAR. I found it very enlightening on one project where we bid $3,600 (40 hours) and an Indian company bid $4,500 and claimed an hourly rate of $15!!! That meant they were planning on 300 hours.Now, contrary to popular belief, we do not bill out any programmer at 8 hours per day or 40 hours per week. Any programmer is generally capable of 5 - 6 hours of solid coding in a given day on average. Otherwise they would burn out and I will not have that happen to my people.Therefore, based on this assumption, we could complete the project within two business weeks, but it could take them as much as two months!Logic indicates that they either must be incompetent and it really will take them 300 hours, but maybe they will push their people to work 8 hours per day and 7 days per week and complete the project in 38 days. Or, that they are misleading their customers, but they still need to preserve the appearance that it took 300 hours and the customer will still wait more than a month. Or, they will convince their client that it was 300 man hours and they had 5 people working on the project so they completed it in less than a month. I doubt it would be the latter based on the stories I have heard of projects taking FAR longer than anticipated with these companies.At any rate, it has been wondered how we can compete with these companies. Well, there it is in a large nutshell. We don't compete. We simply do what we do: We offer more work per hour than most US companies could and we charge a fair hourly rate. We DO NOT employ or contract to ANY overseas companies or persons.My thought on this is: as long as there are good, honest people who are out of work here in our country, there will be jobs available for them in our company!In closing, I would like to share a real example of this in action. This image - bids.png [789KB] - shows a screenshot of an actual bidding page. The project was a small one, only taking us 2 hours to complete. However, please note the actual bids from other companies who claim hourly rates of $8, $11 and $15 per hour. Yes, $320 at $8 per hour is 40 hours!
