SPOTLIGHT ON

Adrian: So can you tell me a little bit about you and what you’ve been doing up until before you started with oDesk?

Gary: Yes, I started with Pure Software; I was employee number 30 at Pure selling Purify and started as a sales representative there. Pure went through a bunch of acquisitions and mergers; most specifically merging with Rational and then Rational was acquired by IBM. And I spent two years at IBM as a Business Unit Executive. Left IBM for an ill-fated start-up by the name of IntelliBank, which was a great lesson in focus and then IntelliBank to oDesk.

Adrian: And did you start oDesk?

Gary: I did not. I came to oDesk about a year after inception and it was started by Odysseas Tsatalos, our Founder and CTO.

Adrian: Interesting, ok. So an opinion I found after looking at your software was that its kind of like looking over your developers like “big brother”. Isn’t it just better to set deadlines, and just assume that the guy is doing the job properly? And maybe also especially if you’re working with a couple of people, you can see which guys are getting the job done and which ones are slacking off.

Gary: Well, I think it’s a combination. Our business has three components: hire, manage and pay. And as you said you’ve worked with some of the project marketplaces, like Scriptlance for example; they just focus on the hire process. It’s just about you making a connection with a developer. Our model goes further – to the management and payment relationship. Now what are all the things that you want to do in a remote relationship? What do you need to manage a developer half way around the world?

And so what we think we bring to the party is not only the monitoring, but also the collaboration and the communication. And if you think about a traditional office environment, it’s everybody working in one place. So we try and make remote work better than as if it were in your own office, so you can ‘manage by walking around’ even though you’re not there.

Let me give you an example of how we use it: we have all of our developers in our team room, so at any time I can go in and see exactly what everybody’s doing. We’ve outsourced some GUI work to a GUI designer and we were in a meeting where we were talking about some of his designs, and in real time I could go and see what was on his desktop and course correct him in real time.

So even though he’s remote, he’s sitting 3,000 miles away, we were able to, in a meeting where he wasn’t present, course correct him and chat with him in real time and say, “Hey, we don’t like the path you’re going down, and we’d rather you go this way.” And that saved us eight hours of $50 an hour GUI developer’s time. And so it gives you the ability to just think about guys in your own office where you walk by and say, “Hey, how’s it going? What are you working on?” or “What can I do to help?” It’s the same premise.

I’ve been in remote relationships in my last company where we were using a very good firm in India. We were very happy with the software that these guys were developing but after three months of that relationship we were convinced that they were padding hours. Even though we had a good relationship, we trusted them, they were good guys, they were delivering good code but our bill kept going up and the hours kept getting longer and longer. We had aggressive deadlines but we were paying higher and higher invoices. oDesk gives you the ability to monitor their work and helps keep the trust factor in place.

Now we also think there are benefits for the provider. The provider doesn’t have to justify their existence every month. They worry about trust as well. So if it takes you three hours to debug the code you don’t want to have to apologize for that. You’d like to be able to say, “You know what? It took me three hours to debug the code and here’s the proof.”

The third component of our managed platform involves source code management. Since we also host Subversion and Bugzilla for all of our developers and for our customers as well, if your developers are keeping track of what they’re working on, which the platform facilitates, then you know you can get down to metrics of cost per defect. So if you’re working on bug 3957 and it took you three hours and we know your hourly rate, we know exactly how much every feature and every bug costs us to implement.

Adrian: Oh wow!

Gary: We released last night and I get a report that says, here’s the release that’s going out, here’s the 12 features that we’re releasing. And I get a nice little table that says how much time each one took and how much each one cost. And I can drill down into each of those and actually see the developer and who was working on it and get all the way down to the screenshots.

Adrian: So, in that effect, if that sort of stuff works well you’re really commoditizing developers?

Gary: Well, we think we’re creating a system where good developers rise to the top and the bad ones go away without drama.

Adrian: In practice when that sort of stuff is rolled out, how do the guys off in the Ukraine and India and everywhere else take to it?

Gary: Well they love it. So again it helps facilitate trust, it helps good ones rise to the top, it helps facilitate communication. It’s the same thing as if you and I were working in the same office and I said, “I want a private office with a door and my monitor facing the wall.” Or, we’re in a cube environment and you can walk by at anytime and see what’s on my desktop. It’s the same thing; we’re just going to help facilitate a ‘management by walking around’ environment even though you’re remote. The other thing I was going to say is, again back to my point about the developers not having to justify their time. So “Yes, I was checking the World Cup scores – sue me.” That’s all part of the equation.

I was actually given a demo to a VC and right on the screen there was a screenshot of a developer who was checking the World Cup score. We all had a good laugh and said, “You know, its part of the day. Everyone check the scores.” So we think it’s received pretty positively. We think these developers are thrilled to have the opportunity to monetize their talent.

Just one quick example, we had a guy in Moldova who was making $2 an hour taking the bus 45 minutes to work each way. He started moonlighting on oDesk at $6 an hour. Within three weeks an oDesk Buyer in Michigan gave him a $500 bonus because he said he was more productive than any of his 10 local, full-time engineers. The guy quit his job and made $22,000 through oDesk last year.

Adrian: How are companies using this technology in the Bay area? Are companies like YouTube coming in and using oDesk?

Gary: Companies like ours couldn’t have gotten started without oDesk. I can look at our invoice for last week and see exactly how much we’re paying for development. We’re paying about $11 an hour for all of our development and you just can’t do that in the Bay area.

Adrian: Right.

Gary: We have top notch engineers all over the world. We’re 100 percent distributed – we’re not co-located in a facility in Eastern Europe or India. We’re using the best developers we’ve been able to find in our network all over the world. Start-ups in Silicon Valley, can’t afford local talent.

I’ll give you a great example, we had a company and the CEO I was talking to said he needed two AJAX guys. Well, first of all you can’t find them and if you can they’re very much in demand and in limited supply and so they can charge high rates. So he hired two local AJAX guys at $150,000 each in San Mateo. So he did come to oDesk and hired an AJAX guy through oDesk. He said that the guy he hired through oDesk was just as good and he was less than $20 an hour.

Adrian: But face to face is important. Are there other aspects of that that help build the relationship to make it stronger and help to replace some more of the face to face aspect?

Gary: Well I think it’s the real time communication. I was talking to another customer and he said he loves the fact that he can log in when he wakes up in the morning, go to his team room and see exactly what his developer is working on, or was working on last night. So he has the ability to see exactly what he’s doing.

Adrian: Do you allow project-based billing (flat fees)?

Gary: Some of our customers asked for it and some providers have asked for it, but it’s not something we offer today.

Adrian: That actually was one of my biggest lessons in outsourcing, when I work with developers now I only ever pay hourly. I’ve gotten burnt so much on that and the reason is because in the beginning I’d try and do these flat rate based projects and what I found was I couldn’t really estimate. I mean I think it’s hard with software anyway to really estimate how long something is going to take. And so sometimes I’d estimate and the guy would do it and he’d do it really quickly and so I’d be overpaying him.

Other times we’d underestimate and this I think happened more often than not and so I’d have some guy doing this project and it ended up taking him three times as long, so he’s making… like that guy in the example you gave earlier where he’s making $2 an hour, well he’d be taking three times as long to do it and end up only making $1 an hour. And what they of course then do is they then go and get some other project work and they don’t finish your project.

Gary: Yes because they look at it and say, “Hey, this, is good money after bad at this point.” The other thing is that fixed bid doesn’t lend itself to requirements that change, right?

Adrian: Exactly.

Gary: So it’s pretty nice, as you said, “Hey, I might have a really small contained project and I put it out for bid and it’s very fixed. It’s not going to change, its very light weight.” And so as a result that’s the business model of the marketplace. So Rent-A-Coder is a good option for a very small project with very detailed specifications. But for customers whose requirements aren’t set in stone, and who have longer-term needs, we believe oDesk is the best option.

Adrian: Yeah, I’m really not a fan of Rent-A-Coder, I had problems with their arbitration process, so I closed my account and will never go back. Anyways, do developers sign some kind of a non-disclosure agreement with oDesk?

Gary: They do. So we contract and we’ve spent a lot of money with lawyers in 40-plus countries, to make sure that we’ve taken care of all the statutory compliance in all of these countries so you don’t have to worry about it.

So what we think we’re doing is we think that we’re making it really easy for the small to medium businesses to now also take advantage of global arbitrage.

Adrian: I believe one of the most powerful models for development is to have a small US based team and you don’t have developers, you have more like product or project managers that are actually managing the project. And each of them is working with three to four or five developers and managing them through a service like oDesk. Is that what you’re seeing? And is that something you’re seeing that’s working?

Gary: It is and there’s a couple of different ways to do that and one is exactly the way that you just said and another way is through a lot of our affiliate firms. Our affiliate firms are configured that way. So we have some very good affiliate firms which are co-located developers in that geography with an onshore presence.

Adrian: Do you have cases where a guy has been working with someone in your system for a year with the same company?

Gary: Yes.

Adrian: And so at that point does the company say, “Well it’s been real nice oDesk and Gary we’ve enjoyed paying you 30 percent but now we want to work with the guy directly.”

Gary: We’re not seeing that happen for a couple of reasons, one is because it’s happening sooner and it’s happening with not ideal buyers. The long term buyers, our very best customers that give us a lot of our revenue have multiple team rooms and multiple guys and they love the service. They like not having to worry about payment. So as a provider I don’t have to give you an invoice and as a buyer you don’t have to ask me for it. And you don’t have to worry about getting an invoice and getting it through purchasing and paying, it’s easy.

Adrian: Interesting stuff. So what’s ahead in the future, I mean it’s a Silicon Valley company if you’ve got investors they want to see some kind of way to cash out. Are we going to see an IPO? Or what’s your future direction?

Gary: We’re a start-up so we’re still small. We raised an A-round we’re going to start a B-round in September and we had so much interest, a top tier firm came in and funded us before we were able to put the offer on the market.

Adrian: Oh that’s great. Congratulations.

Gary: Thank you. So we raised our B-round in less than six meetings in less than three weeks. We’re growing very aggressively, we’re adding lots of customers and lots of providers. Where do we go in the future? Well, we want to change the way the world works. We want to give buyers the opportunity to get access to global talent and we want to give providers the opportunity to monetize their talent. We think democracy follows wealth, and that we can help the guy in Moldova to earn the money he’s worth. He’s worth far more than $10 an hour right?

Adrian: Its life changing for these guys. Even here in the Caribbean, an incredibly good salary is $800/month – but I’m sure a good guy on oDesk is capable of making $3,000 a month which is phenomenal.

Gary: Right.

Adrian: Very interesting. Thanks for making time to do this interview!

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