Gigantt outsources much of its work online through sub-contractors. If it's not part of our core intellectual property then we get someone else to do it. It's much more cost-effective. Every full-time employee gets a discretionary outsourcing budget used to get work done, no questions asked as long as it's within the following guidelines.
1. It's amazing how much you can actually outsource effectively once you do the mental switch. It ain't about the jobs you can't or don't want to be doing, it's about the jobs you shouldn't be doing.
Let's say you need to learn about a new technology and whether or not integrating it into the product is a smart move. The auto-didactic hacker approach would automatically lead you through the path of reading manuals, searching forums, asking questions online and generally satisfying your intellectual curiosity through hours of reading and playing around with new toys. Now let's say you value your time as a developer at $100/hour (it can actually be much more). If you spend only three hours figuring out a new technology - that's $300. But why not pay someone who's already an expert at this technology to tutor you on Skype for one hour? That person probably values their time roughly the same as you do. You just got the best tutorial you could get and saved $100 in the process.
Notice this particular example only really works if people don't need to get their boss's approval for every job they wish to outsource. Not many people would be comfortable approaching their boss and asking him to pay for an hour's worth of tutoring, but often that's the most cost-effective thing to do.
The point is to be mindful of the possibility of outsourcing and really think twice before deciding to do something on your own.
2. Get to know oDesk. It's probably the smoothest running outsourcing engine out there, with more than a million sub-contractors. Posting a new contract takes us no more than 5 minutes now. And, if you know what you're doing, deciding on a candidate and hiring can take about 10 additional minutes. That's about 15 minutes we can put down as cost-of-transaction. At the above rate that's $25 overhead. Naturally this means if you can do the job yourself faster than that then you should. But most jobs take more than 15 minutes.
3. Insist on superb English communications skills. That is, of course, assuming English is your work language. This cannot be stressed enough. 90% of outsourcing success and failure is attributable to communication quality. If you aren't speaking exactly the same language, literally, it's not going to work. Be very selective when evaluating candidate's CVs and cover letters. We automatically disqualify based on the tiniest spelling, punctuation, grammatical and style errors. If a candidates can't be bothered to proofread his own profile then you're probably not going to get a 100% perfectionist performance our of them.
4. Plant some non-obvious requirement into your job post. You need to be able to identify (and disqualify) those that send out applications en-masse without really investing time into their cover letter. We sometimes ask for a sample of their English writing work in the job description, even if the job itself is completely unrelated to writing. If candidates don't attach such a link they obviously either didn't read the job description (don't care enough) or can't follow simple instructions.
5. If it's a long-term job or requires any amount of talking over phone or Skype then be sure you can understand the person's accent. Many sub-contractors, especially in Asia, are just not that easy for westerners to understand. It's a matter of accent and also a matter of connection quality - Skype can really a problem in this respect. So do a Skype interview. It can be as short as five minutes. Again, this often does not apply because some jobs require no Skyping to get done at all.
6. Use an hourly rate instead of a fixed-price for the job. Don't worry so much about people billing too many hours. That never happened to us and we've employed dozens of people. Using an hourly rate even for stuff that initially seems like a very clear cut and properly estimated job has a few advantages. Unless your job description is superbly clear and comprehensive, realize that you might not get exactly what you asked for. People will misunderstand and then have to repeat work for you, and if they start losing money while doing so you'll get hurried, resentful work. Unless you've worked with the particular sub-contractor before and he's doing the same exact job again you can't really trust their fixed-price bid to be spot on. The point of outsourcing is to not worry about the job, and this means you have to employ people who are willing to redo and improve their work up to your standards, which may be higher than theirs.
7. Be very clear about I/O. It's just like design by contract. Specify exactly what your input is going to be and how you expect to get their output. It can be trivial stuff like which file formats or applications to use. But it can also be about progress updates - how often do you expect them to occur, etc. Our job descriptions often ask sub-contractors to spend not more than X hours initially on the job, then stop working and report to us with their progress so we can evaluate it and adjust expectations.* The clearer you are about breaking down the work into milestones and receivables the less you'll be disappointed.
8. Coordinate expectations about the amount of work that needs to be done and realize that sub-contractors usually work on more than one job at a time. Specify exactly how many hours per day or week you expect them to work. If the work is occasional in nature then coordinate expectations and realize they might not always be available on a day's notice.
9. Consider over-hiring. Need some data-entry work to be done? Hire two or three people for the same job (usually $2-$3 an hour - very cheap in western standards) and see which one performs best on a smaller initial milestone - that's the one you keep for the long term. Be honest and upfront about the fact that work will start on a smaller evaluation basis. Let people prove themselves to you by working (and getting paid). The cost of hiring and firing is very, very low and we developers are accustomed to the very opposite (recruiting takes forever and mistakes are very costly).
If the work is repetitive and error prone, people will become fatigued and make mistakes, especially the 17th time they basically do the same thing. In such cases it's perfectly reasonable to hire more people for the job than strictly necessary. Redundancy is your friend because it's unlikely two people will do make the exact same mistake. It also helps with the issue of availability mentioned earlier.
10. Finally, be respectful and courteous. Yes, hiring and firing on oDesk can take five minutes and have little implications for you, but the people working for you deserve your respect, even when they occasionally don't live up to your high expectations. It sounds silly to have to even mention this as a tip... Outsourcing online usually happens across cultural boundaries and not everyone has the same work attitude, conversational style and politeness (Israelis, I'm looking at you!). So be extra nice.
* This is actually a tip by Tim Ferris. Read his book, or at least the chapter on outsourcing. Another great chapter on outsourcing can be found on http://www.startupbook.net/.