Six Hidden Costs of Offshoring

The hidden costs of IT offshoring are prompting many IT leaders to bring software development of core applications back home. This white paper offers advice to justify agile onshore development to overcome:

1. Communication gaps that compromise agile development and inhibit collaboration

Foreign developers, like some US based technical types, do not like to expose their struggles. Communication is also often lacking among foreigners even more than US developers as they strive to hide their struggles and mistakes when transparency would establish trust.

2. Lengthy and costly ramp up times due to communication gaps and getting the offshore worker to understand needs.

Besides the language barrier, there are some perceptions and ways of doing business that are different with foreigners. Many Indians are very driven and seem determined to run roughshod over your control. They often dictate the process, methodology and even the results in a rapid-fire pace that seems to steamroll you and your desires. Many developers have their own ideas of what looks and works best and they almost dictate it to the client. A sign of experience and maturity is the ability to LISTEN to the client and value their needs and desires. One other thing – foreigners often ant to work time & materials allowing them to pile up hours, even if it is while they are learning how to solve a challenge. Most refuse to work for a set price.

3. High rates of development “rework” back onshore due to misunderstood needs and\or developer building their way, often not the way the client wanted it.

Again, the perceptions and misunderstandings due to language and developer arrogance cause results to not meet expectations. Yet most developers refuse to fix their work without additional pay (the time & materials method is more important than customer satisfaction). Foreigners often seem to lack an understanding of the concept of “customer comes first.” And redoing work at no charge is part of doing business, especially if they misunderstood the client in the first place.

4. 40% turnover rates among offshore teams.

Foreign companies often have a high turnover rate. Most employers brag of rates as low as $11\hour, but it is at the cost of their employee’s loyalty. It is difficult for some foreigners to understand that low cost does not always get priority over quality. In fact, they often seem oblivious to quality as just getting it done is all that matters.

5. Inability to keep pace with the rapid demands of an agile business (foreigners often work at a slower pace and are slow to respond.

American businesses, like some Asian firms, move at a rapid pace. Many other cultures move at a much slower, more deliberate pace. One of the great qualities of Indian professionals is their attention to detail, often taking time to ponder issues (and expecting to get paid for that time spent thinking about it).

6. No Liability Insurance.

Most foreign firms do not carry liability insurance and the concept of being held responsible for a dissatisfied client is often abhorrent to them as they do not want to be vulnerable to a client whose expectations were not met. Deliverables are sometimes open to perception.

This is not to say foreign resources cannot provide value. There are MANY good foreign companies and consulting resources out there who strive to do a good job and assure satisfaction with their work. But I have found the best practice is to closely monitor and interact with offshore resources. Daily SCRUM meetings where transparency is encouraged without immediate repercussions. It is important to emphasize that getting the job done with the highest quality possible AND assure client buy-in, is of the upmost importance in any project.

I wish you luck in your projects. If I can help in you in finding\evaluating resources and how to engage them, let me know. I have 6 years’ experience with good and not-so-good resources in my own company where we do most development work remotely. I currently use 3 resources who have proven themselves mostly reliable as long as we clearly document expectations. They have become close friends and learned how much I value frequent, transparent communication. They have become assets and friends. You can find the same long term resources through persistence ….or you could just hire us! 🙂

Rob Moses owns and operates a consulting firm based in Virginia where he and his remote resources design and build CMS solutions in SharePoint, Office 365 and WordPress. They also provide remote administration, often at lower cost than keeping FTE on staff. You can contact him at: rob@caladanconsulting.com.

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