Why Offshore Development Doesn't Pay Off

November 06, 2017

Outsourcing has become an integral component of the technology sector. In fact, the global information technology outsourcing industry generated $63.5 billion in revenue in 2016, according to Statista. Of course, the vast majority of businesses turn to outsourcing as a cost-cutting maneuver, with the lowest-cost providers coming from Asia, South America and Eastern Europe. 

However, they say if it sounds too good to be true, it probably is—and the old adage extends to offshore development. The president of an IT advisory and research firm told ComputerWeekly.com, “Over half the people we talked to for our own research said that offshore projects failed to achieve full potential for cost savings.”

Though the “sticker price” associated with these contracts is typically quite low, hidden costs can creep up and eventually far outweigh any initial savings. Consider these common pitfalls before trusting your software or website to an outsourcing company overseas. 

Distance and time

You’ve probably also heard that distance makes the heart grow fonder, but in this case, that’s not always true. Proximity might seem trivial, but meeting face-to-face with a partner who is a few hundred or even a few thousand miles away is significantly more convenient and affordable than flying halfway around the world. 

Time zone differences can play an even bigger role in the success—or failure—of a development project. It’s much easier to arrange a conference call when everyone is in North America and working roughly during the same window of time. Real-time changes are even more worrisome, as it’s unlikely you or your internal team will ever be able to hop on the phone to hash something out over a quick call. 

Sometimes even the tools you rely on don’t lend themselves to global collaboration. One IT professional, Fran Schmidt, described a “horror story” where the combination of delayed source code updates and an 11 hour time difference meant an Indian outsourcing team was always a full day behind local staff.

Language barriers

The situation described above was made even worse by a language barrier. 

Every overseas outsourcing firm will tell you their employees speak impeccable English; indeed, many of them offer access to free language courses and require staff members to pass language tests as a condition of employment. But anyone who has studied languages will tell you there’s no substitute for a native speaker. 

In addition to the difficulty your employees may face understanding strong accents or mispronunciations, overseas workers will struggle to comprehend the idioms, regional dialects and even pop culture references that work their way into normal conversation. Even small misunderstandings can slow projects down over time. 

Culture clash

Language mistakes are an obvious form of cultural misunderstanding, but unspoken differences in how each culture approaches work can be just as pervasive—sometimes even more so, because they’re more difficult to spot. 

For example, in the United States, it’s usually okay for an experienced professional to (politely) push back when he or she disagrees with a client or has an alternative solution, but in many Asian and South American countries, this is not the norm. 

While a partner that is always agreeable sounds great in theory, it can result in unnecessary or inefficient production and lead to products and features that don’t work quite the way the client envisioned. Even when an overseas developer is encouraged to offer advice, he or she may not be familiar enough with U.S. customs and lifestyles to weigh in.

Look at how two people interviewed by Harvard Business Review described the same professional conflict: 

The U.S. manager stated, “I often need information from individuals on Sanjay’s staff. I email them asking for input but get no response. The lack of communication is astounding.”

Her counterpart in India had a different perspective, saying, “Sarah sends emails directly to my staff without getting my OK or even copying me. Those emails should go to me directly, but she seems to purposefully leave me out of the process. Of course, when my staff receives those emails, they are paralyzed.”

Of course, every business must overcome differences in communication styles, but they are often made worse when workers come from vastly different cultures. 

Geopolitical disparity

Finally, though the U.S. is not immune to political strife and even acts of violence, it’s more likely you will face the consequences of these conflicts when your partner is located overseas. Not only can geopolitical instability cause power outages, strikes, and other significant delays, it can also lead to questions surrounding data security and the loss of key staff that decide to relocate. That happened in 2014 after Russia annexed Crimea, a period of time The New Yorker dubbed “A Ukrainian Brain Drain.”

Even when stability is not a major issue, complex legal requirements can be easily misunderstood or overlooked by vendors in another country. Organizations from industries like financial services and healthcare must ensure they meet strict federal regulations and in many cases, be able to demonstrate that compliance during audits or even the sales process. Overseas vendors may not be aware of these regulations, be able to keep pace with frequent changes or completely understand the sensitivity surrounding them. 

An attractive alternative

Offshore outsourcing comes with a host of obstacles that can derail development, but technology hubs like San Francisco and New York suffer from a high cost-of-living that makes it nearly impossible to depend solely on local staff and stay competitive in the marketplace. Luckily, there’s a compromise growing in popularity that offers the best of both worlds—onshore outsourcing. 

Onshore development firms like Redtech recruit and train developers and technology experts in the country’s heartland, which enables them to offer many of the same services and benefits of overseas outsourcing companies with fewer drawbacks. Like it or not, outsourcing has become a four-letter word to many Americans. Companies that can say they support the country’s job market and economy have an advantage against competitors. 

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 Domestic, IT, Onshore, Outsourcing