7 Reasons Offshore Software Development Does Not Work

by Lauren Schneidewind on December 15, 2016

There was, indeed, a golden era of software offshoring for companies in the United States. It lasted only 10 years, starting in 1995 and ending in 2005. During that time, the U.S. dollar was strong. Conversely, wages in other countries such as the post-communist areas and India, were very low.

This difference fueled the rapid growth of offshoring. Everyone believed in a new economic order that would last forever. However, after 2005, companies realized that a critical shift was causing a negative impact on the offshore model.

Although some companies continue to hold on, most have realized these 7 reasons offshoring does not work in today’s reality.

#1: Communication Mess: Language and Cultural Differences

The lack of face-to-face communication, combined with cultural peculiarities and language barriers, results in misunderstandings of technical and project requirements. Another result is a lack of team building and trust. As a whole, this leads to poor productivity and work that is less proactive.

For an offshore project to be successful, communication needs to be adapted. Some things that help are extra face-to-face meetings over expensive video conferencing systems, more team bonding exercises, and lessons on understanding the cultural differences. However, the extra expenses necessary for better communication negate potential cost savings.

#2: Geographic and Time Zone Issues

Do you need to visit your offshoring partners and discuss business directly with them? Think again. You will need to consider the traveling costs and time spent away from the office due to the long distance.

You presume that it will be easy to talk with the offshore employees over the phone or on Skype. What if you have 8 or more hours of time zone difference? Live communication proves to be challenging.

#3: Global Economy Changes

There are times when the value of the U.S. dollar falls, while offshore economies flourish. As a result, offshoring becomes expensive. Especially given the fact that the quality of offshore output has not improved.

Also, IT salaries around the world are equalizing. Expanded Internet availability has increased job accessibility and opportunities. The result? An increase in wages for software specialists, regardless of location.

Another reason why wages are now high in many emerging markets is the increased demand for good IT specialists. At the same time, wages in developed markets, such as the U.S., are stagnant because of slowed economic growth.

#4: Lack of Control

The local software project manager is the contact for clients and employees. However, a project manager does not have enough control over the offshore employees.

Moreover, the project manager has to work 12 to 16 hours per day to oversee every important aspect of the work. That includes a full working day with the embedded team, then some additional hours dedicated to daily offshore meetings and discussions. Plus, extra time for code fixes that result from misunderstandings. An increase in costs and potential job burnout are the results.

#5: What About Ownership or Accountability?

Offshore teams or individuals may have different culturally accepted ways of doing business. They will work for a time on your project and then will go to somebody else - who may very well be your competitor. Keep in mind:

  • Offshore companies are not motivated to grow and retain specialists. They exist to pay salaries. That’s why finding good team members to work with could be impossible.

  • During the project, you may be unpleasantly surprised to find that some workers have left during the middle of the project and others have replaced them. Losing continuity in development loses time and increases costs.

  • In another culture, it may be common to use someone as a scapegoat. If the project is not going well, the team will inform you that the problem was due to person A. Of course, person A is no longer working there. Now everything is OK because person B is working instead.

#6: Legal Aspects and Confidentiality

These issues are very important because neglecting them may cost you your business. Make sure to carefully assess the information you are passing on to the offshore employees. If you hope that signing a Non-Disclosure Agreement will stop them from revealing sensitive information, think again. 

Here’s an example: A very popular U.S. storage software developer discovered a few years ago, that eight of its former employees, offshored in India, offered some of its intellectual property to a competitor. One of the U.S. company officials later assured that from that moment on, he would advocate against offshoring to countries with weak legal protections and high levels of corruption.

#7 Focusing on the Cheapest Providers

Choosing the cheapest provider may unpleasantly surprise you with many hidden costs. Offshoring a software project may look like the cheapest solution. However, make sure to take into consideration all costs involved. Otherwise, you will end up paying much more than expected. For a project with quality much less than required.

Is having a project developed more cheaply worth the extra money to fix the resulting problems – including potential lost customers and clients?

The software industry of today needs to become smarter. Companies like LD Studios, who is an Atlanta-based software consulting business, can show you the benefits of onshore work. Their highly skilled and experienced American professionals help organizations of any size achieve their goals and increase their revenue.


We are LD Studios, an Atlanta based software consulting business. We would love to hear from you! Please contact us for your free consultation.

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