Offshoring Development: Know the Risks

by Jeremy Lord on March 15, 2016

Offshoring software development is a dangerous idea that can quickly become more costly than any CFO or CTO would ever like to admit to causing. To be fair, there will always be pros and cons to every business venture no matter how big or small the idea. There is a slight difference between offshoring and outsourcing though, as outsourcing is not necessarily a bad thing if your firm happens to use an outsourced consultant or manufacturer. Offshoring however, in the software development community, generally means that you are looking for a cheaper alternative to the more expensive agencies in the US. If that is the route that is picked, just know that that is exactly what will be returned as your product...cheap. The goal here is to layout most of the risks that are presented to a firm that is deciding where to take their development needs to, as well as showing some consequences (good and bad) of such decisions. If you’re just curious about negative side-effects of offshoring a development project, scroll to the end.

Some Truth About Offshoring

Developers in other countries, are initially way cheaper to employ. An offshore development agency could potentially charge a fraction of what most local (US) firms could just because of labor arbitrage. The tradeoff however, is knowing for certain the skills of their development team to build the product within the agreed timeframe. The turnaround rate is often an issue with contracting out to an offshore company as it will be tedious to communicate and relay sensitive project information. Meanwhile, the clock keeps ticking and the project will likely go over budget. However, for the price of a single experienced developer in the US you could buy a team of developers somewhere else, which is why offshoring seems like the logical option especially for start-ups without a lot of capital. The big picture will tell a different story though when said companies go over budget because of the costly turn-around time that contribute to lots of problems down the road.

Communication

There has to be a constant yet accurate stream of communication for the deployment of a successful product. The product owner’s (PO) main job is to convey every aspect and detail of his project to the developers so that they can accurately build a product that is tailored to the PO’s needs. This is not easily accomplished if that team of developers is on the other side of the planet through several time zones. Often times with offshore agencies, the project is changing hands every couple of months causing the PO to frequently have to re-explain every detail as it comes together into the big picture. The constant back and forth is always necessary for a quality product, so that any tiny detail can be worked out as quickly and effectively as possible; so make sure it easy to get in touch with your development contractors.

Realistic Cost Expectations

A competitive market price for an MVP (minimum viable product) in the US would start around $10,000. Just to put that into perspective, in the hands of a skilled developer it would take around 70 hours to build. I wouldn't expect that rate of quality development from anybody charging $25/hour. $10,000 is about as low as an MVP could go, even in a highly competitive market; anything below that the client is risking a sloppy application that might not work properly. Even at that rate, that could still be a potentially wet (not hung to dry) application. If an offshore company is offering to build an MVP for less than that, be wary. However, software development goes far beyond just an MVP as there are many instances where there is just a couple hours of maintenance or other work that has to be done on an existing application. Make sure that you know exactly what you need and want to ensure that your development team can cater to your needs properly, and not up-bill for all sorts of unnecessary time. Get a second opinion from a trusted resource to do a system audit to ensure the depth of the project you want to get developed. This will save tons of headaches for your firm. If a project is done incorrectly the first time, it could cost multiples of what was paid the first time to fix the problem as sometimes a whole project might have to be scrapped to build what is needed properly.

Trust Your Dev Team

Make sure that you know your development team and that you can trust them with ideas and confidential information. Sadly, the software development industry doesn’t have a standardized test like a BAR exam to make sure that every “developer” has the right qualifications. When offshoring a project there is often times no way in telling who is working on your project, what sort of experience that developer might have, or what kind of development education they have learned. The general rule of thumb is you get what you pay for. A skilled developer with years of experience providing SaaS (Software as a Service) that is also easy to get in contact with is the ideal person a PO should want working on their project. Meeting such a developer in person is always a good idea so a face can be attached to the work, but that is also very difficult to accomplish if they live across an ocean or two.

Final Thoughts: Don’t do it

I know what you’re thinking, that the cost per hour for a developer looks intimidating, but the cold truth is if there isn’t enough capital to build it right the first time, there probably isn’t going to be enough to rebuild the application a couple months to a couple years down the line. Software development is generally hourly based, so it makes sense to get the job done properly and in as little time as possible. A development shop that has experience building with Ruby on Rails is a great option for firms with little budget as the language was built for efficient code writing (less time = less money out the door). It’s important to realize that unfortunately there is no gold standard of education for a developer, so make sure to get a confirmed look at their work or experience. Always trust who you have working on your project because their experience and vision will be vital when it comes to building a successful application. Granted, every situation is likely to be different, but knowing the risks is essential to mitigating them. Stay smart, protect your own, and always get a trusted second opinion.

The dangers of offshoring include but are not limited to…
  • Personally knowing your developers..slight chance here

    • There is no formal test for development qualifications, so make sure you know and trust your development team
    • Your developers understanding the project and catering to your needs as a client
    • Making sure they have the right set of skills/qualifications
    • Developing a relationship to ensure communication is essential
  • Hidden costs..there will be some

    • Travelling to check-in on the project
    • Unstructured project layout and budget
    • Costs of rebuilding if done improperly
  • More bodies doesn’t always mean more production

    • Larger teams often take more time than necessary to understand the entirety of the project scope
    • One skilled developer can build more than a team of junior developers
    • The client needs to understand the experience and skills of their developers
  • Turn-around time..there’s a lot of it

    • If there is a crash or a crucial problem to be fixed, it could take weeks to fix
    • Making sure your developers are tailoring to exactly what is needed
    • Restricts in-person visits
  • Confidentiality..who knows?

    • If you don’t have a face to put to the project, how much do you trust giving confidential information to this firm
    • Or them meeting security standards and operations
  • Final Thoughts

    • One experienced senior developer can do the work of a team of junior developers
    • Ensuring that the application is built right the first time is worth every penny
    • Make sure the doors for communication are always open for frequent check-ins
    • Protect your confidential information by trusting your development team

Any thoughts on your take or experiences with offshoring a development project? I would love to hear about them. Email me at jeremy.lord@ldstudios.co

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