The Hidden Costs of Offshore Development

Outsourcing has always been a source of great debate around the American watering hole, and quite frankly it may be a debate that will never truly go away. One thing that is certain, however, is that the reason why outsourcing is so frequently leaned on is due to its overtly cost-effective nature. Hiring out an offshore software development company and producing a quality product for a fraction of the price is tempting.

It’s no surprise that U.S. companies have been outsourcing software development to offshore countries in Asia and Eastern Europe for over 20 years. Back home in the states, talent can easily cost you up to $100 an hour, whereas outsourcing the same work to India can be little more than $20 an hour. Like we said, a fraction of the price. However, there’s more to this story than what first appears.

It’s easy to be swayed by the surface price. One fifth of the price to develop a new application? Why look any further? The tricky thing about going the outsourcing direction isn’t the apparent budget it’ll cost you, it’s the hidden costs of offshoring. Those bargain labor rates tell only a fraction of the story about the true costs of offshore outsourcing, and you owe it to yourself to read the full scoop.

Time Zone Alignment and Communication

Everyone’s had their ears burned by the old adage “time is money” to the point where it’s sort of lost its meaning. It comes off as a bit of a cliche, but it’s no less true now than when it was first coined. Time truly is money, especially when dealing with how quickly the world and business moves nowadays.

When you take into account how communication and time delays caused by the overall slow flow of information cut into your workday productivity, the pressure tends to add up quickly. That happens to be one of the biggest troubles with offshore accounts is simply aligning your working hours, especially if you choose to outsource to India or China. Real time communication and collaboration is key for high-quality, low-cost, and time-efficient software development.

Cultural Affinity

Having so many cultures around the globe is a good thing, let’s start off with that. Having the opportunity to live in a rich, diverse cultural system spanning every landmass supplies us with the means to branch out, experience incredible new things, and gain new perspectives on the world we might have otherwise been blind to.

At least, if you’re on vacation it’s great. In the business sphere, cultural differences tend to stand as more of a challenge than an asset. Let’s face it: a team in China is probably going to operate a lot differently than a team in America. While that doesn’t mean either method is wrong, it does make collaboration much more difficult.

Not sharing the same culture and time zone maximizes communication gaps between teams. Without the benefits of a solid communication basis, your teams won’t be able to understand one another’s perspectives and way of business. You can see why that might throw a wrench in your plans.

Ease of Doing Business

Making sure that putting together a viable team to tackle any project means being concerned about the overall concept of “ease of doing business.” The more organization, technique, and collaborative wheel-greasing you can put into a project, the more likely that your teams will mesh and productivity will skyrocket. Offshore outsourcing tends to be a stick in the mud for a couple of critical means for enriching an effective, team-based atmosphere.

Agile Teaming

Making your teams Agile is a significant indicator of how easily and readily problems can be addressed in the heat of the software development process. The compatibility of your teams leans heavily on communication and objective access to each other as resources. With an offshore team, the very concept of Agile goes out the window, as it’s impossible to achieve if the teams cannot interact in real time.

Visa Processes

Bureaucracy can also restrict how easily you can conduct business. Your company may find that it wants to supply foreign talent with the means to travel abroad to the U.S. and work here, and for that they’ll need a work visa. Enter the fact that makes this process a pain in the neck. H1B visas that allow U.S. employers to temporarily employ foreign workers in specialty occupations are strictly monitored, processed under a strict ration, and only issued in October.

With harsh oversight and small window, getting those workers stateside is far from the easiest trick in the book. If there’s one valuable asset you want to get over, it should be worth the effort, but the more visas you want to get out, the harder it is to ensure the machine functions properly.

Tangible Costs of Visiting an Offshore Team

So far, we’ve only discussed anything that might fall under the “time is money” umbrella of costs associated with offshore outsourcing. That is to say, having your time chewed up means that you aren’t proactively engaging in production, but it doesn’t necessarily mean you’re writing checks and draining your accounts. You’re just losing opportunities to make money and gumming up the works.

Obnoxious and costly in its own right, yes, but what about concrete revenue expenditures? There are, after all, tangible costs involved with employees an offshore team to work on your projects, more than time, effort, and patience alone. In order to maintain a successful relationship with an offshore outsourcing company, it’s going to charge you a bit more than that a sweet $20-an-hour that you signed on for.

So, what are these tangible costs of offshore development beyond the hourly fees that you need to consider? Primarily, it’s going to be travel based. While facetime connection services like Skype may prove to be convenient for your uses, they can’t beat a face-to-face meeting. You’re going to have to go to them, like it or not.

Meeting your outsourced developers conveys many details that go beyond the strenuous flight hours and obvious jet lag you’ll be contending with. Travel is expensive, and unless something changes it’ll continue to increase. Let’s say that you want to have quarterly onsite visits with your extended team. What are the costs of flying over from San Francisco and visiting your extended team in Delhi for a couple of days?

Consider the cost factors that will be involved:

• 2 representatives from your company
• Duration: 2 days
• Flights: all airlines, economy class
• Hotel: 4 stars, 1 double room, breakfast, wifi, airport shuttle
• Frequency: quarterly
• Costs in USD

Give or take a few royalties with each of these, but this should round out to about the average cost that a company will spend on offshore development.

Over a three-year period, your company will shell out approximately $37,320 in the interest of maintaining an adequately cohesive relationship with a foreign company. There are other minor costs to consider as well, such as food and transportation, that may have an impact on your expense report.

Intangible Costs of Visiting an Offshore Team

The workload involved with traveling overseas and coordinating with an offshore development team is more than just a money matter. You have to keep in mind that everyone involved, especially those you’re sending as representatives, are people. Sometimes it’s easy to forget that they have their own lives and responsibilities that deserve to be kept in mind.

Not only is it likely that the monetary savings derived from offshore outsourcing often come at the price of a lower project quality, depending on who you partner with, but the human costs that shape the well-being of your employees is a significant as any budget. Let’s explore the intangible implications, both big and small, of having face-to-face meetings with your extended team.

Time Spent in Air

We’re going back to time, but this time we’re more focused on the time of the individual rather than the company as a whole. Delhi and Beijing are quite the destination, meaning there’s no shortage of travel time involved in getting there. As a result, your travel time simply getting to and from will compound with each quarterly trip.

Hiring an offshore team translates to extra long travel time by team management and engineers to fix problems or simply develop business relationships with your extended team. If your outsourcing team is halfway around the world, you should expect 18-hour flights on average. That’s a lot of time to be stuck in a seat inside a metal tube.

Let’s elaborate a little more and get a clear image of your flight hours. What are the intangible costs of flying over from San Francisco, for example, and visiting your extended team in Delhi for a couple of days?

Starting off with the same list from earlier:

• 2 representatives from your company
• Duration: 2 days
• Flights: all airlines, economy
• Hotel: 4 stars, 1 double room, breakfast, wifi, airport shuttle
• Frequency, quarterly
• Costs in USD

For the flight portion, we can determine that your representatives will experience roughly 264 hours in-air time over a three year period.

That’s 11 full days of traveling in a plane out of a year. Needless to say, that’s not going to be pleasant for anyone.

Jet Lag

Jet lag is a physiological condition resulting from a disruption in the body clock or circadian rhythms. In layman’s terms, it’s a syndrome that may occur when people rapidly travel across different time zones. While you may arrive in China in the middle of the day, your body is still attuned to your time zone back home, meaning it feels like it’s midnight. It’s not easy working in that sort of condition.

As a measure, it can take up to a day for each time zone crossed for the human body to adjust to local time. Symptoms are actually agitated when traveling from west to east because our bodies have less time to recover.

There are 10+ time zones crossed when flying from Chicago (UTC-5) to Delhi (UTC+5.5). It’ll take you over ten days for your body to adjust to the new environment.

Time Spent Away from Loved Ones

We can’t put a price on our personal lives, especially our relationships with our families. We do know, however, that business travel comes at the expense of time with your loved ones, whether the absences be long or short. It’s not an easy thing to ask of someone, employee or not.

Conclusion

The appeal of offshore outsourcing fails to live up to its own standards after thorough examination. While outsourcing continues to tout itself as a fiscally superior alternative to locally sourced talent, the truth is that the true long-term costs associated with offshore development and effectively managing those services weaken the validity of the option as a whole. Simply put, offshore outsourcing isn’t up to snuff.

Whether it be due to differences in time zones, increased tangible costs of visiting offshore teams, or the extra weight quarterly travel bears down on your representatives, opting for offshore software development is loaded with hidden costs. If you’re planning on exercising outsourced development for your company, do so with clear eyes. Maintaining careful awareness of possible unknown costs of offshore development, while also keeping in mind alternatives like nearshore outsourcing, will serve to be your friend.

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