Offshore Outsourcing: Obstacles And Opportunities
By Krishna Nair

Going overseas for IT talent is a lot like going overseas for vacation. If you don’t have a reliable local to guide your offshoring efforts, you may end up taking some wrong turns — mistakes that can cost you time, money, and ultimately business.

Despite the risks, outsourcing offshore is on the rise. According to the 2017 Harvey Nash/KPMG CIO Survey, the largest IT leadership survey in the world, as many as four in 10 IT leaders plan to increase offshore outsourcing — a trend that has been largely unchanged in recent years.

“IT leaders tell us they want to free up their own resources, gain access to new skills, and save themselves some money,” says Dr. Jonathan Mitchell, the nonexecutive chair of Harvey Nash and the Global CIO Practice. “Hot outsourcing areas include application development, followed by infrastructure and software maintenance.”

The road to hell is paved with good intentions, and that includes offshore outsourcing confidence.

Part of the rush to outsource offshore talent comes on the heels of H1-B visa uncertainty, with IT execs unsure of how much international talent they’ll be able to bring to the United States.

Harvey Nash’s Pulse Report on the impact of proposed reforms to the H-1B visa program found:

  • 61 percent of U.S. IT leaders with large development teams believe the proposed changes will make skilled IT talent less available
  • 68 percent of companies with 50+ developers believe reforms will increase the cost to hire skilled IT talent
  • 59 percent of companies with 50+ developers will consider offshore options

With that in mind, offshore outsourcing seems like an easy alternative to hiring staff here in the U.S. But there’s a bigger conversation that needs to happen in the IT industry about the problems that come with this assumed convenience.

SKILL INFLATION RISK

For example, let’s say your organization is trying to move to the cloud from on-premises infrastructure, and you decide to add five offshore cloud and DevOps developers. Your company has no experience working with an offshore team. Let’s say you’re lucky enough to find three people with a specific, refined skillset for cloud and DevOps. You can’t assume they’re experts ready to deal with any situation thrown at them. Why? Because the offshore company you hire will say they can handle it even when they can’t. Consider the perspective of the offshore

company’s salesperson. You ask, “Do you have cloud and DevOps talent available to help with my project?”

Few companies will say, “No, we don’t have the people.” They’ll try to win the work and worry about finding staff to do it later. U.S. companies do this frequently. Companies all over the globe do it, too.

Just because you can hire coders for $3 an hour doesn’t mean you should. Maybe if you’re lucky, that $3 an hour coder will work out great, but in my experience, this rarely happens.

We prefer to be honest with our clients. We’d rather risk losing business than put the project or relationship in limbo. Occasionally when we work with new technologies, we build a prototype that showcases our project delivery capabilities. Clients are receptive to this honesty.

Ignoring skill inflation risk can waste time, money, and resources you could have used onshore. Offshore talent can certainly help get projects started, but it’s harmful to rely solely on them.

WHAT’S NECESSARY FOR OFFSHORE SUCCESS?

Now that I’ve warned you about everything that can go wrong, here’s how offshoring can go right.

You, too, can have success in offshoring, if you follow these three keys:

  1. Find a trusted partner.
  2. Communicate clearly.
  3. Set expectations.

It’s crucial to have a trusted partner, even if it adds additional expenses. Money shouldn’t be the bottom line: Every time you move into an unknown market pursuing the cheapest rate, you put your organization at risk of missing a deadline or getting lower quality work. In the U.S., many technology consulting firms have deep ties to offshore markets. We’re like the tour guide who knows where to find the best street food in Mumbai, and which stands to avoid. Sure, you could dine without us, but you’ll have a better dinner with us. We do most of our offshoring in Valsad, rather than bigger cities like Mumbai. It’s a great family-friendly location filled with talented IT professionals who want to live in a smaller city but still be part of a growing company. By going to Valsad, we get lower turnover than we would in a large city.

SET EXPECTATIONS

Before committing to an offshore contract, find evidence that the company has the expertise and experience to be your strategic partner. Any size company can get hosed in an offshore market. I watched a firm, let’s call them Biggie Bank, pay $220 million to a U.S. consulting firm that then used offshore talent to build a lending product. Within three years, Biggie Bank had to revise the product because it never worked properly. The problem? A lack of ownership by offshore contractors working on the project. While you may envision that you’re hiring an offshore firm with a steady employee base, your contractor may be subcontracting to lowest-bidder-wins independent contractors in that local offshore market. Those contractors will do the job and move on. They have no ownership in your project and no incentive to create a product that works. You can probably afford one project failure, but accumulating multiple failures is bad for your career and your company.

STRATEGIC PARTNERS PREVENT MISSTEPS

The bottom line is that you need a strategic partner. If you don’t have one, you can end up in a frustrating and costly situation. When you form the strategic relationship, don’t consider cost without also evaluating quality. Just because you can hire coders for $3 an hour doesn’t mean you should. Maybe if you’re lucky, that $3 an hour coder will work out great, but in my experience, this rarely happens.

If you decide to DIY your foray into offshore talent, ask what the offshore partner brings to the table and the scope of their work experience:

  • What projects have they completed that are similar to this task?
  • What is their core skillset?
  • What U.S. references do they have?
  • When you hire a whole company, will they do everything for you?
  • What are their limits? (Be wary if they claim to have no limits.)
  • What’s the percentage of employees versus project-based contractors?
  • What if they want your team to do more?

Offshoring’s most common issues can be avoided with a dose of direct communication and effective partnering. With a little extra work, my advice will help make your next outsourcing experience a success.

Krishna Nair
About the Author:
Krishna Nair
CTO
About 1Rivet

Working from offices in Washington, D.C., New York, Toronto and Valsad, India, the company’s three core divisions offer:

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IT mergers and acquisitions, systems integration, data integration, data visualization and analytics, delivery management and customer experience.

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