3 Reasons Why Outsourcing Your Software Development Offshore is Risky Business


09 November 2017

Software Outsourcing


In 2018, the outsourcing market was worth over $85 billion USB. Even though this was a dip from 2016 when it totaled over $100 billion USD, offshore outsourcing is still popular, but is it worth it?

Ask 100 C-level managers of Australian private and public organisations this question and you will get a tangle of responses weighing the pros and the cons of outsourcing against in-housing and offshoring against onshoring.

In the end, each manager will have a unique perspective on what counts as a pro or a con. To muddle things further, some considerations could be pivotal to some decision makers but be completely overlooked/dismissed by others. Ultimately, however, the size of India's outsourcing industry shows that many think outsourcing to India, Southeast Asia or elsewhere is the best combination of these options.

This is probably because it is perceived to be the most cost-effective option; however, those potential savings come with more than some risk, especially when it is software development that is being outsourced.

Click to see the top 20 risks associated with offshore outsourcing

Choosing the right developer is a little more involved than comparing hourly rates and picking whoever is cheaper. The true cost of developing software is also a question of control, speed and quality.

When you take these into account, the offshore market's competitive advantage quickly vanishes.

#1 Control

The immediate and inevitable loss of control is the biggest downside to offshoring.

Right off the bat you have to deal with timezones. For an Australian organisation outsourcing to South America, there is literally zero crossover between standard working hours! Outsourcing to India is more convenient in this respect, but 9:00 am in New Delhi is 1:30 pm in Brisbane.

This is probably not a deal breaker, but the change in country also means new laws, cultures and languages.

Can you protect your IP in India? Probably, but there is an element of risk. Food and drug companies in particular have been caught up in the Indian court system in recent times and corporate espionage rears its ugly head everywhere, including Silicon Valley (Google vs. Uber).

To make matters worse, due diligence is much harder online or over the phone. Who is really developing your app? When you develop with a local development house, you can schedule meetings and meet the designers, developers and testers working on your app and see the progress that they are making as they make it. This applies doubly when you develop in-house as your developers are now your employees.

Developing onshore may mean a bigger price tag, but it also means more control.

#2 Speed

One of the biggest time sinks in the development process is testing and bug squashing. As such, hard and loose coding is usually slower than deliberate and methodical coding.

While there are high-skilled developers working overseas and low-skilled ones in places like Australia, the highest skilled and most talented individuals will tend to gravitate to the ecosystems with the best pay.

For example, Silicon Valley tech workers are primarily foreign-born. Even elsewhere in the United States, e.g. Austin, Texas, more than a third of tech workers are foreign-born.

Considering a developer's time spent coding is dominated by quality control and that less experienced developers make more mistakes (and as a result spend more time doing quality control), developing onshore is less risky as it is where you can expect the talent pool to be at its best.

The question of speed is linked with the above question of control. The slowdown will vary, and it might not be noticeable, but there will undoubtedly be some on account of issues such as language and timezone.

Considering that the average onshore developer (a pool that will include people born overseas) can already be expected to be more experienced and, as a result, less likely to make mistakes, speed is a legitimate risk associated with offshoring.

This issue is compounded because correcting mistakes requires oversight and communication (i.e. control) which is weaker when partnering with an offshore team.

#3 Quality

Turnover is a natural part of business, but it can be particularly disruptive to development teams.

For starters, some developers do not build what you need, they build what they think you need, and not even that--they may build what they think the technical requirements backlog says you need. Depending on the backlog, this could be a very accurate representation of your needs, or it could be the complete opposite. In any case, most people are not experts in your business and as such misunderstandings will occur.

The concern is that a small misunderstanding in documentation can translate into a large gap in capability. This is why turnover is particularly disruptive to development teams. Familiarity is critical to minimising misunderstandings. India's high turnover rates (35%) coupled with time and language barriers, can have an immense impact on product quality.

This is a hidden risk to partnering with an offshore development company.

Is it worth it?

Some of the managers choosing to send work overseas do so without knowing these risks, thinking the lower price outweighs potential drawbacks.

But choosing the right developer is a little more involved than comparing hourly rates and picking whoever is cheaper. The true cost of developing software is also a question of control, speed and quality.

Hidden costs, such as long distant phone calls, travel and the repercussions to umbrella issues of control, speed and quality can quickly upset the balance.

In the end, outsourcing and offshoring both have their advantages, but they also have their risks. Knowing the risks empowers you to make the decision that's' right for your business.

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