Choosing Your Offshore Software Development Model

staff augmentationWith the shortage of talented mobile and web developers in the US and Europe, opening an office in an offshore market with a comparative abundance of skilled labor is appealing. Like so many other great concepts, what determines success and failure is not the idea, it’s the execution. Whether you are offshoring with a strategic vendor, or setting up your own operation, your expectations are going to be the barometer for success. Before we discuss key considerations, let’s talk about the alternative models to opening your offshore software development center.

  1. Proprietary. This refers to building your own offshore center from the ground up. Developing your own offshore operation is a viable option for large corporations who are 100% sure about which country they want to set up in, have a very large amount of capital to commit to the operation, and have a 3-5 year outlook to recover initial setup costs. This is a less viable option for companies who want to build an offshore operation of less than 100 employees.
  2. Staff Augmentation. This is when a strategic vendor hires offshore employees on your behalf. You have direct input into many of the same decisions you would make if you were the employer (hiring, termination and salary decisions –managing the employee and their work, etc.) without the liabilities of being an employer. You leverage the existing offshore facilities and operations of the vendor, as well as their HR and recruitment capabilities. A good Staff Augmentation company will replicate the experience of having your own offshore development center at a fraction of the cost. Talk to Get[Devs] about Staff Augmentation.

Before You Choose a Model, Lets Talk Process Neither model will work if you don’t currently have good processes in place. Adding any resource, local or offshore, will compound the problems of a broken system. Get[Devs] is a big fan of the distributed development model. We believe that the best results come when ‘the innovators’ sit as close as possible to the product owners. By innovators, we are usually talking about designers, BAs, PMs, and possibly your architect level developers. If your core team of innovators is mature and consistently uses good tools and processes, you may be a suitable candidate to layer in developers and QA engineers globally, but choose wisely. If you intend to offshore all facets of entire projects from start to end, be ready to manage a whole host of complicating factors that most small or medium enterprises are simply not equipped to deal with. In short, know your organization’s limitations and thereby know what to offshore and what not to offshore. If your core team sitting in your office is not running like a well-oiled machine, layering in remote resources is going to compound your problems – not alleviate them. BOTTOM LINE – anything you offshore should be a somewhat repeatable, measurable process. If you choose the staff augmentation model, start with a QA team and/or some senior developers. If it’s working, fill out your team with intermediate and junior developers. When you really have a handle on things you can start thinking about incrementally higher value positions – like a Project Coordinator. If you are interested in setting up offshore, but your current processes are not quite in order yet, we can help. We enjoy process engineering as much as we enjoy team building. Considerations in choosing your offshore model: So you have established that you have mature processes, your organization has adopted and embraces tool usage, and you have identified QA and/or developer positions you can offshore. Next, think about what it really takes to establish a real offshore operation – no matter the scale. Remember, you want to establish legitimate, respectable operation. DO NOT:

  1. Do NOT start with juniors. You must build teams from the top down no matter how great the temptation is to save a few bucks.
  2. Do NOT start with freelancers. If you want to build a successful offshore operation you must reduce variables and increase control.
  3. Do NOT skirt regulations. If you are starting to build your own operation from the ground up and want to be taken seriously you will incorporate in your off-shoring destination and you will follow local employment laws to the T. If you are using staff augmentation you want to make sure your vendor is doing the same. Don’t be afraid to ask them for copies of their business permits, etc. You will not attract serious talent flying by night. Period.

DO:

  1. Use an accredited service to incorporate if you are starting from the ground up to build your own off shore center. Spend some money and do it right. This will save you countless hours and frustrations. A good service will also get all of your business permits in order. Trust us – most of the countries with strong offshore IT capabilities have more permitting requirements than you can imagine.
  2. Your first hire should be a really good HR generalist. Hire someone from the industry. They can do 3 things you can’t possibly do: a. Set policy appropriate for local law and culture b. Get other systems set up such as payroll, tax payments, benefit payments, etc. c. Most importantly, they already know the lay of the recruiting land.
  3. If starting your own operation, you must get good office space. If you are using a strategic vendor, make sure they have good office space. If you want to recruit super stars you need to have decent digs. You also need to pay attention to what internet is available in what areas, what buildings have real disaster recovery plans, and what buildings have true 100% power backup. You are going to need it sooner or later.
  4. Keep your people working together as teams in one offshore office to the fullest extent possible. Remember, you must reduce variables and increase control. Distributed development does not mean everyone works from home in uncontrolled environments.

The Barriers (for your own proprietary operation):

  • MONEY: Although you may eventually save money working offshore, you will be making a major investment to do it right. Most off-shoring destinations have somewhat restrictive company ownership laws, high capitalization requirements, strict labor compliance laws that require constant administration, etc.
  • TIME: You must have a plan for which key person you are going to send to your new offshore operation to get it up and running. If you think this happens in a month or two you are likely in for serious disappointments.
  • CULTURE: You may have traveled there, but that does not mean you understand the culture in a working sense. Pick a culture that is somewhat similar to your own as it will help reduce possible friction points between the onshore team and offshore team that must be integrated. Get[Devs] works in the Philippines for many good reasons – the most important being is that no other outsourcing destination has a culture that is more closely mirrors American culture. We can’t stress this enough – cultural differences can sink your offshore venture if you don’t address it properly. Trust us – we are not disparaging any other culture. They all have some tremendous selling points. We have just found that the Philippine culture meshes with American culture the easiest.

BOTTOM LINE – You don’t go set-up offshore on a whim. Half-baked is going to be full-trouble. If you take your products, your clients, and your business seriously, you must develop a robust operation with redundancies where appropriate (infrastructure). The benefits of the Staff Augmentation Model:

  1. Virtually no start-up capital requirements. A respectable Software Staff Augmentation company will require a deposit equal to 1-3 months staffing fees – but this is nothing compared to the startup cost of your own operation.
  2. Reduced operating capital commitments. Operating overhead is spread across multiple accounts.
  3. Speed. The vendor’s infrastructure will be set up and ready to go. A good vendor will also have a well-oiled recruiting machine in place.
  4. Focus. Using Staff Augmentation will allow you to focus on your products and projects – not operating another office. The importance of this cannot be overstated.
  5. Reduced Variables. You may have noticed – we have said a few times that a key success factor in offshoring is reducing variables. Setting up your own operation dramatically increases variables (finding the right managers, finding the right location in an unfamiliar labor market, understanding culture before you hire, knowing local laws, etc.).
  6. Commitments. Most of the better staff augmentation companies are going to look for 6-24 month contracts. This is shorter than your ROI period on your own operation.
  7. Local Expertise. Leverage the experience of people that have already set up successful operations in your offshoring destination of choice. Benefit from the pain of their learning curve – not your own.
  8. Other Legal Issues. With Staff Augmentation you are not legally the employer. There are benefits in reducing these liabilities.

Final Thoughts:

  • Don’t do anything offshore until your current processes are highly refined. Contact Us if you need to talk more about this. We like to talk process and the chat is free.
  • While many of us feel driven to have our own offshore operation, its rarely the right move for small and medium sized companies.
  • Know what to outsource. Don’t ship your innovation positions offshore.
  • Build from strength. Start with senior developers and QAs and fill teams out below them as they prove capabilities.
  • Ensure that facilities (either yours or your vendor’s) are in A1 shape. If facilities go down, you go down.
  • Ensure that operations (either yours or your vendor’s) are in total legal compliance. Make it your business to know this.
  • If you go about off shoring in a haphazard manner, you will get half-baked results.
  • Reduce variables & increase controls. Offshore repeatable, measurable processes and jobs.

Questions about offshoring software developers and QA engineers? Chew the fat with Get[Devs]