The argument for BPO offshore outsourcing may hold water, but it does not apply when it comes to finding a partner to create innovative software products. The real costs of offshore can be found not in the unit labor costs, but in the cost of ownership associated with doing business offshore. There are the obvious ones such as the cost of travel, the cost of communication, and the cost processing H1B visas. The real costs are associated with having inexperienced people with a non- North American development culture attempting to meet the innovative demands of new software products that will meet market demand and enable a profitable business.

Start with the fact that only in North America do developers work in an iterative way with the marketing department to develop a product that meets the demands of the customer base. Going offshore means you are with an inexperienced work force that only knows how to build to specification. No room for deviation or creativity. Products just don’t get developed that way in the US, so the resulting build to spec product has to be built over and over again until finally it is market ready.

Compound this problem with the fact that the people building the product are unfamiliar with the technology and the problem becomes even more severe. Not to mention the fact that the people that started on the project probably are not the ones that are working on it when it is finished, since employee turnover can reach 40%-50% per year in many offshore locations. Oh by the way, did I mention that the language is different, and since the time zones are totally out of synch, there is limited real time communication to keep things on track. Then there is the management issue. Since you are dealing with an inexperienced development team thousands of miles and many time zones away, you need to dedicate staff to managing the team. Also, that manager must spend a lot of time in the foreign country, away from home and family, not doing much for employee morale back home. Hopefully, once the product does get built, your intellectual property will not get stolen and find its way to a position on the shelf next to yours at a fraction of the price.

Unit labor costs of doing business offshore is certainly lest than doing development onshore. But you get what you pay for, which are a big migraine and not much more.

(Paul Gasparro is Co-founder and Vice President of Business Development for MapleWorks – the smart choice for on-shore software development. He posted the above blog as a response at http://www.trybpo.com/offshore-vs-onshore-outsourcing-pros-and-cons/)

This entry was posted on Wednesday, July 15th, 2009 at 3:02 pm and is filed under Outsourcing Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.