Like many companies in today’s global economy, particularly in the information technology industry, Decision Design was lured to “think globally” about its labor sourcing and decided to establish an offshore development center in India. With the advent of innovative workforce technologies, web-based software, and high speed communications, having an offshore work center appeared to be an excellent fit with our continual push to keep costs competitive and deliver high quality services. Leveraging the time zone difference seemed like an attractive opportunity to provide our clients an even higher value-add to our offerings. With the well publicized $20/hr labor costs and programming talent as good as in the U.S., who could argue?
After researching and interviewing companies, we partnered with a multi billion $ firm in Delhi. We established a core group of project managers, developers, and QA resources. We developed specialized tools to communicate tasks, progress, and technical development environments. We had regular project meetings with the team in Delhi to ensure that communications were as strong as they could be. We regularly went to India to ensure that our project teams were working well together. All appeared headed for success.
But we never got there. It just didn’t work. So we pulled the plug.
After the two year initiative, we learned many things about working in an offshore relationship. We discovered what other companies are now beginning to discover; that costs were not low in reality and the quality of the delivered software was terrible. At least for the type of work we do, offshoring was a failure.
Homeshoring is about bringing task-centric, cross-functional development teams together in small groups where our developers work in close proximity. Homeshoring development centers are located away from the higher rent, higher labor areas of the U.S., providing significant cost savings over San Jose, Boston, L.A., or NC’s Research Triangle. Homeshoring providers build and use high speed, high productivity-producing development technologies that support using lower cost resources around the country. Homeshoring uses resources in the U.S., resources that understand U.S. business, culture, and work ethics. Decision Design’s Homeshoring model requires minimal travel, labor, training and project management costs that are often required in offshoring models.
Our Homeshoring strategy allows us to deliver savings from 30% to 60% below onshore development costs. And we are dead-on cost competitive with offshore or blended offshore/onshore companies.
On the surface, the logic for offshoring seems simple and straight forward: a U.S. software engineer in Silicon Valley will earn $80-120K per year while an offshore equivalent may earn $30-50K. Pundits continually state that low labor costs in India, China, Vietnam, and the Philippines, translate into 50%-plus savings for application development and technology support services.
Unfortunately, for many companies the reality is much different. Hidden costs and differences in operating models are significantly altering cost expectations. Additionally, timelines and costs are exacerbated by serious problems with quality control, knowledge transfer, cultural differences and employee turnover. And the biggest problem of all? Low rates do not equate to low cost. High productivity operations like we have at Decision Design ensure that work is performed in half the time of many developers in offshore centers. This fact alone wipes out the touted 50% savings.
In the end, our poor experience with offshoring was about the quality of the software. We just could not accept the poor quality coding, testing, and delivery. Our clients were not happy and our onshore developers were continually having to rewrite the offshore code. It wasn’t written properly, efficiently, and for the long term. The bugs were difficult to fix and the products were difficult to enhance. And this was from a CMM Level 5 rated company! (CMM observers, beware)
As detailed in the articles and resources in our Knowledge Center and from our extensive first hand experience, there are certain situations that benefit from offshoring.
First, offshore development resources need tight specs, tight project management, and fully defined projects. Offshore resources are not good at change and are not good at figuring out what needs to be done or what makes good business sense in any particular situation. They are best when tasks are uncomplicated and straightforward. Projects that are not fully defined ahead of time will fail to exhibit offshore cost advantages.
Second, commodity or routine tasks, tasks for which inductive reasoning, continual change, or business expertise are not necessary may be good candidates for offshore centers. Data conversions, PeopleSoft to SAP conversions, perhaps even a C++ to Java conversion project would be a good candidate. Call centers and Help Desks are frequently cited as good examples for offshoring since they require little creative or adaptive processes (though even those can present some customer backlash).
Finally, large corporations invested for the very long haul, willing to work through the complex issues they face with an offshore initiative can make offshoring successful. Organizations looking for a short term bang on a short term project (less than 12 months), will most likely see higher cost and lower quality by taking the offshore route.
As a pioneer leader in Software Remediation (rescuing failed software projects), Decision Design combines its proven Remediation Services Methodology with its unique Client Services Methodology to help clients bring their failing offshore projects back to one of our Homeshoring centers in the United States. From there, projects will be worked through the software production cycle, as detailed in our Client Services Methodology. Our remediation methodology and our experts in code diagnosis and code repair will quickly bring your software up to our high standards.
For more information on Decision Design’s HomeShoring approach, contact us via email at info@decisiondesign.com or 847-940-9200.
