5 Reasons Outsourcing Technology & Development Might Cost You More Money:
In the last month alone, I’ve heard 4 times from some pretty savvy business people the following reasons for outsourcing development to foreign countries, “Lower costs, cheaper development, cheaper talent and a quicker turnaround with the time difference.” In the end, none of these individuals felt that was the case.
Please Note: I have no problem paying foreign talent what they are worth. I have special relationships with global talent and they are worth every penny! This article is about people who outsource to save money and the pitfalls that come with that.
Can I break some myths for you on cheap versus expensive? The costs are NOT lower, the Development is NOT cheaper and the turnaround is NOT quicker.
Yes, the talent might be cheaper and yes some of them are probably pretty decent, but in the end, you will most likely pay more. Let me repeat that – you will most likely pay more.
Just as communities preach the practice of purchasing from local economic entities, you should consider doing the same when it comes to technology development. Especially if you do not know what you are doing. Hence, as the saying goes “Buy Local”
Let me walk you through a 10-second case study . . .
Case Study: I have a good friend who’s building a mobile web application, with almost all of the development done overseas.
Why? Because the programmers there are charging him $15/hour to develop.
Are they doing decent work? Yeah, it’s okay, but it’s a bit fragmented, not built for scale and has taken longer than anticipated.
Interestingly enough, we had a local analyst sit down with the business owner, walk through the backend of his technology, assess the set up of his databases and servers and look at other geeky things that the general public probably doesn’t understand.
Within an hour and a half of contracted time, this analyst was able to assess, diagnose and implement a few changes that would have taken the overseas contractors a dozen hours to perform.
Key Takeaway on Value: The local talent that charges more can do so because he/she can get it done faster, more efficient and built better for scale, than the guy or girl you are paying $15/hour for a much more prolonged period of time.
Do the math! In the end, you are paying more for outsourcing.
I’m sure there are several people who might challenge this and tell me how awesome they’re outsourcing project went and to that I say, “Awesome, please refer them to me”. I’d suggest holding on to that relationship and resource cause its rare.
Now, while I’m sure there are more than a few reasons outsourcing will most likely cost you more money than hiring great local talent, here are at least 5 that I see the most often: (At the end, there will be a check list for finding local talent)
5 Reasons Outsourcing Costs More
#1 Cultural Context – Every culture has a different and unique way of working. Because of that cultural context, what you might expect overseas talent to automatically perform based on your standard or process may not be the way they do things . . . and vice versa.
This is unrealistic given that every culture has different working hours, practices, approaches, methodologies, behaviors, tools or even lifestyle choices. In essence, having to translate across cultural differences might take extra time and eventually add up.
#2 New Technology – Yes, global talent has access to all of the same platforms, programming languages and development tools. However, talent here in the States has access to the brand spanking new stuff everyday, and they’re using it. The good stuff. The type that makes them insanely worth the money, quick to execute and positions you ahead of most competitors.
In fact, it’s usually 3-6 months, before these new technology “approaches” reach most foreign talent. Again, GOOD foreign talent learns of these new platforms right away is probably already charging more. Hence, I pay for GOOD foreign talent for their value.
#3 Flexibility – Much of the programmers and talent I work with here in the States are very open, transparent and flexible.
To all you non-techies and executives, these guys develop your infrastructure, databases and programming languages inside platforms that give you DIRECT access to your code at all times.
Maybe not the ability to change code, but you have all of it in your control. You paid for it and they make sure you always have it.
I’ve watched foreign programmers keep code hostage and threaten to shut you down unless you agree to something they believe was already agreed to. Please refer to #1, Cultural Context, if you are wondering why there was a communication breakdown.
Repeat Alert – Good Foreign talent will not do this to you, but then again, you will pay more.
#4 Security – This is big! Are you aware that many foreign programmers will often create so called, “backdoors” to your code? This is an “undocumented way of gaining access to a program, online service or an entire computer system.”
Ouch!! Imagine if your website or software goes down, or your customer’s credit cards are compromised. The amount of money you could lose can be drastic. Cheaper labor doesn’t necessarily care about the end result or security breaches. It’s just a job.
#5 Response Time – The thinking from most business professionals is that foreign talent is 10-12 hours ahead so while we sleep, they develop and vice versa. Multiple time zones, varying hours of communication, unaccounted holidays and fewer work hours are often just a few of the items that were not taken into consideration. Remember, the U.S. is a very systematic, “get it done yesterday” culture and other cultures may not be . . . and why should they be.
Again, if you were working with top level talent overseas and paying for it, they can basically take an idea and run with it. But we’re talking about people who outsource to save money.
Longer response time can prolong a project and your $15/hour can eventually turn into 1,000 hours for an item that might have only taken 100 hours at $100/hour.
Which would you rather pay for? $15,000 for lesser talent and a longer time frame or $10,000 to do it the right way the first time.
The only time you should outsource is when you know you’re going to them because they are worth paying the money. For the rest of the general working population, here are some tips to find local talent:
Tips For Finding Local Talent:
1. Go to a Co-Working Space that has a great reputation for creative and technical talent.
2. Meetup.com –> Type in a skillset you’re looking for (i.e. Programmers, Graphic Designers, etc.) –> Read up on the group and join the most appropriate one –> Attend a function –> Get acquainted with their group. Remember, you can’t just find great talent, you have to have a relationship with them as well.
3. Attend a Startup Weekend in your city – Don’t be fooled by the title Startup Weekend. These functions have some of the greatest talent in the city come together in one place for a full weekend. I met some of the greatest designers, developers and programmers there. Again, remember relationships. Be nice and respectful and they will give you some guidance.
4. StartupGrind in your city – This is another community-based initiative that fuels creative talent at the local level. By being in this eco-sphere of talent, you’ll find amazing resources.
SPECIAL TIP for Executives and C-Suite Type people – Old School tactics for hiring talent is dead! I’m sorry, but it’s true. May it rest in peace. As a good friend of mine and fellow entrepreneur, Dallin, put it to me today at lunch,
Prepare for the new economy.
Meaning – Take off your tie, throw on some jeans and go mingle with the talent in your local city. Don’t be afraid to ask them questions you “heaven forbid don’t know the answers to”, and start establishing a relationship with the people who quite frankly will be the pioneers of the future.
#5 Finally, you could also hire a digital strategist (<– Definition from Wikipedia) – I, myself, am one and do it for several companies across the U.S. You can either find one locally or please feel free to reach out to me with general questions ([email protected]).
A digital strategist comes in, looks at your situation, comes up with a strategic & tactical game plan, helps resource the people you need, oversees the initiatives, guides the big picture and executes to market.
Have you or your company ever faced with problems with outsourcing? Please feel free to share below.
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Photo Credit – Harry Winston Watch Photo in Header Graphic courtesy of Hodinkee.com
