The Hidden Costs of Offshoring

These days every company is a “technology company” whether we realize it or not. Not all deal in technology – as in, they don’t manufacture it, sell it, or market it. Whether you’re B2B, B2C or a little of both, and no matter the service or goods your company deals in, your marketing and communications needs are now high tech enough that you likely have an IT system in place. It’s inescapable. If you’re spending annually on IT, you’re probably already aware that businesses have been turning to offshore outsourcing in order to save money on tech support, web-based customer support, and a number of other common business necessities. It’s tempting when, as Stephanie Overby of CIO.com says, proponents of offshoring boast that you can get work that normally costs $100/hour in the US for $20/hour elsewhere. In truth, offshore outsourcing comes packaged with a number of hidden expenses that most businesses aren’t ready to shoulder, and specific conditions that must be met in order to benefit from the hassle of transition. In short, there’s a reason why the newest trend in outsourcing is “re-shoring”. Here are just a few reasons why businesses are jumping ship and bringing their teams back home.

Want to save money? Prepare to be put on hold.

It’s a wonder why this comes as a surprise, but many businesses seem to be taken aback when offshoring doesn’t begin paying off right away. Even if a business can handle all the unavoidable costs of the initial transition to an offshore partner, that transition is going to take time. Outsourcing doesn’t happen overnight, and in fact it typically takes months just to ensure a smooth setup, proper training, and so on. Needless to say, if this transfer isn’t handled perfectly, there will be delays. Also, bear in mind that the smoother the transition, the more you’ll invest in it. It’s a rather aggravating dilemma: if you aim to save money and do it right, you’re probably going to spend more money on making sure you save money. A lot more than this goes into the transition period (the most costly part of offshoring) and businesses that can’t wait at least 8-12 months to begin seeing the savings they signed up for often bail out early, because they came looking for a quick turnaround and didn’t prepare for a long-term payoff.

The human barrier.

There are key human factors in offshoring that are sure to throw wrenches into your plans for lowering cost – time zones, language and culture. First, consider that the best collaboration happens directly and in real-time. One of the great advantages of in-house teams, or at least teams that share a time zone with your business, is rapid response time. When your IT department is halfway around the world, communications delays, errors, and other perils will inevitably undermine productivity. Its not just time that isn’t on your side, either. Language, for one, can, and will hinder the relaying of both minor and major communications. Language barriers and grammar can also hinder the SEO of a business website or mobile app development. Culture presents another unique challenge. According to Hank Zupnick of GE Real Estates, something as small as an employee’s workplace comfort level will impact productivity. For example, an American worker in an American office may be willing to speak up and correct a blatant problem, where a worker from Israel, India, or Ireland may simply comply with a demand even though it doesn’t make sense, inherently wasting resources, time, or money.

You may end up playing a game of limbo.

How low can your company go? If you’re planning on offshoring, in worse cases your business may take a hard hit in – quality. Let’s first imagine that your offshore outsourcing transition has been a dream. Everything has gone right. You found a great collaborator, your new team has been trained, delays have been few, and you’re 8-12 months in and ready to begin saving money like all the big dogs in your industry. Then work starts coming in from abroad and…it’s not quite what you were expecting. What happens next is a potential budget crisis called “rework”. Your team at home has to simply redo anything and everything that falls below your business’s standards and, well, you’ve now paid for the same work twice. If this keeps up, you were better off keeping your business’s money at home to begin with. According to a report by Vic Cheema, “60-80% of software development costs are spent in rework” and “44% of organizations say they don’t know what their rework effort on a per-sprint basis is”. Additionally, warns Cheema, consider the added cost of additional quality control measures should your offshore collaborators be unable to catch up to acceptable standards. That issue, in turn, may also be compounded by high turnover rates. According to Cheema, the average turnover rate for offshore providers hangs around 40%.

Considering Offshoring?

If your business is considering offshore outsourcing for mobile app or web development, it’s wise to do your research. As we’ve said, these days just as many companies are focusing on optimizing costs at home. The prospect of saving big bucks by sending work abroad is easier said than done. Companies have certainly made offshoring work, but the truth of the matter is that offshoring requires a great deal of time, hidden costs, careful considerations and deeply experienced transition skills.

Keep it Local!

Fortunately, in 2017, businesses in the US have many more affordable options for outsourcing work on domestic soil than they did even five years ago. Digital marketing, communications, and web and app development companies now offer the skills and services of offshore providers not only at competitive rates, but also with higher levels of quality and turnaround. If your business is looking for cost-effective alternatives to offshoring, look no further. Contact us today about your company’s budget and needs, and ask us how we can help you succeed.

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