Offshoring: The Promise and the Peril

4 minute read

Offshoring. The word fills finance people with hope and technical people with trepidation. It can be a CFO-CIO battleground.

Here at Mind Over Machines, we understand why companies offshore IT operations. It works well…for certain types of projects. But for the strategic software development that is our bread and butter, it’s proven to be a vexing proposition.

Over our 30-year history, we’ve 

undertaken offshoring projects at clients’ requests. We embedded one of our MINDs with a team in China, working on a dedicated project. We partnered with an outsourcing firm in South America, and collaborated with an Indian company as well. In each case, everyone involved put forth their best professional effort; we failed, course corrected, tried again. The outcomes just never lived up to our standards. We’ve also been called in to clean up numerous offshoring projects gone wrong.

Takeaway: While offshoring can work beautifully for routine assembly-line tasks, it isn’t a good match for innovating strategic business solutions.

Triple Threat: Cost-Culture-Time

Too many offshoring decisions are driven by that tenuous metric: the hourly rate. Yes, you can probably get a cheaper rate by going overseas, but overall project cost always is more important than unit cost. Between cultural differences and language barriers, it’s a safe bet your offshore team will consume far more hours completing your project than a local team would; commonly double and triple.

“There’s this laborious back-and-forth just to determine the project scope: ‘You tell us what you need; we tell you what we heard; you verify if that’s accurate,’” explains our COO Dmitry Cherches. “And be careful what you ask for because, best-case scenario, it’s exactly what you get. There’s no value added.”

“More likely than not, things will get lost in translation,” adds Mind Over Machines Founder & CEO Tom Loveland. “Especially in tech, we have all these idioms. When we say, ‘gray out,’ we fundamentally mean ‘make it unclickable.’ One client made that request only to have its application come back from the offshore team with the color of the still-functioning fields and buttons changed to gray. That’s an innocuous, amusing example. Usually the stakes are much higher.”

Overseas Information Security

“Let’s say you do manage to find an overseas company that delivers your project on the cheap; eagerness to maximize profit can breed opportunism that leads to the number one danger of offshoring: intellectual property theft,” Dmitry asserts.

Two companies have come to us as victims of overseas data theft. One had its KPIs sold to its competition. The other incident was even more egregious; an offshore company took the solution it built for the client and tried to sell it to their competitor. Unfortunately, even the long arm of the American legal system doesn’t usually reach across the ocean, especially in the amorphous realm of proprietary data and business processes.

To keep any one overseas entity from accumulating too much information about their company, savvy businesses will split a large project into several smaller pieces, thus creating a more complicated (and more expensive) architecture. “You’re doing what you need to do to protect yourself; making sure no single offshore team has enough of your intellectual property to hurt you. But more teams mean more overhead,” observes Tom.

When to Safely Offshore

Offshoring makes sense for a couple types of projects that happen to be at opposite ends of the spectrum.

First, for low-level, routine operations like data cleansing, CMS maintenance, QA, support, even website development. Anything a junior developer could do, where you aren’t giving away company secrets, may be safe to send overseas.

On the other end, a large enterprise might opt to offshore a megaproject if it’s big enough to offset the overhead, or if they own the offshore contingent. “If you own the overseas operation, you know you’re safe. Otherwise, you’re potentially sinking a lot of money into additional risk management like third-party security audits, code review, and penetration tests,” says Dmitry. “Usually it just doesn’t make sense for small and medium-sized businesses.”

Tom follows up with one last caution, “There is this allure of ‘chasing the sun’ where, ideally, Team A spends its workday dreaming up a solution and hands it over to Team B to implement while they sleep. This can be very powerful. But if Team B gets it wrong, you’re hit with the ‘double delay,’ waiting for Team B to wake up so you can explain what they did wrong and get back to the drawing board.”

Strategy & Offshoring Don’t Mix

Mind Over Machines sees offshoring as an opportunity to save money and brainpower on basic software and IT functions. Conserve your energy and expertise for solving the puzzles that help you capture new revenue, grow competitive advantage and streamline operations. Better yet, let us work alongside you in those higher-level pursuits.

“We aren’t a vendor. We’re a partner, focused on a long-term relationship. We deploy our American business acumen to optimize your business, helping you design and implement ways to work smarter,” says Dmitry. “We know when to hold your hand, how to guide you, and we deliver the solution that is the right fit for you.”

A couple years ago, Computerworld Founder and CEO Martyn Jones wrote an article about the seven don’ts of offshoring. Number one: “Don't offshore anything strategic. By strategic I mean connected with real business strategy that addresses a significant business challenge.”

Our MINDs have been addressing the significant business challenges of companies like yours for three decades now. If you’re thinking about offshoring a project, give us a call. We’ll help you weigh out the pros and cons.

Fair Warning: We may put you in touch with offshore project disaster survivors, rescue clients who have said, “Please share my phone number with anyone considering offshoring. I’ll tell them firsthand about the mess we got ourselves into and how Mind Over Machines pulled us out!”