Offshoring is, no doubt, a lasting trend in global software development. Offshore software development (OSD), i.e. the relocation of software services abroad, put into practice, is changing the business models of many IT companies today. The idea of offshoring seems to be so alluring, for it mitigates the distance factor. However, this mitigation makes us focus on another, very special and important dimension — time. And time is too precious a thing to forfeit.
In the information technology business, you do not have to meet your overseas partners in person for project updates. The only alleged hindrance to your communication is time zones. The nature of the interaction depends significantly on how far a client and a contractor are from each other. You can go about fixing things in either synchronous or asynchronous mode as part of offshore, nearshore or onshore software development. And the overall situation is stable:
- synchronous communication — resolving problems when they are small
- asynchronous communication — delaying and complicating problem resolution
Being stable, it is still not black-and-white. The possibility for the USA and India to work on the same project is the powerful magic of the offshoring, and asynchronicity is a side effect. Of course, working within the same time zone band would be perfect for everyone and bring nothing but benefits to synchronous communication. Yet, the IT is a business, and its bona fide purpose is to increase revenue. Thus, you should be reasonable in estimating budget expenditures. Consequently, why not put your money to good use in low-wage but remote countries?
What is the difference between offshore, nearshore and onshore?
The software can be developed in three ways: offshore, nearshore, and onshore. They all are not directly connected with the mode of communication. The mode is rather affected by what form the partners have chosen.
- Offshoring is the relocation of business processes outside the national borders so as to curtail expenses on the production of goods and services.
- Nearshoring implies that the distance between the country of origin and the one of the producer of goods and services is insignificant.
Onshoring involves processes implemented right in the country of origin.
Outsourcing, which means contracting work outside the company to an external organization and involves trust and obligatory two-way information exchange, is a notion that can comprise any of the three ways at a time. Then, the idea of offshore outsourcing suggests itself. Obviously, IT offshoring occurs either within a single multinational corporation or through an outsourcing contract with an overseas company. Software programming is a service that knows no frontiers and cultural differences. Whether you go offshore or not deals primarily with your willingness to embrace an asynchronous mode of communication or search for other ways to carry out offshore activities with almost no loss in quality of your product.
Advantages of offshore software development — how to do more with less
The recent growth of investment let us assume the risk taken has paid off. What are the reasons that make companies search for external solutions in foreign countries? What are the competitive advantages of the offshore sourcing that enable inter-organizational partnership and make it fruitful?
- Cost Labor cost savings
In the first place, the offshore model is driving down labor expenses. Major offshore locations (e.g. Eastern Europe, India, Mexico, Brazil, etc.) usually offer staff that costs up to 90 percent cheaper than it does in the Western countries of origin.
- Low turnover rates
When demand exceeds supply, turnover rates start growing. For this reason, the US-based IT companies had to launch offshoring initiatives yet in the late 1990s. That experiment proved successful having led to the reduction in local demand.
Access to a large high-skilled labor pool
The cost is the main but not the only reason why offshoring of services keeps growing in the global economy. Now that the competitiveness is enhanced and quality is the top priority, tier 1 countries are free to source technical talents overseas where, in fact, a large talent bank resides. Thus, in case a high-quality partnership is established and the selected contractors are being constantly monitored by the headquarters, relocation of knowledge-intensive service activities, conducted by the reliable contractors, may contribute to the overall innovation performance.
– An educated English-speaking workforce
Among the offshore location choice factors, there are factors of education standards, ICT infrastructure, and home country language usage. Differences not only in skills but also in language can hamper the progress. It is common knowledge that English is the universal language of business.
Threats and troubles of offshore development
Besides the upsites, offshoring of services poses certain security threats to businesses.
- Data security/ protection
First and foremost, you should always make sure that your future vendors are as much concerned with privacy issues as you are. Handling data, not only when going offshore, will inevitably imply risks. But the problem is especially acute when it comes to the legal side of protecting data.
- Vendor’s failure to deliver
Entrusting application development to an offshore vendor, businesses can face another danger associated with its failure to bring the project to successful completion. To mitigate such risks, the client should consider either recruiting a skilled manager for an offshore project or appointing an IT executive to lead a team. By making preliminary arrangements and providing adequate control, you may avoid ambiguity, lack of commitment, or employees’ not showing up for work.
From the above, the offshore model appears to be not as bad a thing as you might think. Besides the significant cost savings in the IT budgets that let offshore grow in size exponentially, you are sure to have other real opportunities to take advantage of (no worries — economic benefits do not necessarily require making a sacrifice of your time, effective synchronous communication can be easily maintained even when going offshore.)