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Build Your Own Offshore Development Team - or Not?

| Posted by Yousef Awad Follow 0 Followers on Apr 06, 2016. Estimated reading time: 11 minutes |

I’ve read a few good articles about the pros of ‘owning’ vs ‘renting’ when it comes to leveraging an offshore development team. But I disagree with the idea that building one’s own offshore development team is better than outsourcing the job. As the owner of a San Diego based outsourcing company with two offshore dev centers, you might suspect I’d be on the other side of the argument. But at the risk of protesting too much, I claim that it’s not because I’m a vendor and want to sell you my services. It’s because I know what it takes to do it right. And it ain’t easy.

I just don’t think a ‘build your own’ approach is the best method of delivery when it comes to going offshore for quality code. If you’re looking to have a team of 40-50 engineers overseas and you have 1-2 years to turn that dream into a reality, sourcing, creating, and retaining your own team may (emphasis on may) make sense. And for the people for whom it DOES make sense, getting good advice on how to do it right is critical. But if you’re engaging in building your own offshore development team, make no mistake about it: you are running a global company including all the legal, tax, infrastructure and logistic complexities involved.

In most cases, for companies of all sizes from start-up to established, the right outsourcing partner can mean strong benefits in terms of risk mitigation, speed, and quality, with none of the costs in terms of time, facilities, infrastructure, and support staff. I would liken this to the familiar argument for cloud—why establish your own electric tower when you can tap into your city’s existing feeds? Why drill for oil to support your car’s engine when you can stop by the corner gas station? Let me itemize some key advantages to outsourcing an offshore team vs creating your own:

Invest in the Overseas Team:

There is an historical “garbage in, garbage out” approach to leveraging overseas dev/test talent and cost savings. We throw something to essentially a coding factory on another continent and wonder why it doesn’t come back looking like it was tailor-made. Or we think we’ve secured the services of a hotshot overseas coder and wonder why he leaves us for Microsoft and a work visa six months later.

I’ve been on both sides of the outsourced development puzzle—client side and vendor side. Some may be in  the unique position to create their own offshore center due to business connections, existing infrastructure, unique cultural background, or a combination of all three.  But this is not typical or practical for most of us and here’s why:

  • Many companies don’t have strong connections overseas.
  • Many compaies can’t establish a brand, infrastructure, and H.R. for overseas staff on top of domestic staff, especially as a small or start-up company.
  • Many companies want to focus less on admin and more on advanced code, apps, products and performance.
  • Most companies  do not benefit from the overhead associated with the infrastructure of offshoring, which is complicated, risky, expensive, and time-consuming.
  • As I mentioned above, most companies don’t want the complexity, risk, cost and administrative distraction of running a global company, and that’s what building your own offshore development team amounts to.

Establishing your own dev center overseas requires intense focus on all five of the areas above. Because it’s hard, distracting, frustrating and expensive. I have boots on the ground experience. I live this everyday. I provide managed software teams to start-ups and established companies to address bandwidth, talent, and quality issues.  

I have two dev centers overseas. They are wholly-owned and operated by my company, Integrant. Every employee (over 130 and counting) one way or another reports at the end of the day to me. We are one company, one professional family, extending to San Diego, Amman, and Cairo.

Our clients engage us to fill in skill and talent gaps within their internal team. We extend that team with our own. We are not second class team members and we are expected to perform at the highest caliber the best internal team member achieves—or better.

I will explain in more detail how we achieve attraction and maintenance of this level of talented and committed staff. (It is not easy.) 

But my larger point is that you can and should achieve the positives of offshore talent without the tremendous burden of the negatives. And unless you happen to be an offshore expert and have an already established company overseas from which to pull, the negatives are overwhelming. Allow me to share with you some of the negatives my clients are spared by working with me.

Infrastructure:

Last month I received a utilities bill for our building in Cairo for $250,000. Yes, a quarter of a million dollars. Apparently the utilities company decided we hadn’t been paying enough and wanted more from us. This is the result. Now begins the negotiation process, involving lawyers, paperwork, politics, back and forth, etc. How will I deal with this? Same way I deal with many, many similar problems associated with creating a dev center overseas: Through a top-notch human resources and legal team that knows the players, the rules, and the logistics.  It’s a pain for us. But it’s built into our business model. Our clients don’t feel it or see it. All they see and feel is great talent, great code, great teamwork and commitment. Now, imagine you’re a start up in the Silicon Valley and this issue comes up. It could be a show stopper.

Another example: A friend of mine who has started quite a few companies, one of which is in Mexico, had an interesting problem south of the border. His company received a $1.2 million fine for purportedly failing to provide an adequate number of parking spaces for anticipated attendees of the business. Problem is, the business was a cemetery on about 50 acres of land and the parking calculations assumed that the “residents” would need parking spots. Hmmmm, Day of the Dead anyone? My friend had access to an on-site (I should say nearshore) partner who negotiated the fine down to $4k. But beyond the potential risk, think of the intense distraction of this type of problem on an ongoing basis.

In general, international regulations, compliance, tax laws and business law is complicated to say the least and imminently dangerous to the survival of your business to say the most.

Branding:

You can’t go overseas and expect to simply pick up hot-shot engineers at the local watering hole. Your brand needs to be established on their soil and be credible to their workforce. This might be ever so slightly easier if you are from the culture from which you’re trying to recruit. But for many this is not the case and even when it is (as it was for me; see below), it’s still a major undertaking. And the expense associated with brand development must be tallied up in media and time, including the opportunity cost of not having an established brand and thus not having available talent when you need it.

I opened my first off-shore dev center in Amman, Jordan. I know a lot of people in a lot of key areas. And it was still difficult to recruit, hire, retain, and maneuver within the Jordanian business climate.

I opened my second off-shore dev center in Cairo, Egypt. Cairo and Amman are about the same distance apart as San Diego and San Francisco. Even being from and traveling extensively within the region, when I put up my “shingle” in Cairo there were no A player applicants. No interest from A players. At all. Only C players. Why? Because in a less than fully developed economy with limited opportunities for stable employment, an engineer supporting a family will not leave one coding job for another unless he/she is very, very sure of implied stability, career path, good opportunities and good incentives. Employees in developing countries have seen time and again corporate “big shots” come in with promises and money and pull out abruptly. The candidate pool is savvy and it has learned to be cautious. It took an investment of time and resources to establish a hiring brand that would attract the A players we needed to service the caliber of clients we keep.

Building a hiring brand is essential. But it is not easy or cheap in most cases. In most cases, as a start-up you don’t know the terrain of your target offshore country, and you don’t have staff or time to man booths and speak at events and wait the one or two years necessary to gain credibility within the market.

And the expense isn’t just about marketing. It’s infrastructure and facilities as well. An example: When I opened the Cairo Dev Center I anticipated having enough employees to fill one floor of the building I was looking at. I leased the entire four-story building. Why? So that when applicants came into our offices to interview, and saw that we owned the entire building, they would understand our commitment to the area and plans for growth of the company within that area. (Even with my experience, if I were to open a dev center in, say, Bulgaria, I would plan to invest at least one year and end up with a team of 4 or 5. That’s realistic.)

Talent Attraction & Retention:

Attracting and retaining talent is the most critical success factor in offshore dev team success. It is vital to understand the culture in which you’re working; respect and hold an offshore team to the same standards as the onshore team (for good and bad); and  provide engineers incentives.

Regarding this last one: To maximize quality you want a diverse dev/test team. You want some folks who thrive on the very next bleeding edge problem worth solving and others who wake up to refactor, clean up someone else’s mistakes, ensure proper protocol and documentation, etc. So while some coders might respond to a material gift, others might want a big end-of-year bonus, an extra week of vacation, a business/pleasure trip to client headquarters. You get the point. There is no turn-key solution. You don’t build and keep a kick-ass team with a cookie cutter. But does retention have to be YOUR problem or can it be a third party’s? I would say the latter—if you pick the right partner.

Employees need to feel cared for and catered to as individuals AND as team members. That’s where having a full team overseas, including all the supporting elements like human resources, benefits, finance, legal, facilities—is critical. If you’re a start-up or SMB in Silicon Valley, support services for your U.S. headquarters will most likely be patchwork or even outsourced. Establishing all that overseas is perhaps an unwise use of time and resources.

Agencies, Outsourcing, Third Parties:

I don’t believe that all vendors/outsourcing partners structure their staff, their teams, and their relationships with clients the same way. Yes, most vendors assign project managers but we, for instance, are a provider of outsourced development TEAMS. We integrate completely and on a tech-to-tech level with all members of the team we’re augmenting. Here’s what it looks like.

Options:

My point is that the answer to creating an awesome offshore development team  is NOT necessarily DIY and in most cases it is better to avoid DIY. It is critical though to pick the right offshore development partner. In my case, that would be in my humble opinion, my company, Integrant. Here’s an example:

We’ve worked with a client contact for years in his capacity as head of engineering for a dominant player within the eCommerce space.  He left to start his own company based upon a top-drawer concept he had long envisioned, including the latest apps and add-ons. When he left to start his company he brought us with him—not the same team that he had at the large eCommerce company, but the security of knowing we’d find him the right team for his new initiative and new technical needs.

We flew him to Egypt to see our development center and meet the team we proposed for him. He stayed two weeks. In sending us a thank you email for our hospitality in Cairo, he referred to the group of talent we sourced and assembled for him as “my team.” That’s success. He has hand-chosen talent that is motivated, committed and visible, without the costs and headaches associated with starting, staffing or maintaining an overseas dev center himself.

When You Can’t Afford To Fail:

When 90% of startups fail, your laser focus must be on what you do differently, and executing on that flawlessly. Taking on the establishment of an offshore dev team, for most startups, would in my opinion be an intense distraction. Yes, you absolutely must be hands-on with respect to team selection, cultural understanding, communication, compliance, and protocols. But you don’t have to go it alone or do it from scratch.

For me, I’d rather find a company I trust to outsource. That’s what we try to be to our clients.  

About the Author

Yousef Awad graduated from San Diego State University with a Bachelor of Science degree in Information Systems and has 20+ years’ experience in the custom software development industry.   He joined Integrant in 1997 after a successful career in programming, database administration and project management.  He is responsible for establishing the company’s wholly owned development centers in Amman, Jordan and Cairo, Egypt.  With over 130 full-time employees, Integrant specializes in providing custom software development, offering clients outsourced teams that allow IT departments to stay in control of their projects and expand their software development teams effortlessly. Beyond Integrant, Yousef’s passion is to bring an understanding of the power of programming to children and young adults.  Yousef is working towards giving younger children access to coding classes that provide real-world, hands-on mentoring.    

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Simply a marketing pitch by Tim Baffa

Regardless of the merits of outsourcing overseas development in comparison to establishing off-shore company branches to perform development, the article just reads as a pitch for the author's services. I would caution from an Agile/Lean perspective that any sort of outsourcing invites waste, inefficiencies, and challenges related to communication and collaboration.

Personally, I would be skeptical of the prospects of any "start-up" company that elects to outsource their development or operations to an overseas third party. Having worked at several start-up companies, what is critical in the initial stages is limiting expenses while developing and marketing the company's value proposition. Incurring the additional expense (and complexity) of third parties as part of the value prop is a recipe for failure, in my opinion.

Re: Simply a marketing pitch by Gaurav Marwaha

Dear Tim

Personally I believe it is all about how the development is managed I have personally delivered products for startups from offshore locations some of which were sold to companies like GE making huge profit. Others got second/ third rounds of funding. In these places I worked with people who worked from home/ Ukraine remote locations like Alaska and of course teams offshore.

It is all about getting the right people for a product team who deliver here or there :-)


Thanks
Gaurav

Re: Simply a marketing pitch by Gaurav Marwaha

Dear Tim

Personally I believe it is all about how the development is managed I have personally delivered products for startups from offshore locations some of which were sold to companies like GE making huge profit. Others got second/ third rounds of funding. In these places I worked with people who worked from home/ Ukraine remote locations like Alaska and of course teams offshore.

It is all about getting the right people for a product team who deliver here or there :-)


Thanks
Gaurav

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