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Biggest Hurdles with Outsourced Development?

What do you think are the biggest challenges or drawbacks when outsourcing some or all of your development?

From my experience, here are a few:
- Lack of trust/authenticity (often times it's just a name behind an email, hard to build trust w/o more info)
- Lack of transparency (difficult to know what's being worked on and where you are in your dev schedule)
- Poor communication skills (not just language barriers but issues with concepts and terminology)

For context, I consult as a PM and sub-contract developers for startups moving from prototype to public launch. I have brought in local (SF) developers who are very expensive, as well as outsourced developers whose value is sometimes hampered by the issues listed above. I'm looking to build more structure and data into the outsourcing operation because the labor is around 25% local cost and I believe it could be much more valuable to US companies with the right improvements.

29 Replies

Jatinder Singh
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Jatinder Singh Entrepreneur
Consultant - Retail Industry Leadership at Slalom Consulting
Marcus,
You have listed the right issues, and I think those are the biggest. In my experience with right tools and experience, all these issues can be addressed and a high quality output can be delivered to the client. I have a company that does exactly that. If you want to explore how we do it and try out our capabilities, feel free to reach me at Jatinder at hatchplan.io; otherwise check us out on www.hatchplan.io
Gabor Nagy
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Gabor Nagy Entrepreneur
Founder / Chief architect at Skyline Robotics
It depends on the project. My biggest concern is IP protection.
This makes outsourcing (especially offshore) a complete non-starter for me.
If I wanted to see cheap rip-offs of my products, I'd just give away all my designs and get some good-will cred...

James Hipkin
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James Hipkin Advisor
CEO, Managing Director at Red8 Interactive
Love to chat with you about this.

When I bought Red8 Interactive 5 years ago it had developers in China. The company provided dev resources to advertising and design agencies. I quickly realized that this wasn't working, for the reasons you already stated. But even though I live in the SF I couldn't justify the cost of developers. Plus they came with all kinds of attitude.

I shut down the China team and built a new team in the midwest. High quality developers at a fraction of the West Coast cost, and no attitude. This solution also addressed your other concerns.

I would be happy to share my experience with you.

James
Steve Carlson
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Steve Carlson Entrepreneur
Operations/Supply Chain Professional
What I have seen as issues/drawbacks typically are due to a poorly written/incomplete SOW, with mutually understood comprehensive acceptance criteria. Agreed to timelines/phase gates, agreed to bug classification, scope change resolution and handling of cost overruns (with assignable cause) have all been problematic in my experiences. Accepting a name on an email instead of a relationship is unfortunate. Outsourcing does not excuse the need for a strong relationship and strong program management on both sides. I do believe outsourcing the right aspects of a design(including protection of IP) can be executed successfully in LCRs. Best of Luck..steve
Israel Ben-Ishai
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Israel Ben-Ishai Entrepreneur
President at Achive3000 Canada
The impediments you mentioned can be mitigated. I have done it with teams in India, Russia and Ukraine. However, my recommendation is to use Canadian companies. The wage difference is not as big as the offshore development, but the real saving
Chris Hote
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Chris Hote Advisor
Board Member at FACCNE - French American Chamber of Commerce, New England
Good points Marcus and good point Gabor that many US and European companies share. Here below is how we tackle those challenges:

Lack of Trust/Authenticity:
Our company project directors accompany the software development teams during daily standup meetings and actually challenge them when technology/design choices are made. The "why" question is a key leverage in this process. Unjustified choices are escalated to our VP of technology.

Lack of transparency:
This situation often comes from a lack of periodic communication. We adopt a pretty extreme Agile/Scrum approach to prevent it. For instance, missing a daily standup meeting causes the engineer to receive a red flag which resolution is escalated to upper management designated as the VP of QA.

Poor communication skills: Our engineers are encouraged to participate in new tech training (SPA, less/cass, VR, big data/python) and new processes (devops).
They actually have a financial incentive in organizing tech webinars for our clients. They may also get into working sessions to extend their Agile and communication skills beyond software development activities.

IP protection: Our customers hire us so they can actually concentrate on their core technology and outsource less vital albeit necessary software components. In that context, we typically intervene on collateral pieces of software included as frontend, data viz, UX, mobile extension, backend.


Naresh Nagarajan
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Naresh Nagarajan Entrepreneur
Advanced Analytics
It depends on what you are outsourcing. Product engineering which involves rapid, agile, prototyping from UX to design and launch in 90 days are best done onshore. The project management should be split so that even where daily change in requirements from beta customers, custom Poc, core engg releases are triaged properly thro a CCB - Change Control Board. The CCB will help to triage must to have and nice to have so that the must to have requirements are correctly built into the patch releases that engg team or dev team will work on. UX should be outsourced not offshore but locally to a good design think and User Experience design firm. Program management should involve daily calls with
Steve Owens
2
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Steve Owens Entrepreneur • Advisor
Finish Line - A Better Way for Small Companies to Develop Products
Just as an FYI, we have never found the cost oversees to be any different than the US. They often say they are charging a lower hourly rate, but it always seems to take many more hours to do the same task. Over the years we have done many apples to apples comparisons, and the US always comes in about 10% cheaper.

From an economic theory point of view, this makes perfect sense, as arbitrages can not last for very long. Markets determine price, not production cost.
Regardless, we use a lot of overseas resources, largely because they are good fit for what we need - but we also us a lot of US resources for exactly the same reason.

Gustavo Chelles
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Gustavo Chelles Entrepreneur
Owner, Chelles & Hayashi
Hi Marcus, We have some experience on attending to development outsourcing, and it's true there are many challenges, like the ones you mentioned.
Babu Mohanan
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Babu Mohanan Entrepreneur
Greenkurry.com
I have been into the other side of outsourcing, means I have been running companies in india and managing developers for the last 20 years. I know it is not easy, Marcus has listed some important points. But I also believe it is also about right match making. For example India has good developers but we also have ignorant ones and crooks. the criteria for choosing a development team should not be the price. If you get the right team and then do the right project management then we can achieve wonderful results. Babumohanan
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