Offshore Development – Assign the Right Tasks, Pay the Right Price

By Chris Vicknair

Director of Client Services, NPI

August 26, 2015

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So you’ve decided to outsource and/or hire offshore IT developers. The decision was the “easy” part. Now comes the search, research and selection of a vendor. There are lots of things to consider and important decisions to be made.

Often, the first thought is, “I’ll use one of the big 3 (Accenture, Deloitte, Atos) and I’ll get the best talent.” But history has shown that the big guys face the same issues that the “small” guys face when it comes to recruiting good resources. While there are many fine offshore developers, it’s not recommended that you have offshore contractors design and architect your core systems. Offshoring works for commodity development, where you already have a solid architecture and coding structure along with very detailed requirements and you just need classes/methods created. Offshoring is also ideal for testing and quality assurance functions.

One set of background facts about offshore resources is just how low the average salary for a programmer is. The average salary for a programmer in India is about $6,200 USD annual*. Even if we double that cost to account for benefits – insurance, vacation, etc. – that is still only about $12K per year or about $5 per hour. Keep that in mind the next time your vendor is trying to negotiate a $35/hr rate (just for effect: that’s a 700% mark-up). Chinese offshore resources get paid significantly better at around $19,300* - $9.27/hr. When you enter into offshoring relationships, be sure to benchmark pricing to be sure you’re getting a good deal.

Suggestions for using offshore development:

  • Do code reviews early and often. Have one of your senior onshore developers review offshore code regularly to catch problems early.
  • Have a local resource point person who works with the offshore team. Have this person work modified hours to overlap with onshore AND offshore resources to facilitate timely communication. One of the biggest time wasters with an offshore team is when they have a question (always at the beginning of their shift) that isn’t answered until the next local business day.
  • Bring key offshore resources stateside periodically to meet the team and get some guidance. Often with the right amount of guidance and hand holding offshore resources can become very valuable to your organization.
  • To recap, offshore development definitely has its place. There is potential cost savings in assigning commodity programming to an offshore team – especially with the right pricing intelligence to validate service fees and discounts. With an onshore resource available during off hours to answer questions, and a senior local resource reviewing code for quality, an offshore development team can be effective and help to lower overall cost of development.