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The long, slow death of offshore outsourcing

Outsourcing IT development offshore no longer works for businesses. The argument was that using developers in less expensive markets would save a business a substantial amount of money and yield the same quality result. But the rules of the game have changed. Why?

Agility and speed are now more essential to a business than ever, and teams needs to be closer to enable the digital transformation required by mobile oriented customers. Offshore outsourcing simply can’t keep up.

The need for speed

Reid Hoffman, co-founder of LinkedIn and Silicon Valley strategist counts speed as his first principle. His famous line is that ‘If you aren’t embarrassed by the first version of your product, you shipped too late.”

To be at the sharp edge of innovation, to get to market first or to steal a march on your competitors, software needs to be developed fast. It can be rolled out and then iterated afterwards where necessary.

There’s also a cost benefit to pace. By releasing fast, agile iterations of software, the cost of change is kept low. Rather than cumbersome, process heavy monolithic software, you have dynamic and nimble apps and platforms that can easily be changed and developed according to market demands.

Leading enterprises are already focusing on pace. Vodafone recently built an intelligent maps app in three weeks. Daimler built its Mercedes Me app with Pivotal to focus on minimal development cycles. Apple’s operating systems are built fast and then updated regularly and Amazon updates its retail platform every 11 seconds.s

Development offshore is simply too slow for modern business needs. The need for speed makes a more significant business case than the simple face value cost savings from offshoring.

A close-knit team is now vital

Developers and customers that work in different territories or even different continents are separated by distance, time, language and cultural nuances. How does this affect the quality of work?

Teams are unable to collaborate. Effective collaboration is borne out of the constituent parts of a team working closely, instantly and reactively. With distance there will be constant handover points. As discussed by Balanced Team, handover points, such as those constantly required by an offshore team, create a margin for error and take pace out of a process.

There is also a loss of fidelity. Practical experience enables a faster, more accurate solution compared to a theoretical understanding of what the issue might be. We need to “go see” a problem in order to fix it effectively. An offshore team is spread across the globe, so individuals will only ever be able to apply theory to a problem, rather than the nous required for a fast solution.

Another problem is there can be suffocation through control. A distributed team often comes with a ‘command and control’ environment. I can’t see you, so I need to tell you exactly what to do. An efficient, motivated, creative team responds to broader goals and objectives, not a rigid, micro-managed framework. This is partly due to motivation. Dan Pink claims that motivation is driven by autonomy, which is almost non-existent in highly controlled situations - like those regularly found in offshore work.

Communication lines can also be disrupted in offshore outsourcing. With his ‘two pizza’ theory, Jeff Bezos claims teams should not be bigger than a number which could be fed by two pizzas. This helps to stay decentralised, move fast, and encourage high autonomy and innovation. Offshore teams are typically big - developers, managers and individuals onshore - there are so many communication lines that the pace and accuracy of work can be affected.

Finally, it’s vital for a development team to be where the customer is. How can you build something that meets a user need when you know nothing about them? It’s a position backed up by Eric Ries’ Lean startup approach. He talks about "getting out of the building" to conduct research. If you are offshore, you'd have to get out of the building and hop on a flight to see who your customers are.

Offshore is archaic

These factors show that agility and speed, and the need for a close-knit team are so vital in modern software development, that a one-dimensional focus on cost saving is now archaic. In fact, it could be argued that a team of 50 onshore developers could create a faster, better and ultimately, cheaper output than a team of 200 offshore.

What is the solution?

To create software that can be built fast, adapted quickly to the market, and iterated at low cost, software has to be built onshore, close to the business, close to the customer.

This ties in with the broader point that the business case for making development a core competency within an organisation is stronger than ever. Consumers and customers now expect a digital experience from all the businesses they interact with, and it means that management teams can no longer afford to have software development out of sight, and done on the cheap. It needs to be at the heart of the business’ strategy.

Offshore outsourcing has ceased to become the smart option for businesses, and those who bring development close and put digital at the heart of their business strategy will reap the rewards.

Robbie Clutton, Director, Pivotal Labs (opens in new tab)

Image source: Shutterstock/ (opens in new tab)Mathias Rosenthal (opens in new tab)