Today’s software companies invest a huge amount of time, effort, and capital into staying at the very top of their game. As the industry becomes more saturated, there’s no choice but to try and stand out from the crowd with powerful, innovative, and relevant software solutions.
But custom software development is far from easy. The competition for recruiting talent is fierce and most companies are left with less-skilled (or less motivated) developers than they’d hoped for. The result? Lower-quality output and less reliable development.
But it’s 2019 – the rat race for local talent is no longer the only option. More and more businesses are turning to offshoring; to building dedicated teams of elite software developers in another country, which are still fully integrated into the business.
It’s fast-becoming the most cost-effective, practical, and sustainable solution for the industry.
We intend this blog as a useful, proactive comparison of both in-house development and offshore teams. Specifically, we’ll analyse how each stacks up against three crucial factors: cost, talent, and getting the job done.
First things first: how much does it cost?
Software engineers are one of the most highly-paid workforces in the world today. It’s no shock, then, that the decision to go offshore is largely driven by cost.
Especially in the US and Western Europe, hiring local talent means significant outlays. If you want the best talent, you need to pay an absolute premium. And salary is only one aspect: there’s the whole recruitment process (and their generous fees), the office space and equipment, plus employee-centric extras like health insurance, flexible working, and plenty others.
When building a full in-house team including senior developers, the numbers can be intimidating. The upside is that if you’ve been around the block, you can be pretty sure you know what you’re getting for your money.
Building an offshore team
Things are a bit different if you take the offshore route. For a start, the cost of living in countries like India and Ukraine is significantly lower than the west. This correlates with salary, and so it’s much cheaper to hire equivalent labour through offshoring than in your local area.
Note we’re talking about equivalent engineers who happen to live in India, not half-trained programmers with no real experience. Cities like Bangalore offer thriving and talented IT communities. Software development education there is highly desired, sitting comfortably in the same bracket as lawyers, doctors, and dentists. So when you engage with the right offshore partner, you can always find developers who meet, or exceed, your requirements – all at a much lower cost.
And all those related expenses, like healthcare, recruitment, and office spaces? Drops in the ocean compared to European or American prices.
So what’s the catch? Why isn’t everyone in the world offshoring to India and reaping the rewards? Perception.
When you’re recruiting at home, you know exactly what you’re getting; if you’ve never built an offshore development team, you might think the operational cost of poor work or low reliability might outweigh your financial savings.
So let’s investigate.
Accessing talented and forward-thinking engineers
When you’re hiring new recruits into the business, it’s usually because you’re scaling up. Not much, maybe, but enough to require some extra internal capacity.
And if you’re a software business looking to take on well-trained, hardworking developers at any level, then you’re in for a rough road! As it turns out, the recruitment process itself is one strong reason companies are beginning to look for teams offshore. Here’s why.
Scarcity and cost of local recruitment
We’ve already looked at how expensive salaries can be for western companies. Unfortunately, that’s not the only cost of building out your team. Recruiter fees average between 20 to 35% of your new employees annual salary, if not more!
The real problem (and part of why recruiters are charging so much) is the scarcity of local talent. Even in major cities like Paris, there tends to be a deficit of quality software engineers available at an affordable cost. Paying full-time employees $60-100 per hour is far above the resources of most companies, but that’s what it’s starting to take.
And there’s another side to this coin: if you can’t afford the really good engineers, then what can you afford?
The power is totally in the hands of the engineers themselves. They’re a scarce commodity and they can pick and choose their employers. If you’re not offering the most exciting work, or the most lucrative contract, then why should they pick your company? More likely you’ll have to dig deeper into the roster of engineers, paying significant sums for average developers.
A way to escape the scarcity and sky-high pricing?
The abundance of extremely well-trained developers in India is astonishing. India produces over 1.5 million new engineers every single year, and they flock to technological hubs like Bangalore.
And they speak English with total fluency, too. Language barriers with Indian developers inevitably stem from companies who – as opposed to investing in a world-class development centre – are paying freelancers pennies for low-quality work. It’s just one of several myths about offshoring that, in reality, doesn’t carry any weight.
When you’re working with the pros, it’s a different story.
Both software engineering and English language teaching are prized by the Indian education system. The result isn’t a blitz of introverted tech wizards lacking people skills; it’s well-balanced, proactive engineers who can take command of their projects and assimilate perfectly into teams of westerners. That leads us on to our final point…
Can offshore teams really work?
This is what it comes down to. On a day-to-day basis, can my business actually thrive with half my developers working thousands of miles away in a different time zone?
Let’s start with the obvious: working with an in-house team is definitely easier. Everyone’s within shouting distance and you all work similar hours. In an ideal world, it’s what every business would keep on doing.
But in an ideal world, it would also be cheaper and easier to employ people in Western Europe and the US! Since we’ve established that’s not the case, it’s important to nail down exactly what gives offshoring its legs on a day-to-day basis.
“But what if they don’t work properly?”
It’s a valid concern that, unsupervised, any group of new employees might not put 100% into the job. But this assumption forgets a crucial tenet of offshoring: they are a fully integrated extension of your in-house team. Including management which reports directly to you.
It’s your work culture, your ethos, and your rules which all these new employees play by. Offshoring isn’t like outsourcing, where you pay freelancers to complete minor tasks. We’re talking about full-time, well-compensated professionals who are passionate about their work. If it works at home, it will work offshore.
How to make offshore teams function well day-to-day
We’ve covered this in detail with a specific blog post – 8 modern strategies to make offshore teams work in 2019 – but we’ll run over the essentials here. First job? Implement good communication and task-scheduling tools, if you’re not already using them.
If you’re all sharing one office, you can almost getting away with ignoring modern work tools like Slack, Asana, or Skype. We don’t recommend it, but it does happen with smaller teams. When you build your offshore team, there’s no room for that gung-ho attitude. You need structure, and you need it yesterday.
From instant messaging and video calls to task scheduling, there’s a lot of simple processes you can put in place which massively streamline, well, everything you do. Your offshore team is hand-picked by you; they’re not idiots. Share the right tools and explain how your team uses them, and everything will come together nice and smoothly.
It’s also good to emphasise a culture of “if you’re not sure, ask”; it helps overcome a lot of hurdles early on. Pro tip!
And that’s it really. If business is steady and your team’s all happy, and you don’t have any plans to scale up anytime soon, then you absolutely don’t need to invest in an offshore team. However, if growth is on your mind (or if you simply can’t fill the empty capacity in your office) then extending your team to India might be a rewarding and lucrative option.
If you’re thinking about it, one of our senior executives would be happy to answer any of your questions. Hit the button below to schedule a free call. We can’t wait to hear from you.