5 Reasons Why Offshoring Does Not Work For You

CEO Insider

You may have heard stories about offshoring that went wrong and made companies lose thousands of dollars. Or maybe you have tried to delegate development abroad yourself, but it didn’t turn out as you expected. No matter how you perceive offshoring now, it’s a fact that many companies not only managed to transfer programming overseas but also attracted considerable investments and went public. So, why aren’t you among them?

As an offshoring provider for IT product companies with over 15 years of experience, I’ve dealt with different sorts of development relocation issues that eventually resulted in lucrative scenarios for clients. Today, I’d like to discuss the main five mistakes that might have complicated offshoring for you and offer useful tips to avoid them once and for all. Let’s get right to it!

  1.  You didn’t set clear offshoring goals
    Just like any other business process, offshoring is difficult without a well-thought-out plan. It won’t be enough to just find an office space for your team abroad, hire some developers to complete your tasks, and pay office rent, salaries, and taxes once a month.
    Tip:
    You should analyze what skills you lack in your company and the amount of work you need to delegate to an offshore team. After that, you must come up with an exact number of overseas employees to handle this workload.
    Besides that, it’s essential to decide on the mode of working: remote or on-site and think about renting a co-working space or a separate office.
    The best way to devise the right offshoring plan is to conduct one or several brainstorming sessions with your strategy team.
    Once you’ve laid out your ideas in a single document, it’s easier to estimate and manage your offshoring budget. Then, you can start looking for suitable destinations and providers according to the precise plan of action and fixed price.
  2. You picked the wrong offshoring location
    Sometimes offshoring may not go as planned because you didn’t properly analyze the IT market of the chosen country. For example, you may have forgotten to consider the level of English of your coders, accurate salaries and taxes, and specific legal requirements for foreign employers. All of this might negatively impact the way your overseas unit functions and even lead to fines.
    Tip:
    It’s important to pay attention not only to the above-mentioned criteria but also to the talent pool and the tech community of the offshoring location.
    You must also find out about the companies that have already opened their R&D branches there, and the work culture of local developers. Gathered successfully, this information will help you make a deliberate decision regarding the perfect country for offshoring.
  3. You didn’t conduct a proper employer branding campaign for your company.
    Have you clearly defined your offshoring goals and chosen the most beneficial location, but still struggle with development delegation? It happens because you’re new on the offshore market, and candidates know nothing about your company. This may lead to frequent offer rejection from developers, as it happened to one of our clients.
    When this company tried to recruit 5-6 developers in Ukraine, they failed to do so. Senior and other higher-level programmers weren’t familiar with our client at first and refused to accept their job invitations.
    Tip:
    If you have the same issue, you should address it by launching a branding campaign in the top local social media and press. For instance, our marketing specialists created informative articles about the product, achievements, and entry of our client into the Ukrainian market. These efforts were enough to hire the needed number of software engineers for our client, so their leaders also asked for our assistance in their local R&D center management.
  4. You applied an ineffective IT recruitment approach
    Some business executives still presume that it’s enough to post a vacancy on several job-seeking websites and wait for candidates to apply. What’s even worse is that many of them hire recruiters that have no expertise in IT hiring, pick unsuitable programmers, and ask candidates the wrong questions. This creates a bad reputation for you as an employer and makes professional developers steer clear of your company.
    Tip:
    If you want to hire the top stars in your offshore team, you need to improve your tech recruitment strategy. It’s convenient to do with an experienced IT recruitment provider that takes into account all the ins and outs of the IT market in the chosen country.
    The next step is to decide on the number of interviews in your company. Professional recruiters recommend reducing it up to 3 online/offline meetings because many engineers refuse to participate in interviews if there are more than 4 stages.
    Moreover, reconsider test tasks and try substituting them with online coding sessions. According to the experience of my company, candidates perceive this skill-checking technique as more favorable than time-consuming test assignments.
  5. You started cooperation with several offshoring providers at once
    Some CEOs believe that it’s cheaper to hire several vendors to complete separate or even the same tasks. Therefore, they assign a provider to complete IT recruitment, the other one – to take care of accounting, and one more to assist you in legal matters.
    This is exactly what one of our clients based in Silicon Valley did. Nevertheless, collaboration with many providers complicated their communication, delayed numerous deadlines, and appeared to be more cost-consuming because of hidden costs and increased services fees.
    Tip:
    The solution here is to find a one-stop-shop partner that covers all the essential functions for an offshore software unit and goes the extra mile for clients. To give you an idea, our client delegated to us not only the recruitment of Ukrainian developers but also legal compliance of their operations with local laws and management of their payroll. In addition to this, they obtained a completely transparent pay-for-a-service pricing plan and made no huge upfront investments.

So, what’s next?

I’m positive that offshoring of your business operations will be fruitful and profit-making if you deal with the five issues that I’ve listed out above. But if you still have doubts about whether to offshore or not, it’s reasonable to get familiar with offshoring journeys of successful companies, receive guarantees of full compensation if something goes wrong, and find a trustworthy vendor that specializes in taking over business operations of companies in your field. Good luck!


Written by Dmitry Ovcharenko.

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