Software Sweatshop

The US economic recession is hitting a lot of businesses hard. I got an email from the CISO of a large publicly traded company saying that they're looking for new outsourcing destinations since wages in India are rising. Apparently outsourcing to Pakistan,  is becoming more attractive, as well as other countries you wouldn't immediately associate with software outsourcing like Slovakia, Vietnam, and Turkey.

But there's more to outsourcing than scouting out the next low cost destination (unless you want to get burned by a  software sweatshop) Outsourcing isn't easy, and unless you're smart, the cost savings won't be the main factor leading to your decision. Tons of reports have suggested that you don't save nearly what you initially expected. It's easy to think that sending work overseas is a cinch; IT'S NOT. Outsourcing works great if there is a clear understanding of the nature of the relationship. Relationships based on trust, partnership, and value should always outweigh low cost. It's a matter of time before your offshore vendor raises their prices. Stop chasing the next low cost offshore destination. Outsourcing is not as easy as you think.

Keep the following points in mind when looking for an offshore vendor:

 
1). Lack of Communication: Expecting to send work to some foreign land without both sides being vested in communicating daily will lead to failure. If you go offshore, be sure that you're ready to spend time discussing the status, challenges, accomplishments, and goals of your project.

2). Undefined Requirements: I recently asked a question about software project failure on LinkedIn a few weeks ago and was overwhelmed by the quantity and quality of the responses. It was actually in response to an article that I found on the Wall Street Business Technology blog about failed corporate IT projects The main theme from the 76 answers (and counting) that I received is that unclear specifications and lax project controls result in failed projects. With onsite IT projects going belly up, can you imagine how hard it is to keep an offshore project on track? Don't underestimate clear specs.

3). Currency Fluctuation: Now this is really sad. Companies that went to India 5 or 10 years ago are now looking for the next low cost country to shift their operations. Don't make lowest cost the only reason for choosing your offshore vendor; it's short-sighted and unsustainable.

4). Corporate Culture: Do you value quality over the lowest cost, do you treat your employees like the geniuses that they are, do you make decisions based on principles and values rather than expediency? Well you better make sure your offshore partner does also. Often times they won't be the cheapest, but they'll be your ace in the hole.

5). Losing Key Resources: Too many offshore projects are hindered because of attrition. This is an all too familiar problem with companies that have sent work offshore. In developing countries like India, wages are rising, diminishing most cost savings. The rising wages mean that there is more opportunity, so top talent is jumping ship for more lucrative opportunities. Does your offshore partner hire generalists or experienced specialists? If your offshore vendor is a "we do everything/one size fits all" firm, chances are they'll have high turnover. Truly great companies are very selective about who they hire and fanatical about keeping them happy. No doubt, not everyone will be a superstar, but experienced team leads will bring the best out of the rest of the team.