Outsourcing Reality Check: Good Developers Aren't Cheap
So we all know there's no such thing as a free lunch. But intellectually knowing that doesn't stop smart people from believing it (myself included). Whenever you pinch pennies and cut corners, you're gonna get burned. It's a law of nature; there's no way around it, period. Like they say, when it comes to cost, time, and quality, you can only have 2 out of the 3. 
I own an outsourcing business based in Chicago... and we don't sell ourselves as the cheapest provider.
Consider this, a friend of mine visited India a few weeks ago and wanted a custom shirt made. It cost him $45 bucks, $42 for the material and $3 for the labor; labor is the only cheap thing in developing countries. Energy, office space, etc. is the same:
- Gas in Pakistan is about $5/liter
- Rent is close to $1200/month
- Electricity is about $400/month and it isn't even reliable so we're seriously thinking of putting down $30 grand to install solar panels. Solar panels in Silicon Valley is common, in Pakistan it's unheard of
This doesn't take into account the benefits we give our employees like lunch, health care, etc. If we didn't do any of this, our good developers would all quit and we'd be stuck with a bunch of crappy developers.
We do NOT want to run a software sweatshop. We want to attract and retain good developers and we know that it costs money to do that. We look for clients that value quality over pinching pennies.
If you're working with a software sweatshop, then yes, you should expect dirt cheap prices (some firms are charging $3.36/hour!) If you don't think the quality is worth what you're paying, then work with someone stateside. Prices are rising, so companies like mine sell value, not sweatshop prices.
Nothing worth value is ever cheap. Yes, you will save money by working with an offshore development team, but you'd better be prepared to work with a firm that sells value, not cheap labor.
Raza Imam
in Outsourcing failure, Offshoring, Software startup, web 2.0, outsourcing lessons, outsourcing advice, business lessons, entrepreneur lessons, bootstrap, Pakistan business, entrepreneurship, management, programming, Silicon Valley, humor
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Reader Comments (4)
Great article. The problem I see is that typically it is difficult for non-software engineers to appreciate the long term value of a clean and solidly-engineered codebase, something that is rarely the case with cheap development labor. Though the initial product from a "working" perspective is there just fine, the "value" of the code base in terms of how well it was designed is typically not. In the long run this exerts a huge maintenance cost, possibly needing a future rewrite, but in the short run it's sometimes hard to see.
The quality notion is absolutely true and this is the only way outsourcing will work both for technology service providers and their potential consumers.
Serious awareness needs to be spread to clarify the fact that you cant get quality just for nothing.
Haris Khan
http://www.zigron.com
This is the first time I've read your blog, and I have to tell you that, after reading many of your posts, I can appreciate your sense of humor, frustration and overall point of view. Of course, I'm just writing a comment so I cannot go into much detail, but I can tell you that our company, a small web development shop, with 5 full-time .NET programmers, outsourced projects to India for several years. At one time we had 6 programmers working in India. What a nightmare. The work product was barely acceptable. Communication terrible. Management non-existent. By the time all was said and done, we lost clients and we lost money. I walked around saying to myself that the world is definitely not flat, not flat yet and not flat for us. Keep up the interesting and insightful blog posts.
Your friend who visited India has very expensive tastes if he spent that much on a tailored shirt.
Plus your figures for gas is way off, and the figures for rent, electricity would be more sensible if you mentioned what was being rented for that price...and what was powered by $400 worth of electricity!