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***For the purposes of this blog post, I will be referring to “greenfield” projects (new software builds from the ground up) as opposed to “brownfield” projects (building on to, or improving an existing software application).***

Offshoring - the practice of basing some of a company's processes or services overseas, so as to take advantage of lower costs.

-Oxford Dictionary

To determine whether offshore development is a fit - you should evaluate the following 5 things about your organization

In the 1000+ conversations, I have had over the past 6 years here are the criteria I have found that make using offshore developers a good option to evaluate:

  1. Your organization is a software/SaaS company or tech-enabled company.
  2. You have a competent and experienced CTO who has written code and is familiar with modern software development practices.
  3. You have a team of developers who are your full-time employees, and who are experienced in providing detailed user stories and technical guidance to other developers.
  4. You have experienced and capable project managers who have worked with offshore developers before.
  5. You and your team know just what it is that you want to accomplish and can provide the technical details. You are in need of someone who can execute the work, not collaboratively generate creative solutions.

If 3 to 5 of the aforementioned items describe your company or organization then I believe that offshoring could potentially be an appropriate fit for you. I have heard directly from dozens of people whose companies met these criteria that reported to have had excellent results in off-shoring software development.

On the other hand, I have interacted with at least 30 different companies or individuals over the past several years that have reported having had disastrous results with their attempts at offshoring software development. In all of the cases that had poor results the organizations met only one, or in most cases, none of the five criteria that I have laid out here.

Over 75% of these companies reported that the deliverables from their offshore developers were completely unusable and ended up resulting in complete loss. The other 25% reported that they had something that was salvageable but significant rework was going to be required and their desired timeframe for completion was totally out the window The lowest reported loss was $30,000 and the highest was over $1,000,000. Yikes!

Common mindsets of individuals who lost money in offshore development

  1. Software development is a commodity. All people who write code are mostly the same. I just need someone who can write code.
  2. Because writing code is a commodity, I intend to seek the cheapest hourly, weekly, or monthly rates for developers and hire those individuals to do my work. Software developers outside of the US are cheaper than developers inside the US.
  3. I am fully capable of verbally describing the features that I want the software to have and that is enough for a software developer to work with and successfully complete my project.

Flawed thinking

Let's examine these mindsets one at a time:

  1. Software development is far from a commodity, it is both a creative and highly technical endeavor. The practitioners of this craft are exceptional individuals who can successfully meld these two sides of the brain. There is both a wide range and a broadening gap, between the truly exceptional and the novices. The pace at which technology is advancing requires even the best developers to continually educate themselves and grow just to maintain their capabilities. This rapid advancement also creates an environment that makes it challenging for the most consummate learners to break into a skill level for a new technology or framework that can accurately be described as mastery.

  2. There are talented software developers and successful software development agencies all over the world. The ones that are really good understand they have access to a global marketplace and correctly charge for their capabilities. Their time-based rates can be just as much or more than companies based here in the US. Let me say it again, I am certainly not intending to communicate that software development firms outside of the US are substandard. Remember the definition of offshoring that we started with. We defined offshoring as having the intended purpose of lowering costs. If you are offshoring with the purpose of lowering costs, you will likely be seeking lower rates and will seek to compare options based on “prices”. If you are seeking to compare options based on “prices” or “rates” you will find the cheap providers, not the most capable ones. Please remember that you will need to have at least 3 of the 5 criteria I noted above to be successful when hiring an agency that is focused on delivering the lowest rates.

  3. Building a new custom software product is a highly creative and challenging endeavor, but is so worthwhile when you do it well. It is difficult, if not impossible, to predict what the intended user base will value. You can’t predict exactly who will use the software and how they will want to use it. You can and should perform some market research and user research to help validate some of your big picture assumptions but you just can’t know exactly what the software should be until you put it out into the world, get some real-life feedback, and then iterate. The same is true with physical goods. Just think how different today's cars are from the Model T after over 100 years of iteration and driver feedback. Because it is so challenging to deliver the best possible software with your first version, you will want a team that can creatively gather feedback from your user base or customers and efficiently use that feedback to develop future iterations.

    If you have talented user researchers, user experience designers, project managers, and developers on your team then you could very well be capable of preparing an offshore company to bang out the code that you need to accomplish your objectives. If not, you will be best served to hire or contract these aforementioned skills well before considering “cheap development”. If you don't have experience in developing custom software you may not have the skills to communicate to an offshore team the exact details of what it is that they need to create and that is a recipe for spending a lot of time and money and ending up with something unusable.

Think about your user base and why you are considering a custom software solution.

I am an American and I expect that my audience for this blog post is primarily going to be Americans just due to the nature of the content. Furthermore, I expect that the readers will be individuals looking to create a new software product that will help them launch a business, or more likely, people who currently work for an organization that is exploring developing a custom software solution of their own.

Americans know how other Americans think. If your software product is for Americans then Americans are likely the best fit to creatively help you define features that will help you achieve your objectives. There could be some cultural nuance to the first version of your software that might be best understood by people who are more familiar with the user base that you are intending to serve.

If you desire a contracted partner or vendor to creatively help define the best-fit user experience and feature set, then using an American team for the first version of a software product intended for Americans could end up saving you a lot of time and money. On the other hand, if you don't need any creative help and you know just how to describe the intricate and technical details of what you want then an offshore team could certainly remain a viable option.

Is offshoring software developers cheaper than US-based development?

The bottom line is that if you already have the team structure and overhead in place then offshoring could be a great option and it certainly can be cheaper. If you are not a tech-savvy organization and do not have a tech team in-house then offshoring for a new custom software application is likely not the best fit for you.

Rate Examples:

This is not intended to be a comprehensive list of available rates. This is provided here for comparative purposes. I have gathered these rate ranges from my own conversations and experiences.

Offshore software developer rates:

  • $45/hr to $95/hr
  • $1,800/week to $3,800/week

US software developer rates

  • $115/hr to $200+/hr
  • $4000/week to $8000+/week

As you can see, if you just evaluate the hourly or weekly rates then US-based development can be quite a bit more expensive than offshore development. However, this does not take into account the technical expertise you will need to be successful.

Let’s stay with examples of the two types of organizations we have considered thus far:

  1. Organization/Company Type #1: Tech/Software Company
    1. You are a software or SaaS company
    2. You are a tech-enabled company
    3. You are a very large organization that already has all or most of the following people on your team as full-time employees
      1. CTO - Chief Technology Officer
      2. UX Designer - user experience designer
      3. Visual Designer or user interface designer
      4. Software project or product manager
      5. Experienced software developers who are accustomed to assigning detailed tasks to others
  2. Organization/Company Type #2: Non-Tech Compnay
    1. You are NOT a tech company and you don't have experienced software product people on your team
    2. You are a small to mid-sized business and software is not your core business but you need software for your business or organization to function at its best.

Software companies and highly technical companies already have the following skills and overhead in place

  • CTO - $150k to $500k per year
  • UX Designer - $40k to $200k per year
  • Visual Designer - $40k to $180k per year
  • Software project/product manager - $40K to $150k per year
  • Experienced/Senior Software developer - $70k to $200k per year

This totals up to approximately $340,000 to $1,230,000 in annual salaries that may be needed to offshore development successfully. Non-tech companies do not have any of the aforementioned skills on their team or if they do it they are quite limited. This means that they could be best served by contracting these skills in a fractional way. It would not make sense for a non-tech company to hire a team that cost $300k to over $1M per year when their budget for a custom software build is approximately $200k.

Summary

Remember where we started. Offshoring for the purposes of this blog post means that you are considering contracting a new software product to be developed offshore for the purposes of saving money. I want to be sure to say again that there are wonderfully talented software developers and incredible full-service agencies all over the world. When you seek to offshore to keep your time-based rates down you will find that companies that were created to serve tech/software companies with less expensive labor.

Offshoring can work for you if you already have the software development product team in place and need extra capacity to execute the detailed instructions you provide. Offshoring will likely not work for you if your organization is not a tech company and you don't have the team members, experience, or hundreds of thousands of dollars (maybe more) of annual overhead needed to help your offshoring initiative be successful.

This is not a sales pitch and it is certainly not intended to say that Airship is the only way for you. I do believe Airship could help you to design and build a new custom software application and I would be glad to speak with you about your opportunity. However, there are other US-based agencies that can likely help you as well.

3 US-based companies for you to interview

Here are 3 other US-based companies that I have had positive interactions with. I invite you to interview them to determine if they are a good fit for you. You may find that one of them may be better suited than Airship to serve your needs depending on the specifics of your requirements:

  1. Thoughtbot - Boston, MA - London, England and several other US cities
    1. Fill out a form on their website here: https://thoughtbot.com/
    2. Ask for their Founder and COO Chad Pytel
  2. Atomic Object - Ann Arbor, MI
    1. Fill out a form on their website here: https://atomicobject.com/
    2. Ask for their Co-CEO Mike Marsiglia
  3. Infinite Red (Mobile Apps)
    1. Fill out a form on their website here: https://infinite.red/
    2. Ask for their Founder and CTO Jamon Holmgren

In each case please let these individuals know when you reach out that I (Luke Richardson from Airship) sent you. I hope that connection will help you to get the best service from these organizations. I can not speak from personal experience regarding the quality of their work, but I can say from personal experience that these three individuals have been kind, gracious, and very helpful to me.

If you are looking for help with designing and building a new custom web or mobile software application then I would love to speak with you and determine if Airship is a good fit to help.

How do I know how to evaluate this?

For the past 6 years I have been a part of the firm as a Vice President and Opportunity Explorer. I am responsible for interacting with prospective clients and helping determine if we are a good fit to help them with their custom software needs. Airship itself is a professional services firm. We design, build and maintain custom web and mobile software applications for a variety of organizations. Airship has served custom software clients for 9 years now.
Additionally, I seek out top technologists to gather insights and stay on top of current trends. Over this period of time, I have interacted with 1000+ individuals and/or organizations that were seeking some form of custom software design or development. My objective here is just to share what I have learned in hopes that it will be helpful to you as you try to decide how to best accomplish a custom software project that you may be considering for your organization.

Meet Luke Richardson - Lead Opportunity Explorer at Airship, a custom software development company
Luke Richardson
VP and Opportunity Explorer

Problem-Statement-Webinar-PDF-no-date

Start with: What problem are you trying to solve? 

One of the activities we work through revolves around refining your problem statement. A problem statement is the key business problem that needs to be solved. In software development, it states “what has to be done” for a project to succeed. It does not say, “how it has to be done.”

We use the 5W’s + 1 H format as well as the SMART Framework when establishing a problem statement. In fact, you can draft your own problem statement by using our free download. This download will get you thinking through some of the questions and answers prior to starting your project.

Download: Problem Statement
 
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