Are you in India or Eastern Europe and planning to outsource? Don’t, if possible!
Outsourcing might seem like a good option, especially when it has produced tremendous results across the oceans in the US and in Western Europe. Primarily a wise cost arbitrage option , for the world outside of India, the same toolkit does not work well if your business is based in Central or Eastern Europe or India.
The opportunity to serve locals isn’t an economically rewarding one for the outsourcing company. It does not turn out to be viable for the customer either. It might cost about $25 per hour to outsource a task for labour that is based out of India, while it may be about $30 per hour if it is to be outsourced to another country in, say perhaps, Eastern Europe. Now this is a rather cheap prospect if you are based in Western Europe or the US. But in India or Eastern Europe, the cost of hiring a developer is often half of the cost of outsourcing or even less. If you chose to outsource within India as an Indian customer, it could cost you about $20 per hour. Out in Poland for a Polish startup it could be about $30/hr. Do the math, and it will be as clear as day to note that it is a whole lot more expensive to outsource rather than to hire. If you want to outsource at the cost of hiring, be sure that you’d be getting the bottom feed of the talent pool. The opportunity cost for an outsourcing company to serve you instead of a high paying international customer is just too high, to ignore.
This shouldn’t come across as earth-shattering news: it was always a known fact that outsourcing is predominantly an export-oriented endeavor. The economics within low cost countries make it quite un-viable to outsource domestically, if you expect high quality.
Why still outsource?
Hiring by itself can be a challenge. It is a time consuming process. You don’t always have the guarantee of finding the perfect fit in terms of qualifications and in terms of a team-fit. You also have the challenge of uncertainty with respect to the retention of the hired employee, while having to battle with the obligation to work around a lot of things that may wind up diverting organisational resources from the main task. The ideal way to do this is to wait to hire – where you absolutely have to hire and cannot compromise whatsoever. The alternative is, to outsource.
If you simply must outsource development, here are a couple of hacks to get by.
- Outsource around a milestone obligation – When you know that you have a particular need that has to be achieved within a set timeline, or that you have to accomplish a certain task with a limited amount of time on hand, you can’t afford to divert your energy and attention to hiring. The focal point of the efforts should be to get the task done, and the right way to do it is to find labour fast. If you outsource based on needs, you have the guarantee of a temporary association that will not impinge on the organisation’s pocket, and will also guarantee the comfort of temporariness in that there will not be major adjustments to accommodate a new hire. For instance, let’s say you’re looking to launch an app on a certain date, and find yourself facing the challenge of manpower lack in a particular area of operation. Fill the gap with the help of outsourced software development . Chunk down your tasks into individual milestones – launching a product, releasing a new version, releasing a new platform – and then work around those needs to outsource particular tasks.
- Outsource for a specific skill that cannot be brought in house yet A second scenario where outsourcing might be of use is where there is the one-off task that requires expertise that lies outside the regular expertise and actionable scope of tasks in your own organisation. To bring in external consultants and experts to handle specific needs may not be an impediment in an organisation especially because it is a one-off expenditure event that becomes a temporary need. To this end, a database of consultants and experts can be drawn up, to approach from time to time where a need arises.
- If you are a savvy negotiator, ask your vendor to build a team for you & get an option to hire the team in, say, 18 months. That way, you get to have a say on who gets hired for your project and then you can hire them when you are ready. It reduced knowledge transfer risks, increases employee-level commitment and reduces cost.