When it comes to outsourcing software development, the offshoring business model has grown exponentially as organizations look to reduce costs, streamline processes, and reap the benefits of specialization.
While there are benefits to offshoring, many organizations have learned that there are drawbacks, as well. Before you commit to working with an offshore development partner, take a look at 5 cons to offshoring.
What’s the Difference between Offshoring and Outsourcing?
Before diving into the disadvantages of the offshoring model, it’s important to understand the differences between offshoring and outsourcing. In recent years, these two terms have been used interchangeably because some of the aspects of these processes are present in the other.
Outsourcing is a practice used by companies to transfer portions of work to outside suppliers rather than completing it internally. The most significant factors for outsourcing usually relate to cutting costs and reducing internal infrastructure Outsourcing is an “umbrella” term, and while the process has been used for years in functions like accounting and legal, it has become wildly popular in software development and support.
Offshoring happens when you relocate the work to a different country and is a form of outsourcing. An example of offshoring would be when a company from within the United States works with a company located in India or China for a specific project. So, offshoring is always outsourcing – but not all outsourcing is offshore. Make sense?
5 Cons of Offshoring
1. Time Zone Differences and Proximity
One of the biggest disadvantages of offshoring is time zone differences. Many offshoring companies operate within a 5-12 hour difference from their client, meaning work schedules may need to be adjusted to accommodate your offshore partner.
Furthermore, unless your offshore partner commits to staffing late night shifts that work with your company’s time zone, you may have to wait for responses from the offshore staff. These time differences can also lead to lengthy delays in project deadlines as both companies struggle to accommodate each other.
Thinking about visiting your offshoring partner? This could be difficult considering the distance, costs, and time spent traveling to an overseas location. If regularly meeting with your partner and having face time is essential to your company, offshoring may not be the right fit for your business’ needs.
2. Communication and Language Issues
When working with a company from a different country, it’s usually safe to assume that most people on your team speak English as a second language. When working with someone who natively speaks another language, this can make communication and collaboration a unique challenge even if they speak English with relative proficiency. So, even though a team can speak English very well, that doesn’t mean that communication will be as smooth as it is when communicating with someone who is a native speaker.
3. Cultural and Social Differences
Even if the language barrier can be overcome or minimized, an overseas team can have cultural and social practices that you’ll have to accommodate.
For example, if you contract an agency from India, they can have up to sixteen public holidays a year depending on their regional location. Couple that with the United States’ ten public holidays, and that is twenty-six days a year that rarely coincide. While a handful of team members might tolerate Christmas Day conference calls, it’s more “Bah, Humbug” than “Happy Holidays.” So, you must consider the impact of the fragmented calendar during the project and how it’ll affect your deadline.
Work styles will also exhibit social differences. For example, it’s considered acceptable and expected for a North American worker to be assertive and straight-forward. However, this is not always the case in other cultures which view the employer-employee relationship very differently. These cultural variations dilute the valuable input and feedback loops expected in Western business, creating an increased potential for offshoring issues to arise.
The discrepancies in cultural and social practices can also lead to misunderstanding of complex business problems. This in turn leads to business and personal misunderstandings, and challenges that wouldn’t be the case when everyone on a team has a similar overall business dynamic.
4. Geopolitical Unrest
The unstable political climate in prominent outsourcing countries can cause increasing geopolitical risks for businesses. For example, Ukraine is a popular outsourcing location, but is frequently a victim of political unrest which can flare up without warning. This is true of many developing countries that are generally go-to’s when looking to outsource work.
Whether the issue is a government shutdown, military coup, riots over an election, or pressure involving drug cartels – all of these “far away” issues could quickly become much more real when your project or business is directly impacted because of the fallout.
5. Displacement of U.S. Jobs
Critics of offshoring note that the level of unemployment in America increases as more jobs move overseas. For example, if you outsource jobs to India, one of the disadvantages is that there’s less opportunity and open positions for qualified Americans, which can hurt the national economy and livelihood of cities and towns across the country.
By choosing a provider in the US, that creates more open positions for qualified local individuals and helps to bolster our economy rather than sending money overseas.
An Offshoring Alternative: Onshoring within the United States
Fortunately, there’s no need to look overseas for quality software development outsourcing. A simpler and more effective outsourcing alternative is onshoring.
Onshoring offers improved communication and increased productivity between both parties, while still working to reduce costs. It also eliminates the risks of compromised IP and data, geopolitical uncertainty, and contextual misalignment.
For example, a company located in Los Angeles or New York City can reduce costs by contracting services from a company located in smaller cities in Middle America, where living costs and prices are much lower.
The blend of finding quality talent at an affordable price point is quite advantageous for companies located within the United States. By working with a company located in the same country, both parties will benefit from more convenient time zones, faster and cheaper business travel, and easier collaboration.
Sparq: The Nation’s Leading Onshoring Partner
If you’re looking for an onshore alternative for your organization’s IT solutions, Sparq can help. As the leader in domestic IT sourcing, Sparq’s innovative domestic model eliminates the obstacles of data security, IP protection, political concern, time zones, distance, language barriers, and more. We help keep jobs in the United States, and provide high-quality work at a fraction of the price of providers in major metro areas.
With development centers strategically located throughout the United States, Sparq provides world-class solutions for organizations across various industries including pharmaceutical, healthcare, high-tech, insurance, and consumer & retail goods. Get in touch with us today to learn more about our capabilities, and to see how we can help your business outsource responsibly and economically without compromising quality.
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