As a financial department, your primary goal is to manage costs and ensure the financial health of your organization.

…and yet there are things that need to be understood for successful change to be made.

Understanding The IT Department's Pushback on Offshore and Nearshore Software Development

When proposing offshore or nearshore software development as a cost-saving measure, you may encounter significant pushback from the IT department. Understanding the IT team’s underlying concerns is essential to evaluating the proposal thoroughly and making an informed decision. This article aims to shed light on the real concerns that IT departments have regarding offshore and nearshore development and why the concerns listed below should be considered before making any cost-cutting or spending decisions.

The Concerns of the IT Department Worth Considering

Quality of Work

  • Concern: Offshore and nearshore development teams may not consistently meet the same quality standards as onshore teams.
  • Explanation: IT departments with leaders who have experience working with onshore and offshore teams often worry about the code quality produced by offshore teams. Differences in training and coding practices (best vs. “street”) can make a huge difference and can bypass industry standards, even if just one person on the team has a different coding philosophy. This can certainly happen anywhere, but when it happens overseas, no matter how well you manage it, it may stay hidden for months before raising its head in product issues. Add the recent surge of U.S. companies looking for lower rates, and you may get an excellent hourly rate for someone who is juggling and billing against three or four clients, leading to a lack of attention to code quality, resulting in increased bug rates, longer testing cycles, and more frequent rewrites, negating the cost savings that were the reason for going offshore or nearshore in the first place. Add the constant movement of talent for small wage increases, and you will find that you don’t always end with the team you started the project with, and a valuable knowledge base is lost. This is a valid concern that should be discussed.

Communication Barriers

  • Concern: Timezone differences are the most common issue, but language barriers based on technical terms and expectations can also lead to communication challenges.
  • Explanation: Effective communication is critical in software development. Timezone differences can cause delays in getting questions answered and issues resolved, leading to slow project progress, developer turnover as the offshore firm tries to keep the employee busy while waiting for an answer and moves their people to other projects, or decisions made by uninformed developers without proper context. These can lead to issues and cost overruns that are out of your control. In addition, translation issues, not in language but in non-verbal cultural expectations, can result in misunderstandings and misinterpretations of project requirements.

Security and Confidentiality

  • Concern: This is always mentioned but should be top of list. Offshore development may pose risks to data security, intellectual property protection, and competitive information that can easily be sold without anyone knowing about it, with little that can be done after the fact.
  • Explanation: IT departments are responsible for safeguarding the company’s data and intellectual property while improving the competitive edge. Offshore and nearshore outsourcing can introduce risks related to data breaches, unauthorized access, compliance with local data protection laws, and data mining and sales to competitors paying the right price. Ensuring that offshore teams adhere to the same security standards as onshore teams can be challenging. To combat this, certain aspects of a project are often off-limits to offshore teams, creating a wall that may not develop problems until the end of sprints when areas are combined and time has already been spent on development that must be redone.

Turnover and Continuity

  • Concern: High turnover rates in offshore teams can disrupt project continuity and knowledge transfer.
  • Explanation: Offshore and nearshore teams often experience higher turnover rates than onshore teams. Imagine a senior developer receiving $20 an hour (out of the $55 or $60 you pay). An offer of $3 or $5 an hour more by another firm is quite tempting. This is much more prevalent in South America due to a lack of resources, but it happens everywhere, especially for good developers. Frequent personnel changes can lead to loss of project knowledge, disrupted workflows, and the need for additional onboarding and training, which can delay project timelines, increase costs, and decrease cost savings.

Project Management and Oversight

  • Concern: Managing offshore teams requires more robust project management and oversight (from 8-hour days to 16 or more for two teams).
  • Explanation: Coordinating and overseeing offshore teams is more complex and time-consuming. IT departments may need to invest in specialized project management resources that are onsite or work extended hours to ensure that offshore teams stay aligned with project goals, timelines, and quality standards on their schedule, not only yours. This added layer needs to be boiled into the equation.

Fees and Extended Due Dates

  • Concern: With development on another continent and access difficult, if deadlines are missed or fees are added that were not foreseen, there is little you can do but pay or lose your work entirely.
  • Explanation: A commonly recorded problem with offshore and nearshore firms that are not owned by the parent company using them are the hidden fees and stranglehold on deadlines. In many cases, there is little action that you can take against the firm since they are protected by distance and local laws that may not be as easy to navigate or enforce as in the United States. Your team is now reliant on their delivery. However, once it is out of your hands, this is part of any gamble, so it may have already been considered.

Company Employee Satisfaction and Turnover

  • Concern: The move to offshore or nearshore development can affect the morale and satisfaction of existing FTE developers, potentially leading to higher turnover rates.
  • Explanation: Changes in work dynamics, increased oversight requirements, and potential additional workload to manage offshore teams or fix issues can lead to dissatisfaction among onshore employees. This can result in higher turnover rates, further disrupting project continuity and increasing costs through recruitment and training. It is not typically a concern since companies go overseas to eliminate onshore positions. Still, it should be considered even if you are not planning to eliminate FTE help since it can be perceived as such.

Reputation of IT Leaders

  • Concern: Reputation is probably one of the biggest reasons you will get pushback. The success or failure of an offshore or nearshore initiative can significantly impact the reputation of the IT leaders responsible for the offshore project.
  • Explanation: or strategic decisions that were out of their hands. If the move to offshore or nearshore development results in poor quality, project delays, or increased costs, it can tarnish their reputation and credibility. It is essential to clarify that both departments hold responsibility for the outcome, so there is shared responsibility for the savings and the potential challenges to come.

Evaluating the Proposal: Key Considerations That May Be Adopted.

To address the IT department’s concerns, work together to try and ensure these items can be adopted and managed:

Quality Assurance Measures

  • Action: Establish strict quality assurance processes and standards that offshore teams must adhere to. Consider setting up regular code reviews, automated testing, and continuous integration practices. These are typically already part of your internal and onshore outsourcing process, but take the time to make sure you use some of the hourly cost savings to increase QA hours that can evaluate on a more frequent basis.

Communication Strategies

  • Action: Implement robust communication tools and practices to facilitate real-time collaboration. Schedule regular meetings that accommodate timezone differences and use collaboration platforms that support clear and effective communication that works on a 24-hour clock. Ensure that someone with an entire picture of what is trying to be accomplished and has the power to make decisions is available 24 hours a day.

Cultural Training

  • Action: Provide cultural training for both onshore and offshore teams to improve mutual understanding and collaboration. Foster a culture of open communication and encourage proactive problem-solving. This can help with retention and understanding of project goals and potential reasons for delays.

Security Protocols

  • Action: Enforce stringent security protocols and data protection measures. Ensure that all onshore team members are trained on security best practices and comply with relevant regulations. If data must be sent, do your best to find a trusted company that has been in business for a long time and was recommended.

Retention Strategies

  • Action: Develop strategies to retain key offshore personnel, such as offering competitive compensation bonuses, career development opportunities, and performance-based incentives. In many cases, these offset the savings you will realize but help retain the knowledge base and the people you want for your project.

Enhanced Project Management

  • Action: Invest in experienced project managers who can effectively oversee offshore teams on their schedule and yours. Utilize project management tools that provide visibility into project progress, track milestones, and manage risks. Hire delivery managers who understand the technology and have the knowledge to make crucial decisions for the company 24 hours a day.

While offshore and nearshore software development can offer significant cost savings in proposed hourly rates, it’s essential to recognize and address the valid concerns of the IT department. By understanding these concerns and implementing mitigation strategies, the financial department can make a more informed decision that balances cost efficiency with project success and provides a more accurate cost savings calculation. Collaborative discussions and careful planning can ensure that any move to offshore or nearshore development aligns with the overall goals and standards of the organization, ultimately leading to a more successful outcome for all stakeholders.

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