It's been said of America and England that they are two countries separated by a common language. If a North American company elects to use an overseas outsourcer, both parties may be speaking English, but from a practical perspective, it may sound like a modern-day Tower of Babel.
Design culture: Besides language, there is a difference in design cultures -- the actual product development approach -- that can make offshore outsourcing less attractive.
In North America (and Western Europe as well), there is typically a great deal of communication between the client and outsourcer. For example, the marketing person might say, "I think this product should be this shape." An experienced North American outsourcer could counter with, "I know you want it that shape, but if it were this shape it would actually go faster." The interaction can help bring about a trade-off or balance between what the customer wants and what the outsourcer delivers -- ideally resulting in the highest quality and most marketable product possible.
In some cultures, particularly in the Far East, the norm is to develop what you are told. Often, that means plodding forward without offering feedback. Ultimately, this will result in a product that meets the specifications, but which does not perform as the customer expected.
The creative pushback -- the counsel and advice that should accompany the design services -- does not occur, resulting in multiple iterations that increase project cost while potentially delaying product delivery.
Political/financial stability: All it takes is a quick glance at any newspaper to see the turmoil around the world -- a terrorist attack here, a coup d'etat there. What's more, many foreign countries are suffering through economic crises that make the current problems in the United States pale in comparison.
Needless to say, these instances have ramifications that are far more worrisome than the effect they might have in the outsourcing community. Still, these are elements that must be considered before looking abroad for assistance in bringing a product to market. In a research report published by Black Book Research and Brown-Wilson Group, Canada ranks as one of the top 10 safest countries in the world to do outsourcing. India ranked in the bottom 10.
Total project cost: From a dollar perspective, the lure of offshore outsourcing can be particularly potent. The cost of labor in India, for instance, may be only 40 to 50 percent of the going rate in Canada; in China, it may be as low as 25 percent of that same cost.
However, the cost benefit has to outweigh all the issues outlined above. And there are often hidden costs. If there are language issues, for example, you may have to incur the cost of interpreter services.
The cost of overall project management is another variable that must be accounted for. Far less management is typically required when using onshore resources because of the dynamics cited. But it is even more closely correlated to the experience factor than anything else. Because the offshore team may be less experienced in the specific development or market area the customer is seeking, tighter project management and oversight will be required.
It should also be noted that in Canada, R&D tax credits cut as much as 70 percent of the cost of developing technology. This allows companies to counter the low labor costs that offshore oursourcers use as one of their competitive advantages.
In the right situations offshore outsourcing makes sense, such as in high-volume manufacturing, product testing, or fixing a problem vs. creating a product from scratch. But if you're a North American company designing a brand-new product, creating a prototype, or doing something that's out of your company's primary area of expertise, you should be looking at onshore very seriously. With an experienced staff, close proximity, negligible time difference and real-time interaction, the discussion of onshore vs. offshore should be an open and shut case.
Gasparro is co-founder and vice president of business development for MapleWorks Technology. He can be reached at: firstname.lastname@example.org.