Hidden Costs of Offshoring

The media is full of reports of tech companies going offshore for their software development and support capabilities. While this is a real phenomenon that is happening, and the dollar cost savings can be compelling, there are several downsides that don't seem to be brought up very often. These can have a tremendously detrimental impact on a company's products and brands, and without careful consideration can lead to shortsighted decisions that ultimately take down a company.

Here are a few of the considerations:

1.) You may stifle and inhibit your product efforts

Truly great products are created by innovative engineering teams that work very closely with Product Managers and other groups in a company. As a Product Management professional I've worked with some great teams that have delivered some incredible products. Products like these aren't something you can simply write a spec for, deliver it to engineers overseas, and get something exceptional back. Sure, for simple and VERY straightforward coding work you can farm it out. But if you want to create truly breakthrough products you need a team that has great ideas AND that works closely with your Product Management folks to ensure customer needs are being met. The best situation is where you get a team that looks at the MRD (Market Requirements Document) and figures out a way to deliver far more than what it calls for in a way that Product Management could never have thought up.

2.) Your brand and customer relationships may suffer

The cost of losing a customer and ruining your brand as a result of offshoring can be very high. Consider this example. My wife Sarah (VP of Sales for the 280 Group) recently had a software problem and contacted technical support for a well-known brand name product. She ended up exchanging email five or six times with them. After the second message it became painfully obvious that the person on the other end didn't speak English very well, and that they had little chance of even understanding the problem let alone solving it.

Now if this was an isolated incident it would be one thing, but this company gave me the exact same lack of service when I had a different problem. Sure, they saved a lot by having the support handled by someone in India. But now that they've lost us as customers, the question is, how much are they going to have to spend to attempt to win us back?

Smart companies are realizing this - that's why Dell pulled their India tech support efforts recently. The long-term value of a customer is FAR higher than any short-term savings they can realize by having someone less-expensive answering support questions.

3.) Managing offshore development can take a huge toll.

A friend of mine recently returned from a trip India where he is managing an engineering team and was investigating finding new facilities. He goes there about once a quarter. During this trip he got violently ill, and suffered the usual jet lag and loss of personal time when travelling. Upon returning he informed his boss of the progress, and was told that he needed to return again in 2 weeks to finalize the deal on the office space and make sure the team was on track.

The cost of this? Well, I can tell you that if he gets the chance to work for a different company where he doesn't have to travel he'll be the first to jump ship.

Incidentally, he mentioned that they are having problems with attrition of staff in their India office, and that office space is no longer as cheap and widely available as before. While it had been easy and cheap to offshore two years ago, it had become more complicated and time-consuming recently.

4.) Lack of accountability

I'm working with a team that is remote right now for a client. Every day we have a team meeting conference call and people call in from multiple sites. Though good in theory, we end up having to repeat many things that are said because the phone lines are questionable. Additionally many people skip the meeting, or delay us because they don't have the project files to look at when we put them up on the projector. I also suspect that a good part of the team is doing work (or other things) on their computer while on the phone, since when they are asked a question it is clear they haven't been listening.

There is something to be said for making your team show up in person, look you in the eye when you are having a difficult discussion about schedules and features, and not be able to hide their facial expressions behind a phone line. True accountability makes for great product teams.

THE BOTTOM LINE

One has to wonder, when the laws of supply and demand begin to catch up with the situation, and the hidden costs of offshoring begin to become more apparent, will companies come to regret their cost-conscious post-bubble offshoring choices?

Brian Lawley is the President of the 280 Group, the Product Marketing & Product Management Experts? The 280 Group provides consulting, contractors, training and templates to help companies define, launch and market breakthrough new products. For more information about the 280 Group's services and toolkits (Product Roadmap, Product Launch, Beta Program, Developer Program & others) visit http://www.280group.com.Ebay Make Money Off
Fast Fraud Internet Make Money Society
Business Opportunity Make Money At Home
Internet Make Money Online Store Ways
Make Money Flipping Real Estate
Business From Home Make Money
Make Money Free
Extra Little Make Money Ways
Based Business From Home Home Make Money
Affiliate Affiliate Make Marketing Money Program
Act Make Maker Millionaire Money Think Way Wealthy
Easy Make Money Online Ways
Good Make Money Ways
All4homebusiness
Ebay Ebook Free Make Money
Business From Home Make Money Opportunity Work
Email Marketing Rss
Quick Make Money On The Internet
You Make Lots Of Money On Runescape
Big Business In Make Money Own Small
Easy Home Make Money Working
Make Money Off Site Web
Auction Internet Make Money Selling Site Web
Email Marketing Jobs
Loophole Of The Rich How The Rich Legally Make More Money And Pay Less Tax
Internet Make Money Off
Fast Internet Make Money
Make Money Real Ways
Adsense Google Make Money More
Free Make Money Page Web
Make Money Taking Online Survey
In Make Money Quick Runescape
Easy Extra Make Money Way
From Home Internet Make Money
24102c0002c Home Make Money Online Work
Business Forumshere
Cash Earn Fast Make Money
Make Money Online Search Ways
Ebay Ebook Free Make Money
Best Extra Make Money Ways
Make Money Using The Internet
Legal Ways To Make Money Online
Make Money Online Right Now
Web Based Email Marketing Software
make money online
Make Extra Money From Home
Auction Make Money Online Sell
make money typing at home
From From Home Home Make Money Work
Great Make Money Online Ways
Fast Fast Legally Legally Make Make Money Money Online Online
Make Money From Home Using My Computer
Make Money Selling Web Site On Ebay
Ebay Make Money Ways
Make Money Taking Survey
Good Ways To Make Money
Easy Fast Loan Make Money Ways
Computer Easy Make Money Ways
Creating Make Money Site Web
Free And Quick Ways To Make Money
Internet Make Money Site
Business Forumshere
From From Home Home Kid Make Make Make Making Money Money Money Money Online Profit Work
Extra Guide Make Money
1000 Make Money Ways
Affiliate Best Make Money Program
Based Business Home In Make Money Sew Sewing Success
Can Help Make Money Remote Rss Site Syndication
Earn From Home Make Money Money Online
Ahead Business Business In Make Money More Move Nlp Power Product Rapport Sell Technology Use Yourself
Earn Make Money Online Survey
Adsense Blogspot
Internet Make Marketing Marketing Marketing Mlm Money Network Online Promotion Site Tool Web
Quick Make Money On The Internet
Make Money At Home Stuffing Envelope
Why Smart People Make Big Money Mistake
Building Make Money Site Web
Make Money Investing In Stock
Business Ca Home Make Money
Based Based Business Business Home Home Make Make Money Money One One That That
Make Money In Real Estate
Internet Make Money Online
Make Extra Money At Home
make real money at home
Best Home Make Money Ways
Internet Make Money Ways
Best Ways To Make Money From Home
Make Money On The Internet Online
Ebay Make Money Online
From Home Internet Make Money
Easy Free Make Money Online Quick
Home Make Money Online Opportunity Work
On Fixed Income Need To Make Extra Money
Cash Fast Make Money Online
Quick Idea To Make Money
Learn To Make Money On Ebay
Canada From Home In Make Money
Computer Make Money Use
Business Free Make Money
Different Make Money Ways