Software Sweatshop

These days, everyone's looking for a rock star coder, but they're not that easy to find. That's why more startups are sending work offshore (not to mention that more VC's are demanding an offshore strategy from their portfolios)

Big companies set up captive development centers that serve the same purpose. Startups can't do that, so the trick is to find a mature and reliable team that will become a part of you. Outsourcing can not be transactional... the offshore team has to be a part of your team. That way they actually understand you and are committed to you. Outsourcing is about high value, not low cost. The real benefit is nurturing a team that's an extension of you.

That's exactly the type of offshore development that we advocate. Check out what other startups are saying about their offshoring experience and ask yourself if you're going offshore the right way:

1).

The first a product engineering outsourcing case by Jeff Angus describes how eProject, (now called Daptiv) a Seattle based SaaS provider of project management systems has had unabashed success partnering with an outsourcing firm located in the Ukraine and in Redmond, Wash.

"We went out and got references for offshoring partners. The qualifications we were looking for were unusual," says Chris Lynch, eProject's vice president of engineering. "We were looking for quality of work rather than lower costs ... I was hiring locally, so costs were budgeted," he says.

"Quality was always the biggest need. Our specs called for a partner that as technically competent and independent, [who] would tell us what they thought we were doing right or wrong, and who would function as an extended part of our team. We wanted a peer who had enough expertise of their own to recommend content and coding techniques as well,"
Lynch explains.

2). 

This is a quote from Mike Volpe, VP Marketing at Hubspot.com. Hubspot.com has a killer marketing blog that is required reading for every startup and small business. Dharmesh Shah, the founder of Hubspot has a great blog about startups as well. Here's what Mike said about their offshore team, there's a valueable lesson here:

"for the record, we do have some overseas development done at HubSpot, but the folks abroad are really part of the team - we interact with them daily and the only difference between the folks here and there is the actual address."

3). This is a great quote posted by Stephen Wiehe, President and CEO of SciQuest. He wrote a response to a comment I posted in the Wall Street Journal's Business Technology Blog

"Anyone who questions just how significant hidden costs can be when outsourcing only needs to look at the recent recalls of toys manufactured in China. Many companies focus on costs they can see, but fail to consider the unknown costs that are often the greatest source of risk when offshoring jobs.

Forward-thinking companies know that you can't be high touch, high tech and low cost without sacrificing one or more over the others. For example, offshoring service jobs might lower costs, but you're likely to lower your customer satisfaction rating at the same time.

As wages continue to rise in India, organizations need to take a serious "look under the hood" and begin to articulate the unknown costs of augmenting their workforce with offshore staff. As stated in Raza Imam's post, organizations should seek to expand their workforce with overseas talent to bring more value to the organization, its stakeholders and its customers, rather than solely as a means to cut costs.

We began to notice the trend of rising overseas employment costs several years ago and have downsized our offshore team to just 10 percent of what it was at its height. We've solved the communication issue broached in the study by bringing members of our overseas staff to our headquarters for three months on a rotating schedule. Our offshore developers have gained a sense of unity and camaraderie with our U.S. staff while furthering their knowledge of our procurement solution suite. Effective communication with your offshore workforce, as well as the uncovering of unknown costs is 90 percent of the hurdle to a successful partnership. As a result, you can eliminate what may be the greatest hidden cost of all-inefficiency.

4).

Finally, I received this email in response to a comment I left Matt Roger's blog. His post was titled How to Get Good Offshore Developers. The post was actually on ReadWriteWeb also.

We've deliberately made our developers part of our team (the actual guys, rather than the company!) and spend a lot of time with them and talking to them. They now help drive the development forwards with creative ideas to develop the system and are utterly committed.

The point is that offshoring is here to stay. If you're a startup and need good developers, you need to establish a relationship with a good team rather than outsourcing to the lowest bidders.