The Server-Side Pad

by Fabien Tiburce, Best practices and personal experiences with enterprise software

Posts Tagged ‘offshoring

Nearshoring to Canada – Your Comments

with one comment

My blog post on The Case for Nearshoring to Canada seems to have hit a nerve, at least with unbiased Canadian readers  ;).  Unfortunately the article was cross-posted to LinkedIn so some interesting comments were posted there instead.   As a follow-up to the original article, here is a compilation of the most interesting comments, from various sources.  Thanks for your contribution.

Gary Toste writes: “For offshoring to be successful, you truly need to commit to it and integrate it into your processes and commit to going there regularly. So yes there are additional costs outside of just what you initially see to make it successful. As soon as you outsource anything, be it down the street, or half way around the world, there are complexities that need to be managed or things can fall apart. The further away though, the more issues that can happen. Timezone is by far the biggest factor in my opinion. ”

Sean Abel writes: “In my experience with offshoring (about 15 small to medium custom software projects with total combined budget of $1 million USD), the costs savings were negligible. In order to get the correct product on time with an acceptable level of quality, there is more time spent on the front end specifying (never a bad thing) and on the backend in quality assurance than is my experience with in-house talent. The one positive that I noticed was that the paper trail was more comprehensive than a typical in-house project. The biggest negative was the very few hours of in-office overlap between my North American assets and my overseas developers. This required resources on both ends to work some odd hours when resolving complicated issues. All in all I find that with my typical engagement I can deliver a superior product in less time for the same cost with a local development team. Manufacturing is an entirely different animal and not my core expertise.”

Marcio Ferrini writes: “…in Brazil the time zones, work ethics and business values are close as well. I think our main problem is related to instability of our currency. The exchanges rates vary so much every day and even we having contracts in dollars, we end up having expenses in Reais which has some time to be adjust.”

Peter Giblet writes: “In addition to your comments I would also say there are other advantages to leveraging Canadian skills in development projects. In addition to the reasons pointed out corporations engaging R&D resources do have significant tax advantages for new developments, provided the terms and conditions of an employees contract are correctly worded.”

Alex Boudarov writes: “There is no cost saving in outsourcing whatsoever. Indian devs cost between 20-60$/hr. Resources at lower price range overbill heavily, which brings the effective price point to North American standards. In my experience (I have seen how outsourcing in major financial institutions) it is more expensive then local development, especially considering lack of face to face communication, timezone difference and lack of control over the development process on their end.”

Steve Sykes writes: “When offshoring (and outsourcing, to a degree) got started as concepts, there tended to be a lack of a “total cost” view. Such a view would take into account all the great points made thus far here, and also things like vendor management – which requires visits to vendor facilities, etc. I’d like to see a “carbon impact” factor introduced to such analyses, as well as the productivity cost associated with an executive traveling to Russia, China or India. A week trip is usually stretched into 10 days or 2 weeks – and then there is the wind-down before the trip and wind-up afterwards. Whole lot easier (and less expensive) to manage a vendor in the same metro area (or at least, province). I would suggest that each such trip impairs between 1% and 5% of annual productivity. I’d also like to see all of the human costs sufficiently considered. “

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Written by Compliant IA

April 1, 2009 at 4:15 pm

The Case for Nearshoring to Canada

with 2 comments

Recent accounting scandals and political instability in India have exposed offshoring as an uncertain and risky proposition.   There are cost savings to offshoring but is there value?  Let’s see.  Offshoring is by no means convenient.  Coordinating efforts with individuals in different time zones takes much planning.  It can affect an organization’s productivity and a product’s time to market as simple changes turn into costly iterations coupled with high management overheads.  Communication requires extra work too as the person on the other end may not have a sufficient grasp of English, Spanish or French (whatever is the prevailing language of your organization and jurisdiction) to communicate effectively.   Quality is harder to control and issues often take longer to fix.  Lastly, let’s not forget that the focus on customer satisfaction is very much a cultural phenomenon which may be blatantly absent in some parts of the world. In other words, it is unreasonable to expect offshoring to be like working with local contractors albeit cheaper.  It is nothing like working with local contractors, will definitely affect your operations, lengthen your time to market and may increase your risks.  All things considered, it may or may not be cheaper.  

None of this is new of course.  In fact many US companies realize the risks of offshoring and already nearshore to Canada.  The value proposition for Canada is strong.  Canada has political stability, infrastructure and an educated labor force.  It is aligned with the US time zones, has similar work ethics and business values (customer satisfaction, attention to details, etc…).   Canada has over 80 ethnic communities (lots of languages spoken) in Toronto alone.  Lastly with generally lower wages and a strong US dollars (1 US = 1.25 CDN at the time of writing), the risks are low and the advantages real. 

A decision to offshore should be based on overall value, not up-front cost savings. Canada’s value proposition is strong.

Also read follow up to this article at: https://betterdot.wordpress.com/2009/04/01/nearshoring-to-canada-your-comments/

Written by Compliant IA

January 21, 2009 at 10:10 pm