Why offshoring is bad

While offshoring still allows companies to cut operational costs in the long run, its overhead and risk has led some clever officers to take advantage of the poor economy at home—offering on-shore work at nearly off-shore prices.

When the State of Indiana needed to upgrade their computerized system for processing unemployment claims, Indiana governor Frank O'Bannon turned to India.

Political motives could explain why most CIOs in the public sector have been hesitant to go offshore, despite the opportunity to reduce operational costs by as much as 20 to 40 percent. Despite these concerns, offshoring is still going strong; Gartner Research predicts that the amount of money U.

Additionally, most experienced corporations express satisfaction with their offshore relationships. However, as numerous IT decision-makers like Wesley Bertch have discovered, problems can quickly arise when attempting to up the ante to high-level software development.

Not everyone can pay the upfront logistical costs, and Offshore Outsourcing authors Robinson and Kalakota believe that few companies have what it takes to take advantage of the global job market. Armour, Stephanie. Bishop, Ian. Greenemeier, Larry. Gross, Grant. You may have heard stories about offshoring that went wrong and made companies lose thousands of dollars.

Good luck! Written by D mitry Ovcharenko. For media queries, please contact: info ceoworld. CEO Insider. Tip: You should analyze what skills you lack in your company and the amount of work you need to delegate to an offshore team. After that, you must come up with an exact number of overseas employees to handle this workload. The best way to devise the right offshoring plan is to conduct one or several brainstorming sessions with your strategy team.

Then, you can start looking for suitable destinations and providers according to the precise plan of action and fixed price. For example, you may have forgotten to consider the level of English of your coders, accurate salaries and taxes , and specific legal requirements for foreign employers.

The discussion will proceed with the expected hiring deadlines and our recommendations on managing payroll, equipment procurement, and compliance matters.

We respect your privacy and will never share your data with any third party or spam you. Thanks for your message! We won't leave it alone! We will get back asap but no longer than 24 hours. Thank you and looking forward to talking to you soon! According to recent data, this year it is expected to increase by 1. Earlier I wrote an article about the offshoring trends of in case you want to read more about the basics of this practice.

Businesses have always been looking for cost-effective solutions but in times of pandemic the bets go up. There is a great number of things to do first before actually starting the offshoring process. We all know that consistency is a key to success.

Therefore, you should go through a definitive to-do-list when choosing how and where to offshore your tech business. Successful offshoring examples show that the choice of the destination country might be crucial for the outcomes. Eastern Europe is one of the most prominent and beneficial offshoring hubs. The list of real cases below serves as proof of this statement. Offshoring enables your in-house team to focus on the most relevant challenges your business is facing at a specific time.

Right before WhatsApp was launched in , the company offshored its software development to Eastern Europe. WhatsApp relied on offshore talent in keeping the backstage, providing design solutions, and taking care of core app development , while their in-house engineers were concentrated on client-related tasks, such as customer support. Soon after that, the messaging app went on top of the AppStore and Google Play.

At that time, it was the largest acquisition ever of a company funded by venture capital. Google is another big player in the list of examples of successful offshoring. However, it enabled a large reduction of business expenses due to offshore hiring. If you are also in need of Ukrainian IT talents, consider Alcor as a recruitment provider. Amazon successfully used offshoring as a means of expansion. The startup is specialized in developing outdoor home-security solutions. Alcor was happy to provide them with accounting services and payroll outsourcing.

What is more, within a year the second offshore development hub was opened in the West of the country. They opted for offshoring in order to find rare engineers to develop AI algorithms.

At first, they were collaborating with several service providers simultaneously, which resulted in confusion. After that, they delegated all back-office operations to Alcor. Our real estate managers prepared a perfect location , legal and finance teams offered the most beneficial structure of doing business in a foreign country, while Alcor IT recruiters were searching for top IT specialists.

Alcor hired over 25 professionals and launched a fully equipped development office in only one month. The results exceeded all their expectations! Among the examples of offshoring , there is also the thriving experience of BigCommerce. They wanted to expand but faced the lack of skilled IT engineers in the U. Their cooperation with international outsourcing companies appeared to be exhaustive and non-productive. Consequently, the IT company turned to Alcor for cost-effective solutions in developing their product and growing a professional team.

Among other successful offshoring examples , there are also such companies as Reddit, Samsung Electronics, Oracle, and Huawei. All of them chose Ukraine as an offshoring destination because this country appears to be an attractive option for business growth and development.

Not every single decision to offshore is destined to be triumphant. This business move requires much thought and effort, otherwise failures are inevitable. There are some reports about a giant telecommunication company whose decision to offshore resulted in a fiasco.

They chose an Asian provider for collaboration, which was good at coding but not so good at the telecom business. Thus, they have wasted loads of time trying to develop business applications. The provided IT services were so poor that the company made a decision to send this process back to the in-house team. Consequently, the client received nothing but financial problems and a stressful legal battle with the offshore partner.

This offshoring example shows how crucial the choice of vendor could be. Develop and improve products. List of Partners vendors. Table of Contents Expand. Table of Contents. Offshoring Background. Latest Developments. The Pros. The Cons. A Complicated Picture.

John Reh wrote about business management for The Balance, and has 30 years of experience as a business manager. Learn about our editorial policies. Updated on November 14, Your Privacy Rights.