U.S. businesses are accelerating their delegation of technical and service work to centers in India, China, the Philippines and to a lesser extent other areas of the globe that have highly-trained, low-cost, English-speaking populations.
Last year I had a chance to try out Palamedea Technology International’s development services and came away pleased with their skills, initiative, and deliveries. Recently I had an opportunity to talk with Mike Feroah, a principal with PTI, a San Francisco/Prague-based consulting and software development company. I asked him about what a business should pay attention to when choosing an offshore developer. Though we focused on software, many of the issues raised apply to general IT and call center service outsourcing as well.
JA: Mike, when I worked with you last year your group was called IIG/STI. So what is PTI?
MF: PTI is a collaboration between IIG/STI and Systems Integration Solutions, a thirteen-year old San Francisco-based IT consulting and IT resources company. We provide complementary services so we’ve joined forces to provide a wider offering that’s both U.S. and Prague-based.
JA: Let’s talk first about potential advantages of offshore outsourcing and then the risks. And then, let’s finish up by looking at some of the issues that are important but tend to be ignored. So Mike, why should someone who needs some software development done look at outsourcing it overseas?
MF: The first thing people usually talk about is cost savings resulting from lower offshore pay scales. And everything being equal, offshore development can be less expensive, but not automatically. If you throw an ill-conceived project over the wall and then don’t manage it well, you’re going to lose — offshore or onshore.
Generally speaking, it makes sense to outsource when you don’t have the resources to do a particular project and it doesn’t make sense to hire them. Then the question is whether to contract locally or go offshore. Though not always the case, often today you can get more highly skilled software engineers offshore than on. That can mean higher quality work and on-time delivery. On the other hand, some offshore services double or triple staff with lesser skilled people believing that extra hands can make up for lower skills. Sometimes that’s appropriate. Anyone shopping for development help should be clear about what they’re looking for — brute force or top notch developers.
JA: So, cost savings can be a legitimate motivation — with project design and management caveats. And not having the staff to get a project done is motivation to go outside, along with the possibility of better quality. What are some of the risks?
MF: The biggest risk is that you’ll lose all the money you spend on the project. But that’s true (and perhaps even more likely) if you do it in-house. Over the years I’ve seen a variety of statistics on the ratio of failed to successful software projects and it’s usually worse than 50%. If you choose a reliable offshore service, it’s unlikely to be the cause of a failed project.
Sometimes I hear worries about the potential loss of intellectual property — not just software ideas but business strategies as well. And certainly you have to take financial information security issues very seriously. You can’t lose control of credit card numbers, for instance.
But security is an issue for in-house projects as well. My advice would be to hang on to critical financial data and to locally manage the development software repository, allowing limited and as-needed access by the offshore service.
JA: Mike, you’ve mentioned to me that you think one important offshore outsourcing issue is the cultural differences between the U.S. and other countries. What do you have in mind?
MF: There are real, significant cultural differences between Americans and virtually everyone else in the world and these differences can affect the success of software projects. It’s not a question of skills. The rest of the world has some terrific software engineers. It’s more a matter of expectations. Americans will try to give you what you want or need. The rest of the world will give you what you ask for.
If you go somewhere, say India, or China, or Sweden even, and you put 50 people in a room and tell them to stay there and you come back in two weeks, they will be just where you left them. But if you put 50 Americans in a room, the next thing you know they’ll have created some committees and begun to look into what’s really needed and what they should do about it.
In the U.S. we expect people to be proactive, not to just do what you ask them to do, but to get back to you with issues they see or suggestions for doing it better. Americans are taught from birth to speak up and to take broad responsibility in all kinds of situations.
But in virtually the whole rest of the world the expectation is that you should just do what you’re told. It’s not safe to speak up or seem to take responsibility away from someone in authority.
So when Americans outsource software projects to other countries, other cultures, each side has different expectations, even though they’re not evident on the surface. They’re tacit. So everyone can seem to be in agreement, and when the software comes back it has no bugs and it seems to fit the specs, but it doesn’t work out from a business point of view. Everywhere along the line, small choices were made by people who thought they were following orders, but who really didn’t understand the subtleties of American consumer expectations.
Americans will ask questions when they’re not absolutely sure they understand. They even ask questions when they think their boss doesn’t understand. That just doesn’t happen in the rest of the world.
JA : Interesting. Does the difference in culture mean that offshore outsourcing is dangerous to do? How can the cultural differences be overcome?
MF: We think you need Americans imbedded in the offshore staff. They can bring in the tacit understanding the locals don’t have, whether it’s understanding American consumers or looking beyond what’s asked for to the point of a project and aiming for that.
One of the reasons we chose Prague as the site for our offshore facility is that Americans like the city and the Czech Republic. We’ve hired some talented Americans expats who have chosen to live there. The country is completely stable and pro-American and a nice place for our American clients to visit when it makes sense to meet with their offshore team. And though the time zone difference is inconvenient, it’s still practical to have regular conference calls, something we think is extremely important.
It’s one thing to have good project management practices and software. We do that. Other services do that. But rather than bringing some of the foreign nationals here to provide understanding back to the offshore team, we think you’re much better off having some Americans right there in the team. It’s worked very well for us.
By the way, I’ve been talking about general cultural differences, but there can be specific issues as well. We focus on insurance and financial services. Our people have been through many projects and understand the area very well. On the other hand, I would hesitate taking on a project in manufacturing, for instance. It takes a substantial effort to come up to speed on an industry, to understand its culture, and then be able to make thousands of small well-informed decisions while building an application.
JA: Thanks for the insight about the impact of cultural differences on offshore development. That’s not something most of us would normally think about.
MF: Come see our group in Prague sometime.
JA: Good thought!
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“If you choose a reliable offshore service, it’s unlikely to be the cause of a failed project.”
“There are real, significant cultural differences between Americans and virtually everyone else in the world and these differences can affect the success of software projects.”