The Failure of Offshoring

A couple of years ago, I engaged in my first offshore experience, when we hooked up with a small company out of Argentina to develop and deliver some additions to a website, including the addition of a simple CMS. It had been a first crack at what would end up becoming a significant change in my career.
At the time, the experience had left a rather bad taste in my mouth, like realising that the glass of milk you’re drinking is a little off. It wasn’t that the experience was horrible, just that it could have been a lot better.  
My experiences continued with other groups, mostly in Central and South America, and also included an arm of one of our regular vendors, who shifted operations from the United States to India. And I think it might have been the point at which I decided that if the opportunity arose, I really needed to find out what offshoring was like, first-hand.
Funny how life works, eh?
So here I am, about a year and a half after making my decision, sitting in a converted warehouse in the country of Costa Rica, operating as the offshore agency providing the services. I’m on the other end of the line now, and I’m developing a whole new appreciation for the difficulties of running and offshore operation.  
Yes, I said “developing”. Just because I’ve been doing this job for over nine months doesn’t mean I’ve got all the answers. Far from it, really. What I’ve got is an appreciation, which is the beginning of understanding. Only when you understand can you really act on a problem. Until then, you spend a lot of time analysing, learning, questioning, fretting, stressing, and working your ass off.  
In my current view (remember, I’m merely in appreciation, not full understanding), there are two fundamental problems with starting up an offshore company:

  1. Finding the right people to operate in a start-up environment
  2. Communicating the urgency that is inherent to dealing with North American clients

Allow me to detail both of these points…
As with any startup, you always need to find people who are dedicated to the realities of all startup companies: They start from nothing, they change constantly, the skillsets of those in the company (at all levels) are unprepared for the dynamics of working together, and the only way to deliver finished projects is to invest heavily in time.  
The tricky part is finding those people. Even in North America, where such a thing is far more commonplace, you need to find people who wish to create, to give of themselves (and ask for little — often nothing), who can see (or claim to see) the goal that everyone is striving for. There is no such thing as “not my job” or “I don’t know how” — it’s expected that everyone throws in what they can, and learns what they need.  
Here, it’s a little harder. Those people exist, and I’ve been lucky to find a few of them. But some of the familiar North American ethic is missing. As a result, we need to give more direction than we’re used to. We need more time to follow up with people, explaining intention and expectation. Projects need more oversight. It’s a change for everyone.  
Even harder, though, is communicating urgency. North Americans have near-absolute views on deadlines. They want something by a specific date, or there’ll be hell to pay. There’s no middle ground, no grace period. Miss your deadline and you’ll pay a penalty, and its usually monetary (or ends up being monetary). And that doesn’t account for all the mental anguish that goes along with angry clients — which, believe me, accounts for a significant part of the reason no-one wants to miss deadlines.  
As we discovered not long after our arrival here in June, the concept of a North American deadline does not translate one-for-one. While there are a few who understand, North Americans tend to refer to the cultural understanding as “mañana time”. When you have that kind of a gap in understanding, you’ll have a gap in delivery.  
Both of these issues lead into a pushing match, and ultimately you’ll find two things happen: Management time increases, and quality drops.  
Now before everyone goes off on me, saying I’m calling out generalisms (I am) and not painting an accurate picture (I’m not), allow me to state something else: This is not inherent only to Costa Rica. This is a problem I’ve seen with every offshore company I’ve worked with.  
In fact, these are only the two most common problems. Every company I’ve worked with that has offshore models has problems like these. But these are far from the only problems. I’ve seen a couple of other problems creep into the mix as well:  

  • Development ends up going “rogue” and refuses to follow specification (this is often due to a “we know better” mentality)
  • Significant increases in paperwork owing to a cultural need for process
  • Inability to synchronise with vendors due to large differences in timezones

All of these lead to the inherent failure of offshoring: It’s just not that simple.  
In many ways, I’m actually glad that I’m seeing problems first-hand. It’s actually reassuring — not that we’re doing things right or that we’re not alone, it’s that I’m actually seeing the problems. It would be far worse to have the problem and not see it.    
Okay, so what do we do? Status quo is not acceptable, as nothing will change. Things will remain in bad shape and we’ll always be ice-skating uphill.  Some of my Critical Mass co-workers who worked with offshore companies learned the hard way: they spent more time managing the projects, even holding conference calls at 1:00AM to ensure that things were going as expected. The wrote volumes of specifications and schedules, most of which didn’t seem to actually deliver what they needed. All of us reviewed incremental deliveries to ensure code quality and understanding.  
Of course, that means more work. Which is exactly what North American companies want to avoid. This is — technically — why they turned to offshores in the first place: so the companies could work less.  
It’s an impossibility. You can’t work less by working more, or vice versa. At least, not over the short-term. And certainly not for complex pieces of work, if you haven’t already established considerable amounts of process, training, and quality assurance.  Now that I’ve worked on the other side of the fence, I see where the failure has come most painfully: you can’t get instant soup in a place where soups are always made by hand.
The answer? None yet, none complete, anyway. Remember, I’m still working on appreciation. Some of the answer we already know — longer-term projects with a defined staff, ensuring continuity and understanding. Ensure that your leads are not North Americans, but locals who comprehend the complexities and know the pressures of a deadline. But even those points are — again — generalised.  
If I do figure it out, though, I’ll be sure to post it here. Right along with the link to the page in where you can buy the book I’ll write about it.
Update! [15 April 2009]
My friend Ivan Ramirez and I have been discussing working in Costa Rica and building teams almost since I got to Costa Rica back in June 2008. He’s just put up a very interesting post on his blog on Latin American offshoring. If you found any of this interesting, I definitely encourage you to check out his post, too — he’s got way more experience with the Latin American labour market than I do.

8 thoughts on “The Failure of Offshoring”

  1. Hey Geoff
    I think a lot depends on the set up and taking advantage of the differences. I’m not that different from you wrt running an ‘offshore operation’. I do my QA work in Calgary for a development company in London UK. They are seven hours ahead of me. Occasionally I have to be at work at 2 am Calgary time for a 9 am London time sprint meeting, but that’s only once or twice a month. Otherwise, we use the 7 hours to our advantage. You see, I regularly start at 6 am (not that hard to do since the commute is just down the stairs) which is 1 pm London time, so we get about 4 hours of overlap where we can discuss what’s going on or any issues that may arise. Then they go home and I have another 4 hours where I can cut releases and hammer the QA servers without any interruption. When the development team gets in the next morning, they have all of my results of the testing the night before and can continue their development in the morning without me interrupting them. We’ve been doing this now for 2 years and we have at least another years worth of work ahead of us.
    Of course, my situation is the reverse of what you’ve experienced in the past with ‘offshore’. I’m the one with over 2 years prior experience in the project and the development team were the ‘new kids on the block’. So the training wasn’t with the offshore group. I would think this would be similar though to your current situation where you are the experienced one on the offshore end, probably even more so than your team at home. Of course that doesn’t address the work ethic issues that come with different cultures, but at least CM has someone at arm’s length who understands what needs to be done and is willing to work towards achieving those goals.
    I look forward to the book coming out 🙂

  2. Hey Jeff,
    Your thoughts mirror much of my experiences in working with international teams and I thought sharing my experiences would provide a different viewpoint. I now work mainly for American firms in various engineering and economics roles in both the US and Canada with exposure to teams and individuals from Asia, South America, UK, and the Middle-Eastern Countries. The overwhelming feedback from management is mostly identical to yours, but with an interesting difference: Canadians are not diligent when it comes to scope and development schedules. It is interesting to compare your experience from the perspective of Canadian management with your US counterparts, and working outside of management I believe I have a unique perspective on these issues. My experience has been all cultures have a different process of triage and will communicate a sense of urgency in completely different manners. The trick (as always) is the people side of the equation, that-is to understand the differences in cultures and communication and to speak the language “¦ just my two cents but I am interested to hear more about how you tackle these issues.

  3. Hey Tom,
    I’d say you’re one of the lucky few — an offshore of 1. That means you have only yourself to keep up with. Not to mention the fact that North Americans operating as offshores tend to perform far better, at least from my experience. For example, if you call Adobe Support from Costa Rica, you don’t get India — you get San Jose, CA. And I gotta tell ya — support from the source is always soooooo good.

  4. Hey James,
    Now that’s an interesting issue — Canucks not diligent with scope and schedule. (I chuckle, and you know damn well why.) I wonder what there is that could be done about that?
    And I agree with you 100% — it’s always the people who create the variables in the equation. That’ll always be the toughest part of any offshore.

  5. Offshoring software development to latinamerica, teaching poledancing to nuns, chess tournaments in crackhouses…

  6. Nick,
    Not sure exactly what you’re getting at with your comment. If you’re referring to working with Latin American companies, I would offer that you have a decidedly negative view. Offshoring in general is a difficult prospect, regardless of where it’s conducted.

  7. Hello to all.
    I’ve been working as a manager down in CR for about a year or so since the company shipped me here.
    I came with the notion that my company was making a big mistake by shifting our operations here.
    Personally, I’ve been very surprised of the capabilities of the people in this country and how good their education is.
    Of course it’s tough and it’s even tougher if you don’t have the right people in your team. But then again, I believe it’s a shared effort and sometimes North Americans are the ones to blame.
    Shit flows downhill.

  8. Hey Peter,
    You’ve nailed some of the problem — North America doesn’t realise that’s it’s like anywhere else. They just think it’s like North America. As for the rest of it, definitely you need the right people. But sometimes you’ll get the wrong people and still need to work with them.

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