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:

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.