Top 10 Mistakes Made by Tech Companies When Offshoring

IT offshoring has become an effective tool to cut down on labor costs and still attain good quality. Many small businesses consider an offshore team when it comes to taking the business to the next level by increasing business efficiency.

Many tech companies exploit this model to scale up by opening their software development centers in developing countries, however, not everyone can do it ass effectively as needed and as a result a series of challenges arise.

If you are considering offshoring too, make sure to avoid the most common mistakes by tech companies. Here are 10 common mistakes IT companies make when going offshore.

1- Opting for Outsourcing

Offshoring and outsourcing are two different notions that are often mixed up. When a company looks for offshoring opportunities, it usually ends up with outsourcing. However, this is a road to nowhere since outsourcing doesn’t work for all businesses.

For example, startups are more vulnerable due to their unique product. There’s always the risk of Intellectual Property leakage, which can be prevented by offshoring. Having your own offshore development center abroad will pay off one day since you invest in your people who work under your control and brand, with no third-party providers having access to your software development.

Still, some initial support is requisite, so consider partnering up with a company who would help with operational management.

2- No Offshoring Strategy

Not only is it necessary to have a certain offshore strategy, but also to accord it with the company’s vision and corporate strategy. Apart from budget and resource calculations, an offshoring strategy includes growth planning, short and long-term goals, and a so-called plan B (to be on the safe side).

3- No clear roles and responsibilities

Having an offshore team of software developers requires proper management. Although companies appoint team leads to supervise others, their primary competence is coding, and here comes all the mess. Team leads are often frustrated with the scope of work, thus cannot properly manage other processes like payroll, accounting, or recruiting.

The best way out is to hire a regional manager or get operational management support from local providers (which is a common practice in Ukraine).

4- Online Communities of Developers

As a rule, companies rely on local websites to get info about the market salaries in a certain country. However, very often they encounter fake salary data without realizing this fact. Consequently, tech companies risk overpaying their new offshore development team. Therefore, only use credible sources and partner advice to explore the local labor market.

5- Regular Deadline

Many processes like procurement, redecoration, and furnishing of your new development office are time-consuming, so set a flexible deadline for setting up your offshore software development center (to avoid unpredictable failures).

6- No Employer Branding

Odds are your company is new to the offshoring country, but you came here for qualified software developers. To attract the best talent, it’s vital to develop a good “offshore” employer brand.

7- No Local Partner

Needless to say that local support is crucial in establishing an ODC abroad. For instance, with Alcor you can feel well assured of everything necessary for a comfortable offshore operation. Being a proven IT service provider, Alcor offers recruiting, legal, accounting, payroll and other services for foreign tech companies in Ukraine.

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8- No Visibility in Place

When working with outsourcers and outstaffers, you could become distant from mentoring “your” team. An offshore development center enables you to keep a close eye on the team and govern all work processes.

9- Renting a Co-working Space

A co-working office undermines your corporate identity. Landlords don’t allow the residents to display their brands, and any corporate policy should be discussed first. Co-working also affects the team spirit and dedication of your developers since de jure they are not your employees.

10- No Operational Management

Even if someone does accounting and payroll for your offshore team, there are many other important things to consider: office maintenance, money transferring, finance management, or legal support, etc. It’s better to reach out to a local service provider that can offer “all-in-one” solutions for setting up offshore.

The Bottom Line

Generally, to avoid the above-mentioned mistakes, one needs to apply a holistic approach. Start from finding a trusted local partner to ensure excellent results. Develop your offshore strategy, including employer branding and opportunities for scaling up, and deal with those country-specific realities; yet overall an Offshore Development Center has never been so attractive!