By Shaun Polovin
Outsourcing Vs. Offshoring
Some people would call what we do ‘outsourcing’, but that couldn’t be further from the truth. Outsourcing refers to the process of allocating a portion of your business operations to an external entity or person. Most outsourcing organisations – for the sake of good business sense known to them – have their own agenda and probably a range of clients of which you are just one.
When an organisation decides to outsource a portion of their business, they understand that they are placing their business reputation in the hands of their outsource partner and rely on that external entity to have the correct processes, team and ability to deliver what you have promised to your client.
For the right organisations it’s a sure shortcut path to reducing operational costs but depending on the business’s transformation goals and its industry, it may not provide the long-term solution for growth. Relying on an independent company to supply you with core services is always a risk.
In our line of work, the questions clients ask about outsourcing their development work is what if they go under tomorrow? there goes the development arm of your business. I’ll admit, we tried it a few times ourselves before we went down the permanent route. We found an “ISO accredited” company in India and tried to have a small test project developed. What came back was worthy only of our big green garbage bin, but that’s not to say all outsourcing development companies are rubbish. Decision makers just need to take the care and due-diligence in selecting a reputable partner to hand over a critical piece of their business, and this can take a lot of work.
When you offshore, you are setting up a brand business operation, however it’s in another country where a dollar generally goes a lot further. Our team in Sri Lanka has been hand picked and interviewed by both our local management team and our Sydney management team. Every team member has gone through both internal and most have also been offered external training and certification. They are all valued employees and members of the team and are greatly appreciated for their contribution at both a team and company level.
Why Offshoring your web development company makes sense for you and your clients
When we explain to clients the reason we have built our company in the above manner, our clients often nod their heads in agreement. It makes complete business sense if executed correctly and I’ll tell you why.
In Australia, the high living costs come with equally high salary prices. In our industry you are also faced with demand for quality digital staff considerably outstripping supply. Therefore, when you consider the cost of not only employing your team but also recruitment fees, training, taxes (e.g. Payroll) it comes as no surprise that the cost of delivering a large ecommerce website for clients, when all resources are locally based, would be astronomical. Achieving efficiencies in a service based, labour intensive business is never easy. It’s almost impossible to apply Henry Ford style production efficiencies, however it is possible to reduce your operating costs through effective offshoring.
The other major benefit from running an offshore office is also the retention of IP. Consider the following scenario: After months of searching and paying a hefty sum to a recruitment agency you find a great web developer to work on a range of new client wins.
Nine months later, after investing heavily in this new staff member’s training so they have a deep understanding of a number of key projects, another firm swoops in and poaches your star developer. The poaching firm is prepared to pay well above market rates out of desperation and have made an offer that can’t be refused. There goes your investment and you’re back to square one – hunting for a replacement in a very competitive market. Compare that to our Sri Lankan office where we have achieved well over a 90% retention rate over the course of 5 years. Now that won’t be the case in every offshore office (as we have managed to achieve this through our continuous efforts to build the best culture for our team) but you’re far less likely to face the same dilemma.
Having gone through the trials and tribulations, I have put together a few key points that I think would serve any business looking to offshore a portion of their business operations well. If done correctly you will reap the reward of delivering a product or service at the same level or even better than your local competitors but at a considerably lower cost – a win for you and a win for your clients. In our situation we’ve offshored our development team, but most of the same principle apply to any other business model – be it technical support, customer service or manufacturing.
1. Invest in your infrastructure
It may be far cheaper to set up an overseas operations in the Philippines, India or Sri Lanka but that’s no excuse to stint on the infrastructure. Ensure you have the best quality dedicated Internet lines (which are considerably more than what you pay locally), comms equipment and PC’s.
2. Invest in your team and training
There is an amazing talent pool of staff ready to commit to your cause. Ensure you hire correctly and offer both internal and external training programs. You will be repaid in spades. Provide them with a good orientation program to the ensure a successful on-boarding journey and retention. Socialise them into your brand with your corporate values, events calendar, reward and recognition schemes, company policies and processes, career progression maps and other employee engagement programs
3. Run an Agile development methodology
Running your project in Agile ensures that there is far more frequent reviews of the project progress. I won’t go into the details of how Agile works but for those who are not familiar with it there are plently of articles on the topic and I recommend you have a read of it if you’re in the technology or software development space.
4. Transparency across the organisation
It’s very easy to forget to relay company news and messages with your team overseas. It’s important that they get to see where the company is heading and what opportunities you’re working on. Don’t forget to do this. Yammer is a great social networking tool for companies to use that can help bring any newsworthy items to broadcast across multiple offices.
5. Build a Trustworthy leadership and Management team
Here lies one of the real factors to your success in setting up an offshore office. Unless you or one of your partners is prepared to move overseas to run it, you will need to find a trustworthy team to be your representitive over there. Make sure you spend the time finding the right people as this could make or break you. We have been very lucky in this area as our management team comprises of our longest serving employees and a referal from one of our Sydney team members who had originated from Sri Lanka.
The Fruits of Our Labour
What we set out to achieve those years ago was better cost efficiency with hopefully the same quality of output. What we got in the end was so much more:
- An engaged, dedicated, hard working and highly intelligent team.
- A family oriented team comprising of the friendliest people you are likely to meet.
- A scalable business model capable of catering to our growing clients needs.
- Retention rates that most Australian businesses could only dream of.
- A deep talent pool of well educated and experienced candidates for further expansion
- and last but not least – a great excuse to frequent an amazing country in a beautiful part of the world!
So the next time you think about jumping on Odesk or Freelancer to find that silver bullet, stop, reconsider and think about your long-term strategy.
About the author
Shaun Polovin is one of four founding directors at Sydney’s award winning ecommerce and digital marketing agency Netstarter. Shaun has worked with B2B and B2C brands such as (Shaun to fill in the blanks). He’s passionate about and specialises in digital marketing strategies, creative web design and digital innovation that engages audiences; business and digital commercial strategies that lead to profitable conversion outcomes. Shaun lives in Sydney, enjoys travelling, the odd spot of surfing and triathlon training.