Offshore Development Center Challenges

The Global Outsourcing Survey, 2020, conducted by Deloitte, shows the inclination of enterprises from embracing disruptive technologies to return to basics: shoring up value and driving down costs, with a renewed focus on risk management.

With cost reduction being the top priority amongst companies, offshore development center (ODC) has emerged as a go-to solution for businesses globally.

Not only does it help bring down the project cost by as low as 60%, but it also aids in improving project quality by hiring highly skilled resources across the world.

As more and more enterprises are inching towards offshore development centers, they are often facing these challenges.

Offshore Development Center Challenges, and how to mitigate them?

Often, businesses only consider the hourly rate of talent while comparing the development cost. They fail to account for geopolitical issues, skill availability, local labor competition, legal and intellectual property-related issues, wage inflation, attrition, or currency fluctuation, which directly or indirectly affect the project cost. Besides, they also face management, communication, culture, legal compliance, and cybersecurity challenges.

So, without any ado, let’s find out these challenges and how to mitigate them.

1) Productivity and Performance Challenges

Businesses frequently face challenges of mismatched expectation vs. reality where the performance of the hired offshore team and the quality of output is below average. This usually occurs when the skillsets of the hired resources don’t tick the boxes of the client’s requirements.

There are performance issues in work efficiency and effectiveness, causing delays in project deliveries. This results in increased time-to-market for new products and delays in the business road map.

Solution

This challenge can be mitigated by the below steps:

• Transparency in Hiring– Transparent hiring is the first and most crucial step while selecting an offshore team. So, it’s recommended to choose an offshore partner that is proactively involved in the end-to-end hiring process. Right from screening, shortlisting, interviewing to selecting resources, they take your inputs and preference into consideration at every step of the way.
  Selecting an offshore partner like this would ensure that you hire the right resources that deliver quality output meeting your expectations.

• Customer Support and Assistance– The responsibility of the offshore partner doesn’t end just by providing transparent hiring; they must set up customer support to assist you in proper project deployment.

• Regular Feedback – Choose a partner that creates a process framework that takes regular feedback (weekly/monthly) on output, resources, and ongoing operations. Also, it takes corrective actions to fix issues in case of a mismatch between expectation and delivery.

2) Management Challenges

When working with an offshore developing company, the probability of coming across management challenges arises in the following scenarios:

• Missing customer-centric attitude, where the partner is keener on the financial aspect of the collaboration than providing you with a proper solution/team on your projects.

• Lack of systems, processes, framework, and escalation matrix

• No resource backup for the hired team

Solution

Businesses can address management challenges by doing a thorough vetting of the offshore partner, where it’s crucial to evaluate the following:

• Their business approach and attitude towards their customers. What kind of solutions and assistance (technical or non-technical) are they willing to provide on your project?

• Evaluate their systems, work processes, frameworks, and escalation matrix. Access their operational hierarchy and if any escalation is raised, how soon would it be resolved relating to the hired team, quality of output, or new skill set requirement?

• In today’s volatile time, having a resource backup has become necessary to ensure the project’s uninterrupted development. therefore, choose a partner who can provide quick resource replacement and on-demand upscaling or downscaling of the hired team.

3) Communication Challenges

Working with an offshore development center clearly means managing a remote team overseas. Countries like China, Brazil, Vietnam, Taiwan, and Egypt have emerged as a hotbed for offshoring projects over the past decade; communication still remains a significant challenge while working with an offshore team.

Precisely, communication challenges arise from two aspects:

• Lack of logical and analytical skills– In this scenario, though the team is competent in speaking and understanding the preferred language of communication (usually English), but struggles to understand the briefs due to a lack of required knowledge and skill sets.

Moreover, the team lacks the analytical aptitude to probe the requirement and deliver quality products.

• Lack of language proficiency- In this case, though the team has analytical competency, they struggle due to low English proficiency. English is still not taught as a first or second language in many nations. Lack of language proficiency results in communication gaps between the company and the offshore team.

Therefore, these gaps often result in miscommunication, longer time in debriefing, and lastly delayed results.

Solution

Businesses can address communication challenges by setting up a rigorous selection process. An efficient selection process can go a long way in mitigating the first challenge. A robust selection process would ensure proper screening, shortlisting, and selection of teams based on their skillset and analytical aptitude. The selection process includes:

1. Resume vetting

2. Analytical aptitude examination

3. Candidate selection interviews in English

Besides the selection process, it is always better to choose an offshore development partner from English proficient countries like India. India has the second-largest English-speaking population and ranks #48 in language proficiency worldwide. So, you get access to a proficient English-speaking team from the executive to management level.

4) Cultural Barriers

Cultural differences are among the most common and evident challenges faced with an offshore team. When working with a diverse group, one is bound to experience language barriers, cultural gaps, differences in beliefs, and working styles.

Sometimes all these cultural differences can be while working with offshore teams within the same nation. These differences can lead to friction between in-house and offshore teams, affecting their ability to collaborate and deliver quality output.

Solution

Understanding the team’s cultural diversity, beliefs, and emotional quotient can go a long way in mitigating cultural barriers while working with a diverse team. It is essential to do your homework and check the cultural compatibility of the offshore development companies at the corporate level, process level, and day-to-day interaction level before hiring them as your offshore development partner.

Here are five ways to ensure cultural compatibility between you and your offshore partner.

1. Be aware of the professional etiquettes of the region you plan to set up your offshore development center at.

2. Maintain a clear communication channel to encourage transparency and ensure the goals and objectives are conveyed to the offshore partner seamlessly.

3. The hired team must undergo proper training and mentoring to avoid confusion, miscommunication, and discord between in-house and offshore teams.

4. Create a constructive feedback mechanism that allows teams to communicate and share their inputs openly.

5. Be respectful towards their culture, tradition, and beliefs, and avoid blindly replicating your business model to the offshore development center.

5) Legal Challenges

Businesses get influenced by politics, policies, laws, and international relations. Factors like taxes, labor law, FDI regulations, import and export policies, wage inflation, attrition, and legal landscape are critical and directly and indirectly impact the success of your Offshore Development Center in a foreign country.

Solution

It is essential to do an in-depth analysis of a country’s legal landscape, foreign business policies, FDI regulation, and geopolitical issues before you decide to set up an Offshore Development Center. India is one such nation that has one of the most favorable investment environments for the IT and IT’s sector and invests heavily in creating the right talent pool to invite foreign investment in these sectors.

6) IP Protection and Data Security Risk

IP Protection and Data Security are two major concerns businesses face while offshoring their IT projects. Let us understand the difference between IP Protection and Data Security.

• Data Security

This refers to data safety against an outside threat or malware. It is an intersection of three principles: confidentiality, integrity, and availability (CIA). Failure in any one of the components leads to data vulnerability resulting in a breach of information, unauthorized access, leakage, or deletion of critical data due to poor policy, risk management, or immature security practice.

• IP Protection

It is defined as protecting sensitive information from inside threats and leakages. Sensitive information like trade secrets, intellectual property (IPs), or financial and operational data that, if leaked, can adversely impact the client’s business.

When working with an offshore partner, businesses feel constant pressure to keep information secure while working remotely.

Solution

One can mitigate the challenges of Data security and IP protection by doing a thorough risk assessment and taking corrective actions before starting the offshore development center. The corrective action includes:

• Building enterprise-grade network security into the infrastructure of the offshore software development center.

• Signing detailed NDAs between the hiring company and offshore partner, hiring company and offshore team, and offshore partner and offshore team to ensure data sanctity.

• Conducting regular security audits for infrastructure, servers.

• Create a local database of the ongoing project. This would allow you to create backups for the ongoing work at all times.

• Using hardened systems for mission-critical projects.

Originally Posted at Your Team In India.