The eyes of the developer

(Originally posted 22 April 2009).

Offshore development resources are great. They are invariably well educated, diligent and critically in these trying times – effectively priced. Even now though, a key reservation organisations have around using them is - visibility. They want to see them and talk to them; their requirements are so exacting that only by looking into the eyes of the developer can they be understood. Bringing offshore resources onshore for the initial stages of a project (and so that they can return offshore for knowledge) is a proven way of mitigating this concern.

Lead times involved in procuring offshore resources onshore (often three months) can be ineffective for many projects; especially ones founded on a business case of cost reduction/avoidance. This can be expedited to less than a month but generally only if the resources are undertaking “training” and not developing the solution. Developing the solution though is where they will truly learn and become vested in the success of the project. A seemingly attractive alternative for large organisations (and for the consultancies that service them) is to establish an onshore pool of offshore resources to service future onshore projects. Is this a cost effective solution though?

Five offshore resources brought onshore for three months will cost around $88K (accommodation/fly-backs/insurance/travel/visas etc.). Assuming they can be cross-charged (or sold) at say $877/day for 80% of the time they are onshore; this makes $210K in revenue.

This appears good (140% ROI) except for the fact that once this process is started, the resources have to be retained i.e. taken out of (or reserved from) the offshore pool until they arrive. This can easily take three months. Assuming a cost of $146/day/resource, this totals $44K, taking the endeavour down to $79K profit (60% ROI). This may be able to be offset by them doing other (short-term) work in the interim but it certainly should not be counted upon. Once resources are onshore, organisations should also account for increased team lead/managerial support for them (perhaps one day/week across all of them – totalling around $22K in opportunity cost), taking the endeavour down to around $57K profit (38% ROI).

This should also be considered a high risk endeavour due to the fact that resources are being recruited for a pool rather than a specific project (project may not happen) and manifest cultural differences. Organisations are therefore already borderline as to whether this is a good idea financially or not. The best approach has to be simply to keep a close eye on “hot” skills and ensure that offshore pool resources in these areas already have visas.