Application development is expensive. Depending on the scale and scope of your initiative, a development project can easily run into the six-digit range, if not higher.

Business leaders are constantly asked to cut budgets and tighten their belts. The sticker shock of an outsourced application development project often leads companies to choose the lowest bidder to complete their project. While a local developer can easily cost $125 an hour, offshore firms offer rates as low as $30 an hour. When cutting costs is a top priority, it is easy to understand the allure of hiring an offshore development firm.

But before you sign on with an offshore firm, you should consider all of the short and long-term risks associated with offshore app development. In addition to the hourly rate of offshore developers, there are several other factors that will contribute to the total project budget.

There are also hidden long-term costs that are harder to assign a dollar value but will definitely have a lasting impact on your business.

Additional Costs

After more than a decade of US companies using offshore IT firms, it is understood that there are additional costs associated with using offshore developers.

• Conflicting Business Hours
  It can be difficult to schedule meetings with people who work on the other side of the globe. Your local team will have to schedule conference calls early in the morning or late at night. Odd work hours are a strain on your employees, and the extra hours can lead to overtime pay at the least and often lead to additional recruitment costs to replace your employees who leave due to this additional strain.
• Communication Barriers
  Even when you are in the same room with a person who speaks the same language and comes from the same cultural background, it can be difficult to clearly articulate the results you are looking for with your application project. There are a lot of nuances when it comes to body language, tone, and facial expressions. Now imagine only ever communicating with someone over the phone or via email.
  Language barriers can directly impact the code itself. For developers with little or no English skills, writing self-documenting code is impossible. The code comments will also be limited or hard to understand. The illegible code will hinder future improvements or changes to the product.
• Different Holidays and Vacation Schedules
  Different cultures celebrate different major holidays and take vacations at different times of the year. This can cause project delays, increasing your costs.
• More People ≠ Better Results
  Putting more developers on a project does not guarantee a better application.
• Travel Costs
  If you have the resources, you can and should travel to the offices of your offshore firm. This allows you to check the working conditions, infrastructure, technology, and security systems firsthand.

Long-Term Hidden Costs of Offshoring

While researching offshore developers, information about additional costs (like those mentioned previously) are easy to find. But what about the hidden costs of offshoring? These may not be easy to assign a dollar value, but they definitely have a long-term impact on your business.

• Lost Knowledge
  Developers, like all employees, learn from experience. Outsourcing development is a valuable tool for any company, but there are benefits to using a local firm. When you offshore application development, your team misses out on key collaborations and in-person meetings. They will not get to work side-by-side with the consultants creating the application, which means they are missing out on developing the application architecture, learning the latest in best practices, and how to quickly resolve application issues.
• Intellectual Property
  If your offshore partner does not have the latest in security systems, you could be putting your company at risk for untold dollar amounts.
• Underestimating Non-Development Impacts
  Using a lower-cost offshore development company doesn’t lower the costs for your managers, designers, operations, product team, or the developers responsible for re-integrating the outsourced code into your primary code base. In fact, offshoring almost always increases these overhead costs, sometimes significantly.
• Low Employee Morale
  Replacing or augmenting your internal staff with offshore developers can lead to low employee morale. Frustrations with additional workloads, odd work hours, project delays, communication barriers, and fears about their position being offshored all contribute to low morale. Low morale reduces productivity, negatively impacts project quality, and increases turnover.
• Longer Project Duration
  For all of the reasons mentioned above, offshore projects generally take longer to complete. Longer projects cut into your savings.

Want to Learn More About the Hidden Costs of Offshoring?

ILM Professional Services has written an in-depth white paper on the hidden costs of offshoring. The paper outlines surprising ways you save money in the long-term by outsourcing development with local developers.