Leveraging offshore resources, you can cut your product development process 50%, cut costs 75%, and get better software with less work…but only if you do it right. We explain how you get these benefits and how to do it right.
In today's rapidly evolving always-on business landscape, companies are constantly seeking ways to stay competitive and efficient. One such strategy that has gained significant traction is offshore staff augmentation. This practice involves hiring skilled professionals from around the globe to enhance your existing team. This can deliver flexibility, cost savings, faster development cycles, and access to hard-to-find expertise. It is particularly valuable for fields with employee shortages like software development. In this blog, we will delve into the intricacies of offshore staff augmentation, offering practical insights and real-world examples to help you understand how to win by doing it right!
Offshore staff augmentation is the practice of hiring professionals from other countries to work remotely for your company. There are two ways to augment your staff: (1) hire directly; (2) contract with an agency that provides offshore software experts.
Option 1: Hiring Directly: This approach reduces your costs by eliminating the cost of the agency. However, it significantly increases the management burden. It also risks going wrong if you don’t know the culture, or your initial hires are weak: as they say A-players attract and hire A-players, while B-players attract and hire C-players. You might also get the taxes and legal issues wrong and create a mess. Hiring directly has the same challenges of finding the right skillset, the lag time between making an offer and hiring, and many more negatives.
Option 2: Contracting with an Offshore Agency: While the quality of agencies and their people and processes can vary dramatically, they do provide a faster and easier process that significantly reduces execution risk. In fact, I started MPH International because the companies I was advising were not having the offshore success we were having for the reasons mentioned above.
Local Hire | Remote Hire | Offshore Agency | ||
---|---|---|---|---|
Leadership & Team Management | ||||
Goal Setting | YOU | YOU | SHARED |
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Performance Monitoring | YOU | YOU | SHARED |
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Conflict Resolution | YOU | YOU | THEM |
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Personal & Employee Well-Being | ||||
Personal Issues | YOU | YOU | THEM |
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Work-Life Balance | YOU | YOU | THEM |
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PTO Management | YOU | YOU | THEM |
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Human Resource & Administrative | ||||
Recruitment & Hiring | YOU | YOU | SHARED |
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Onboarding | YOU | YOU | THEM |
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Performance Reviews | YOU | YOU | SHARED |
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Expense Reporting | YOU | YOU | THEM |
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Training & Development | ||||
Personal Coaching | YOU | YOU | THEM |
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Education & Training | YOU | YOU | THEM |
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Career Development | YOU | YOU | THEM |
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Technical & Hardware Support | ||||
Hardware Issues | YOU | YOU | THEM |
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Resource Allocation | YOU | YOU | THEM |
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Office Space | YOU | YOU | THEM |
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Security Training & Processes | YOU | YOU | THEM |
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Operational & Project Management | ||||
Project Planning | YOU | YOU | SHARED |
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Task Delegation | YOU | YOU | THEM |
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Progress Tracking | YOU | YOU | THEM |
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Employee Recognition & Team Building | ||||
Hackathons & Hoolimpics | YOU | YOU | THEM |
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Team Meals | YOU | YOU | THEM |
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Year End Party | YOU | YOU | THEM |
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Individual & Team Awards | YOU | YOU | THEM |
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Community Support Projects | YOU | YOU | THEM |
One of the most significant advantages of offshore staff augmentation is cost savings. For example, let’s look at the all-in cost of a US-based employee with an annual salary of $150,000 per year:
Salary | $150,000 |
Employer Payroll Taxes | $12,975 |
Benefits (Health, Dental, 401K, etc.) | $52,500 |
Office Space | $24,000 |
Hardware | $2,000 |
Total Cost | $241,475 |
For this same amount, you can hire 4 top-flight software engineers in the Philippines, or 2 engineers in either Central/South America or Eastern Europe.
If you employ a local team for 8 hours a day and a remote team for 8 hours a day, you can double your product pipeline speed. Even if you only outsource complementary functions like QA, your are increasing development speed, because every morning the development team has their code from the day before QA’ed, the bugs are entered into the tracking system and ready to be remediated.
While many offshore agencies focus on low-level functions like manual testing, some agencies—including MPH International—focus on providing hard-to-find skills that demand a premium in local markets. For example, MPH International focuses on cloud-native (Kubernetes) micro-services development that can run $400K+ per year in Silicon Valley. We also lead in exploiting technologies like Golang, Scala, PWAs, React Native, Web3, Blockchain, Secure Contracts, sophisticated RBAC, and more. This makes it easy for companies to start with 1-2 hard-to-find positions, but they invariably expand from there.
Employee longevity is critical to the long-term growth of your company because they develop domain expertise and code expertise over time. Too many US and European hires put in their 12-18 months and then jump to a higher-paying big name company with stock options. Finding an offshore agency with very low employee turnover is key.
Selecting an offshore agency is like selecting a partner or a spouse. Imagine getting reference checks on your future spouse from old boyfriends, friends, enemies, co-workers, etc. Your future spouse might quickly become an ex-girlfriend if you did that, but it would be useful info. When selecting an offshore agency, reference checks are important.
At MPH International, we have found that a culture focused on continuous learning, personal growth and product ownership, is far more important than hiring for a number of years of experience. We like to develop talent internally and infuse them with a winning culture, instead of hiring experienced outsiders. The few times we’ve brought in senior individuals with say 10 years of experience (often one year of experience repeated 10-times), we’ve often found that a 2-3 year homegrown talent is more skilled and productive. This underscores the importance of not falling into the trap of equating years of experience with capability. A culture that promotes learning, personal growth, and an attitude of product ownership often yields far more effective and innovative results.
I hear this a lot. I can tell you, as someone who runs an offshore agency, we do everything possible to make them feel just like your employees. We recommend to clients that they extend their infrastructure—such as email, chat, team cloud storage, development tools, etc.—to the offshore team. You can also pick and choose which functions in the table above you want to do. Some clients fly team leaders to meet the in-house team members. It’s totally up to you. We even invite clients to our year-end party. Because of our low employee turnover, our teams typically become the stable foundation of the development team bringing new local hires up to speed. We often joke that were more “employee-like” than the employees.
Having local support skilled in HR is crucial to the success of offshore staff augmentation. Local HR professionals get to know the individuals on your team as people, understanding their personal issues and aspirations. They guide them in a way that maximizes productivity while keeping them happy. This approach results in much lower employee turnover, which is critical for productivity because long-term employees develop domain and code expertise.
Hiring local employees can take a long time with headhunters, finding the right candidates, extending offers, waiting for the notification period from their current job. Offshore agencies typically have people on the bench and a constant flow of candidates, so the hiring process can be very fast. Then you have the termination process, which can require putting someone on a performance improvement plan or laying them off and paying a several months of severance pay. Offshore agencies typically only require a 30-day advance notice. These may seem like small things, but they significantly reduce friction and improve the ability to scale up and down.
Be sure to inform the team how you like to communicate and how you want the team to communicate. Some clients want to be informed only when there are issues or accomplishments. Others like to get into the communication flow of the team. One time a client said, the team doesn’t chat among themselves asking for advice, insight, feedback. The team was doing that on a separate chat app because they thought the client would be annoyed by the banter. When you set up a team, be sure to align communication expectations with the team.
Offshore staff augmentation offers numerous advantages including cost savings, accelerated project timelines, ultra-low turnover, and access to hard-to-find technical skills. By understanding its benefits and implementing it effectively, companies can stay competitive and drive rapid product innovation. If you're looking to enhance your team and drive business growth, consider exploring offshore staffing solutions with MPH International.
We invite you to share your experiences and questions about offshore staff augmentation. For expert offshore staffing services in UI/UX design, programming, QA, DevOps, project management, and product management, contact MPH International today. Let us help you build the team you need to succeed.
Mike Hogan
September 1, 2024