It seems every day I get a call from a businessman about a disaster he had just experienced with offshore development work. Issues with communication, budget overruns, not getting what he wants, not delivering on promises, etc. After I sympathize, and before I clean up the other vendor's mess, I usually explain how we got in this situation and how to avoid it again.
Taking the lowest bid can be a tempting, low-hanging fruit. You have a budget after all, and it's probably your most important consideration when shopping for a vendor. Now I'm not going to suggest that cost shouldn't be playing a huge factor in your decision making process, but you should be taking other things into consideration.
For one, you get what you pay for. There is a huge difference in the quality of development that comes out of skilled and trained engineers here in the US, versus overseas. Less stringent requirements for education, recruitment, training, and quality control permits off-shore vendors to pay lower salaries and charge less. That lower quality is reflected in the delivered product.
It you are getting a lower quality product, then that means you will have more issues with it. It might be buggy, it might underperform, or might not do what you want entirely. Each of those factors increase your long-term costs. For example, those bugs will need to be repeatedly revisited by your engineers for correction. If the application is underperforming, it could be eating up server clockcycles and raising hosting costs. If it doesn't do what you need, then your staff is working extra hard to get their work done. Most importantly though, your consumers are going to notice the quality of your product and evaluate your company based on its image.
Every good businessman knows the importance of a cost-benefit analysis. Before you conduct your next project off-shore, make a list of all the pros and cons. Start with the pros of working with a US team: Reliable, Trustworthy, Available, Responsive, Efficient, Competent, Articulate, and Detail-Oriented. Now compare those pros against the cons list for offshore teams. Does the price still stack up?
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