Offshore software development is a real balancing act. With any IT project, you have to juggle constantly changing requirements, shrinking budgets, emerging technologies, employee turnover, and executive support. Add an 8 hour time difference, cultural barriers, and communication problems to the mix and you have a real recipe for disaster.

Whether you're working in PHP, .NET, or Java, if you're outsourcing software development, you'll quickly realize that offshore software development is about more than cheap prices. Good programmers are easy to find but finding a reliable business partner isn't. Make sure you're getting your money's worth. Look for reliability, experience, intelligence, expertise, committment, process, maturity, principles, honesty, responsiveness, trust, and vision.

How does your offshore partner rank?

Outsourcing isn't for everyone. You can't send work overseas and expect to get a quality product without investing a lot of time into it. There are a few steps to outsourcing success: 1) selecting the right vendor 2) Getting executive support  and involvement 3) developing specs 4) having a long-term mentality 5) gettting them up to speed on your industry 6) establishing clear communication guidelines 7) having a good QA plan in place.

Choosing the Right Outsourcing Company

Finding a reliable vendor is probably the hardest part in the whole process of working with an offshore team. There is no shortage of outsourcing companies in India, Russia, Philippines, Vietnam, Ukraine, etc. So how do you actually go about finding an offshore vendor? Ryan Norbauer has a good primer finding outsourcing companies The bottom line is that you have to find someone that you can trust. You have to trust that they can get the job done. You have to trust that they will do what they say they'll do. You have to trust that they'll admit their mistakes. You have to trust that they're technically competent. You have to trust that they actually understand you. Nobody said it's easy...

Global sourcing is great (and profitable), if you approach it with the sophistication it deserves.   Here are a few ways to find the right team.

Thought Leadership - The best way to find a solid offshore team is to look for thought leaders in your field. Are experts in a specific technology or within a certain vertical? Do they publish articles for trade journals, speak at conferences, and blog about their experiences? Are they established experts in their fields? Are they leading the discussion around your industry, the problems you're facing, and solutions they've implemented? If they are, then you've found what you're looking for.

Referrals - Another good way to find your offshore team is to get a referral from a friend. If you're working with someone 10,000 miles away, wouldn't you want to know that they have a solid reputation? Some of our most solid clients came from referrals from current clients or friends. Needless to say, these relationships are usually built on mutual trust and respect.

Freelance Sites - Finding developers on sites like Elance, Odesk, Rentacoder, etc. look easy, but it's kind of a last resort. Ideally, you want to meet your team, or at least talk to them. In our early days, we looked for projects on these sites, but it was difficult to find the large, complex projects that we really wanted to get our hands on. I'm not 100% sure, but I have a hunch that if you have a complex software project and you post it on one of these sites, you'll get a lot of bids with no real way of knowing who to actually choose.

Meet Them - If you're reading this blog, you probably know that I own a Chicago outsourcing company. Most of our deals come from me actually meeting entrepreneurs and tech execs in person. They're based on a trust in our abilities and experience. I think it's safe to say that one of the reasons that we've grown is that we have a local presence, or a "throat to choke", if you will. 

Read - Read blogs, discussion forums, articles, white papers, presentations, etc. to get a feel for how the vendor thinks. Do they have experience in certain verticals? Are they problem solvers or just a body shop? What is their corporate culture? It helps to know how a company thinks long before you ever contact them. Needless to say, this blog is a way of promotion my own outsourcing company, but more than that, it's a way to provide insight. We've seen way too many offshore deals fail because  complicitly sit on the sidelines.

I recently met an MIS manager at a large Fortune 100 firm and he chuckled at the SoftwareSweatshop button I was wearing on my suit jacket. We started talk and he mentioned he's currently working with 2 offshore vendors. One is a large, established player, the other is a smaller, agile, sharper team. Guess which one he likes working with better? He finds himself giving more complex projects to the smaller team because of the expertise and attention they give him.

There's a lot of concern about the growing attrition at offshoring destinations like India. It's probably one of the biggest contributors to offshore project failures. With classic "lift and shift" of IT services to low cost countries, it's little wonder that offshore teams atrophy so quickly. Afterall, most talented developers don't want to do grunt work. Experienced developers either jump ship for companies where they can make the greatest impact, or start their own firms.

I spoke to another guy that owned a small 60 man operation in Chennai. They specialized in healthcare and insurance, but turnover was so bad that it was impossible to keep employees for longer than 6 months. They left as soon as they were trained. This tells me that there are 2 kinds of attrition:

Job Hoppers: These are usually younger employees who are looking for better opportunities. They're not always the most experienced or the most highly skilled, but given the talent crunch in places like India, they are still marketable. Most robust economies have this type of employee. They are the natural byproduct of a healthy, growing economy. The problem is their job hopping causes a major headache for employers under constant pressure to meet deadlines and produce high quality deliverables. It's important to know that most of the attrition in large companies takes place at the entry level, as employees seek to move up in their career.

Top Performers: Top performers are the guys who run the show. They get more done than 80% of their colleagues, and are the "go to" guys when there's a problem. When they leave, everyone gets worried. Top performers usually leave because they feel they aren't challenged or appreciated. They are quite seasoned and usually don't leave a job to gain more experience. If they leave it's because something is wrong. This is true for most professions, top athletes, doctors, salespeople, and programmers have matured past job hopping. They demonstrate responsibility and a willingness to do what others won't. If they don't go to a company, this kind of employee typically starts his own firm.

So if you're working with an offshore vendor, how do you minimize the sting of attrition? Here are some thoughts:

1). Hire small firms that are amazing at what they do. They will attract a certain type of developer, typically experienced professionals that have seen the problems you're dealing with. Smaller firms also look for leaders, but know that not everyone can be one. For example, my friend with the two offshore vendors feels much more confident in the abilities of his small, agile team than the bigger one. What's worse is that he sees the really good talent leaving the larger vendor in favor ofniche firms... or starting their own businesses.

2). Don't look for mere technical skill, look for commitment and a willingness to figure things out. Most vendors are the same in terms of technical expertise. You don't need rocket scientists, but you do need people that understand what you're trying to do and will bend over backwards to help you. Their corporate culture, hiring process, and business philosophy is a good indicator of the kind of vendor they will be.

3). Ask the same question in different ways. How much attrition have they had? What retention strategies are in place? What do they look for in candidates? What attracts employees to the firm? Why employees choose them over others? How do they engage employees?

Afterall, some of the world's top software engineering teams work in remote, distributed environments. The key to working with an offshore team is finding someone that is not only technically competent, but that can add real value. A body shop of developers hacking away at your specs creates is worthless. You might save a few bucks, but it's commodity work for what will most likely be a commodity product.

A condensed version of an article about offshore outsourcing advice from Baseline Magazine. The point is that outsourcing seems easy, but anyone that's done it knows it's no cake walk.

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When outsourcing, organizations that focus on short-term cost reductions often rush through projects without adequate planning, due diligence or consideration of the long-term implications of the inevitable changes in business requirements or offshore market conditions. This not only causes them to overlook most of their savings opportunities, but often leads to project failure. However, an organization that knows what to look out for can avoid the mistakes that others have made in the past, mistakes that can be understood in the context of the seven deadly sins: pride, sloth, avarice, lust/extravagance, envy, gluttony and anger.

• Pride
  Many organizations succumb to the sin of false pride and plunge headlong into an offshoring initiative without performing due diligence. They assume that they (already) have the internal capabilities necessary to plan and manage an offshore operation, when this is often not the case. They also seriously underestimate the management resources required to successfully set-up and run such an operation.
• Laziness
  You can't just move an inefficient operation offshore and hope that lower salaries will result in cost savings. "Lift and Shift" doesn't work, and, when the process is inefficient it will, in fact, often increase the personnel resources required to do the job, wiping out the cost savings the organization expected to achieve.
• Greed
  Many organizations will not be concerned enough about the ultimate fate of the business, or, even worse, possess disdain towards the offshore operation. This makes it difficult for the offshore operation to retain knowledgeable and productive staff, leading to quality problems and cost overruns as greater numbers of inexperienced resources need to be thrown at the problem.
• Lust/Extravagence
  The desire to solve a problem by taking on more, cheaper personnel is extravagant and wasteful and has serious implications for service quality. It's important to remember that many offshore operations have lower productivity and excessively high turnover, reducing cost savings. Don't give in to the impulse to compensate for low productivity with more bodies: It's a false economy. Before you offshore the process, make sure it is efficient. If necessary, re-engineer and improve the process first. Furthermore, even after your processes are off-shored, it's important to continuously apply performance improvement initiatives.
• Envy
  Don't assume that offshoring automatically comes with big savings and be envious of your peers who are already doing it. Most of the claims you'll find by the promotors of the strategy don't take into account the lower productivity that comes with offshore personnel, higher communication costs with an offshore team, and the additional overhead required to govern an offshore process. Actual savings are often only half of what is claimed.
• Gluttony
  Don't offshore as much as possible as quickly as possible, like a glutton, with the ill-formed belief that this will maximize savings. Don't overlook the average organization's capacity to digest change, and even smaller capacity to digest offshore change -- because organizations that offshore too much too quick often spend the majority of their time firefighting. The key to success is selective offshore outsourcing, following a careful analysis of what processes are the most likely to lead to savings if outsourced.
• Anger
  Don't blame the outsourcer when the savings don't materialize, especially if you committed one or more of the sins above. Blame-wise, at least half will always rest with you, and if you committed multiple sins, all the blame rests with you.