Total Cost of Engagement by Nearsoft

1. The Real Total Cost of
Engagement in Outsourced
Software Projects
Offshore outsourcing vendors like to highlight
hourly rates because they sound pretty low
when compare to the equivalent rate for
US-based engineers. But that is far from the
reality of the Total Cost of Engagement (TCE),
which is what you are going to end up paying.
To the cost of the engineering talent you must
add the cost of additional management, travel
costs, the painful cost of staff turnover, and a
certain amount of productivity loss due to the
distance and degraded communications.
M E X I C O I N D I A
Development Development
Self Management
Management
Turnover
Travel Costs

2. Engagement Manager
No matter what the size of the project, you need to
have a US-based manager in charge of the
outsourced project to keep track of every aspect
of it and to make sure that everybody is in sync.
This is true regardless of the outsource locale, be
it offshore, nearshore or onshore.

3. Tech Leads
You need to have a technical lead for every five or six offshore engineers. These leads act as the
bridge between the offshore and US teams and must, therefore, work a shift that overlaps both teams.
They must be senior enough to be able to track the work done by both teams without becoming a
burden to either team. They must also understand the implications of daily decisions, and be able to
clarify any misunderstandings before they create a crisis.

4. Tech Leads
Without the appropriate talent in this role, a few things are likely to happen,
The teams will play email ping-pong, sending questions and counter-questions back and forth.
One team will ask a question today only to get a request for clarification to the question the next
day.
As the email trail grows longer and more frustrating, after a while, the teams will quietly detach
from one another, making more and more local decisions without closing the loop with the other.
The work of each team will eventually divert from the other and by the time anybody notices, it
may be too late.
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5. Staff Turnover
An ugly, unspoken component of the overall cost is staff
turnover. Losing an engineer means that you’ve lost all the
training you invested in him/her and now you have to spend
time and money to find and interview a replacement. Then,
you have to train the replacement.
This is very negative for team morale, for both the offshore
team and the US-based team.
Bye!

6. Productivity Loss
For every three engineers in India, expect the output of two US-based engineers. There are plenty of
great engineers the world over and particularly in India, but most of the people your outsourcing
vendor will attract (and retain) will be entry level people with modest skills.

7. Travel
Two words: expensive and gruel-
ing. But it’s absolutely necessary.
The engagement manager must visit the
remote site at least once every six months.
Lots of thing can change in that time and it
may be very costly not to take a look for
yourself on a regular basis.
As of the time of this writing, a trip to Ban-
galore cost $1,700. Coach. Without delays,
the trip takes 22 hours (which you won’t
want to do in coach class a second time).
For less time and money you could travel
every other month to Mexico. Without the
jet lag.