I oversee the hiring of dev shops for a mid-sized company in the US and the rates for e-commerce/web development are all in the $120-$150/hour range.
The funny thing is that some of these companies outsourced to the Ukraine and India and the rates didn't change. I would have thought that we would at least see some of the cost savings.
Both companies that outsourced ended up being complete disasters (we are still cleaning up the technical debt 3+ years later), which happened before I was involved.
Since this is the case, it made no sense to hire any company that didn't hire all developers directly in the US or Canada (which is now a requirement).
I suppose I should thank these companies, because it's the reason I have a job today.
The concept of outsourcing for a writing job is weird. You don't see The New Yorker outsourcing their essays to Pakistan, Hollywood outsourcing their scripts to Ukraine, the NYT outsourcing their reporting to the Philippines, etc.
Tech seems to be the only industry that thinks that hiring writers from overseas to produce content is somehow going to result in anything viable.
If you read the articles, I would say that the companies listed above (like the NYT) are not the ones outsourcing, the outsourcing is quite limited in scope, and mostly is design jobs, not writing jobs.
It's not that weird if you consider that a large chunk of software engineering is CRUD apps and digital plumbing, which doesn't require a lot of creativity. Nevertheless, I'm sure India, Ukraine and other countries have tons of talented developers that due to global economics are willing to work for a lower pay. Maybe the problem with the outsourcing model in these cases is that it's being poorly executed. It's already difficult enough to build a strong team within your own city, it wouldn't be any easier to do it remotely across the world, much less if you delegate it to an HR department purely focused on costs reduction.
> a large chunk of software engineering is CRUD apps and digital plumbing, which doesn't require a lot of creativity
The issue is more precision and lucidity of thought and language, and the ability to communicate ideas and emotion to others from a given culture and socioeconomic background.
Consider that when development velocity grinds to a halt because of "technical debt", this is almost always just a euphemism for developers not being able to read each other's code. (I understand there is an actual idea behind technical debt, I'm just talking about what's almost always happening in practice.)
as a 3rd world developer now living comfortably on the 1st world this is exactly my experience, people in the developing world are in general more ignorant on technology, so even if you are an excellent developer it is still going to be a hard sell to ask for a US dev rate. The emerging economies are not technology driven in most cases. In my case I had to look for work outside my own country first to more reputable South American countries and eventually in North America.
I think the problem with outsourcing is it adds a layer of indirection between the stakeholders and the developers. As a developer myself, I find it almost impossible to work effectively unless I have direct contact with the stakeholders.
However if you have architects that design software properly in the U.S. and pass those specifications to outsourced staff, then it's akin to a NYT writer dictating his notes to be typed in and proofread by someone overseas.
My point being; there's an efficient way to utilize cheap labor.
Right, but that proofreader might not totally understand nuances in language and how words take on different meanings to different audiences, even if they are the same words used.
Back to the programming reality from the analogy, I've seen outsourcing happen, for businesses that revolve around American customer bases and rules and regulations- now the code is outsourced, but the basic understanding of how business logic related to the real world use was gone. So the offshore team, while technically competent, was not equipped to make decisions about software with the consumer in mind. If you were working on something and it didn't really make sense in a real world sense, as a dev, you could go to your product person and raise concerns. Without the cultural context- those concerns never get raised.
Agreed. So in that case, I would not use an outsourcer for that particular piece. The problem is American developers treat outsourcers like they are American developers. Don't do that.
Treat them like 1) there is a language barrier and 2) they will not know there is a language barrier and they will forge ahead in the wrong direction.
Some of the best developers and PMs I have worked with were born in a country you barely know about, it just took a little time to get to know them and their skillset.
The best way to combat that is to not design anything too far into the future. This is where agile and sprints can be very helpful. It also means you are checking the work of the subcontractors on a regular basis. After a while you will learn how to communicate very well, you'll see the strengths and weaknesses of the staff and you can operate within those constraints.
That is the real work here; discovering acumen. Once you know that, you can hand out work that fits within their wheelhouse.
American developers excel at this because there's less of a communication gap. If an American can not do something he will tell you. If you are wrong about the way you are doing something, an American developer will tell you. Outsourced subcontractors will blindly do what they understood they were supposed to do without questioning anything resembling rationale.
This is not the way to look at it. Software engineering and content writing are not even close to being similar in any sense. You don’t need cultural context to write good software
I manage an outsourced team having worked in Latin America. I agree with the other commenters here. It will fail if there's no quality control and no filtering. Just like in the US, there are good devs and bad devs. It's up to the agency to actually manage and help them grow.
> The funny thing is that some of these companies outsourced to the Ukraine and India and the rates didn't change. I would have thought that we would at least see some of the cost savings.
Why would the rates be lower if the market is one where demand for labor exceeds supply? It's not like lowering the rate is going to allow them to sell more hours, since they are still constrained by human capacity. If the quality of the work was not good, that's a different issue.
In this kind of discussion context, typically the OP's rates are the bill rates to clients (the OP's company). I normally see the smaller agencies clear 40-50% margin, and the big names are clearing 50-80%, so I wouldn't be surprised if those agencies in Ukraine and India were paying their teams in the $60-75 per hour USD range at most, which is considered really good in those parts of the world.
Margins are much higher. Large scale IT Services pay around 40$-60$/day for skilled specialists.
I briefly worked in a specialised consulting role where the charge to company was $2000 per day and my cost to the company was $55/day.
I used to do margin calculations at a mid-size US agency that staffed a lot of roles. In terms of actual project margin, we rarely got past 30% and was usually more like 15-20. The trick is that there is a lot of cost in operating an agency beyond just salary. The cost to the agency of employing a developer (or a designer or a tester or whatever) is more than just what they're paid.
We had a rate card that included both the cost to the agency per hour for a particular role and the agreed rate we had settled with the client. We had a fixed rate for each role/locale even though we paid people different amounts. I knew my own salary and handful for my direct reports and the "cost" side of the rate card was a lot more than I was getting paid. And that cost was the base on which padded to get profit from the client.
And that profit itself wasn't pure profit for the company because a lot of paid for our fixed costs (office space, hardware) and non-billable roles (HR, receptionists). And of course a lot of it ends up in the hands of our holding company and their stock holders.
It would be interesting to know whether the same issues would exist outsourcing to a country such as New Zealand with less of a language and cultural barrier or if it is still largely the nature of remote agency work.
The funny thing is that some of these companies outsourced to the Ukraine and India and the rates didn't change. I would have thought that we would at least see some of the cost savings.
Both companies that outsourced ended up being complete disasters (we are still cleaning up the technical debt 3+ years later), which happened before I was involved.
Since this is the case, it made no sense to hire any company that didn't hire all developers directly in the US or Canada (which is now a requirement).
I suppose I should thank these companies, because it's the reason I have a job today.