“ We needed to find an economically solved way to get products through much more quickly so we could meet market demands. ”
Many companies have subsidiaries and offices in multiple countries around the world. This seems to be a default situation these days, but in more recent times, it’s hard to imagine that large enterprises and companies had any single office, right?
Ascendix Technologies is a perfect example of this. Today we want to share our own software development outsourcing story that took us to five different IT outsourcing locations before we got the solution we were looking for.
We asked our Chief Executive Officer and Managing Partner, Wes Snow, to share this journey, compare each outsourcing location we tried, outline their pros and cons, and explain why we chose Ukraine as our offshore software development center.
Why Did We Decide to Outsource our Software Development?
Todd Terry, the CTO and managing partner, and I founded Ascendix in 1996 as a VAR (value-added reseller) in the CRM (customer relationship management) space. We effectively sold other people’s software and developed professional services around it.
Along that journey of around nine years, we made great money and progress with it. So we developed this professional services practice around CRM. And around year nine, we thought the following way:
Well, we are making good money here, but the reality is we are reinventing the wheel very often.
So we decided to switch from a purely professional services firm that sold other people software to developing our own software within a particular vertical. In this case, it happened to be the commercial real estate space.
So we doubled with a variety of other products out there on the marketplace Salesforce, Dynamics, etc. and we ultimately found that we are making a big difference by verticalizing and developing our own products.
As a professional services company first and foremost, we were very new to this whole world of products.
We thought we could splice off or separate our professional services talent to do product development and make meaningful progress by taking the product to market.
The reality is that it was a slow start and we ultimately didn’t have much attraction.
We just didn’t see the success of this idea in the US.
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What Was the Problem with the United States?
I’ll tell you a story of when we were developing a product here States-side. We worked with one very gifted development team and we put all of our eggs into that basket.
They were doing great work for us but eventually, there was a business event where they left.
So, we were sitting there holding our bag and really not having our diversification strategy.
Of all the things I would say that we benefited from greatly, it’s the isolation of turnover which happens normally here in the United States.
It is very expensive to spread intellectual property and know-how amongst the number of US-based resources.
You need to have a scale for that.
It’s much easier to accomplish that when you have offshoring with an economic price point as we have it.
“ While one person once had all knowledge of a particular development, we now have twenty people who have that knowledge today. ”
For these reasons, we immediately started looking for software outsourcing or offshoring possibilities. That became the start of our journey.
Our First Steps Towards IT Outsourcing
We reached out to our friends, family, and people we have done business with and asked them:
“Hey have you tried outsourcing/offshoring, did you have success with it?”
A couple of them gave us enough information to look into their arrangements.
So, it was based on a recommendation or referral and that is how it started.
They had a level of success enough for us to say: ‘Ok, let’s give it a try.’
Our First Try: Outsourcing to China
Back then, we chose to go with China.
If I knew what I know now, I wouldn’t start where I started.
Facts and stats about IT outsourcing to China:
- $15-$35 hourly developer rates
- 140,000+ software development companies
- 7+ mln technical specialists
- $1,2 trillion IT market size
It was a lower-cost provider, but I have to tell you that we had some challenges just in terms of language and communication.
We started there and, candidly, had a pretty abrupt ending.
That was about a 3-6 month engagement.
We got something out of the door, but it wasn’t something of high quality and there were a lot of frayed edges.
Then, we started to hear about the concept of nearshoring.
“ One of the main challenges that we had with China is that we are on the other side of the globe. You could hardly be more opposite on the clock. ”
Core Challenges of Offshoring to China
There is a language barrier and a clock with absolutely zero overlaps.
In a pure sense, everything was relegated to a specification.
And if it didn’t say clearly and definitely enough on a piece of paper, you didn’t get an opportunity to refine that or augment that with any kind of voice over.
IT Outsourcing to Argentina
The nearshoring idea really resonated with us, so we looked at Argentina.
Here are the key facts about software development outsourcing to Argentina:
- $45-$65 hourly developer rates
- 114,000+ software developers in the IT market
- 15,000+ technical graduates yearly
- $7.5+ billion IT market size.
The Argentinian firm did quite well for us.
The language barrier was less so and there was a more friendly clock alignment.
However, unfortunately, the economic benefits started to fail when the Argentine economy started to improve.
So bill rates went up and all the reasons, or at least one of the large reasons, why people do this went away.
We were not seeing the savings, an economic benefit that we once benefited from.
Key Issues of Outsourcing to Argentina
The economic benefit went away. I think we might still be there if that hadn’t happened.
We were getting some good things done and a nearshoring model allowed us to come up to that place.
But at the end of the day, if the folks that were working with us there were close enough to the same price here, then the car has a flat tire.
Our Third Try: IT Outsourcing to India
So then we moved over to India and that’s where many people actually start.
The core facts and stats about software development outsourcing to India:
- 50% of Indian developers have a salary level of $10,000/year
- 2+ mln app development jobs in 2021
- 25 is the lowest average developer age.
At that time we had started to specialize and verticalize in commercial real estate and this particular provider had a specialty in this industry.
It was attractive for us and we did some good work there, had a certain success, and it was one of the longer stands.
However, we found that we were seeing those cultural differences that percolate and manifest themselves in the worst times.
Main Barriers of Offshoring to India
At the end of the day, we started seeing trends of misalignment there.
The passivity or just the passiveness of the folks we were working with led to a pretty bad impact on the enhancement of the professional services that we delivered.
Outsourcing Software Development to Mexico
Going from there, we were back to the nearshoring model as we looked at Mexico.
The key facts about IT outsourcing to Mexico:
- $35-$55 average hourly developer rates
- 13,000+ technical graduates yearly
- 115,000 technical specialists in the IT market.
There was an economic benefit there.
You would think that since we are so close to them, there would be less of a language barrier, but we still found this to be a challenge for us.
So much so that we almost gave up on the offshoring and outsourcing model search.
Prime Points of Outsourcing to Mexico
There were a language barrier and some communication challenges.
They had a much better command of the English language than of those we had previously worked with, but there were some nuances that manifested themselves in terms of work/product.
One of the large drivers we found is the abundance of resources and skillsets.
“ Then we had a tough time keeping the types of resources that we needed, so that led to some bad delivery and ultimately put us in the state of: I don’t know that we are ever going to find this perfect fit for us and we may have to come back to onshoring and do it all internally. ”
Why We Selected Ukraine as Our Offshore Development Center
For the last 15 years, we have set up shop in Eastern Europe, Ukraine specifically.
Ironically as we end our journey with these different outfits from Mexico, Argentina, India, and China, we received an email from a custom software development provider from a location we never really considered.
Eastern Europe just wasn’t a popular choice.
We challenged them with a proof of concept and said:
“You know, we are about done with this, but if you guys can tackle this project, we’ll see what the results are and we’ll move forward if it is positive”.
Facts and stats about IT outsourcing to Ukraine:
- $25-$45 hourly developer rates
- 75% of European countries outsource to Ukraine
- 40,000+ new tech specialists yearly
- 1,000+ events for IT specialists, startups, and investors every year
- 1 hour ahead of Western Europe, 7 hours ahead of the US (EST)
- #11 place in the top 50 world’s developers
- 150+ tech universities and colleges
- #1 In Eastern Europe in number of IT professionals
- #7 place in the world in terms of quality and efficiency of the freelance workforce
“ It was not only a pleasant surprise and valuable experience, but a very successful result and it was an over-delivery. ”
We are in Ukraine now, where the talent pool is abundant and economic conditions are favorable.
Besides, software development outsourcing to Ukraine means a time zone situation that’s not like a nearshoring arrangement where Mexico and Argentina are favored.
A funny fact about offshoring to Ukraine is that we, as Americans, wake up when the sun is up. But when I came to the office, no one was there. They are not getting there until 11 AM – 11:30 AM.
(Editor comment: it is not always the case, in fact, the majority of Ukrainian developers prefer starting their day at 9 AM – 11 AM)
There is still some overlap with Ukraine starting their day later, so we maximize the amount of time we can collaborate, which is a part of the Ascendix secret sauce.
It seems odd for us, but it pays off big time in the dividends achieved when the afternoon calls come around 4 PM, and they still have 4 hours left in their workday, a wonderful overlap to get a dialogue and collaboration that simply can’t happen in the piece of the documentation or specification.
Talent abundance is a huge reason why we choose Ukraine for software development outsourcing.
Besides, check our article to know more about Ascendix’s journey into the software development world.
“ Imagine Boston, Massachusetts in the United States. So, you pick up all talents from the universities, institutions of higher learning, and have it over one in place - Ukraine, Eastern Europe. ”
There is all that talent that comes from MIT and Harvard but has nowhere to go.
Unlike Boston, Massachusetts, you generate a pool of these talented individuals and you’re just sitting there in the marketplace.
We are now filling that void.
And it is very interesting what you could get in terms of the level of talent.
It is an abundance of highly-qualified professionals. It’s like a Bay Area or Boston, Mass area.
The Key Benefits of Software Development Outsourcing
First and foremost, everybody will resonate with this – the cost compression. I would say there may be other things that may not be as obvious as well.
One of them is round-the-clock development.
The primary benefit of a round-the-clock development approach is that you have others working while you are sleeping, and vice versa.
I would also say that there is access to talent that may not exist here in the United States, at least those that are affordable.
So the combination of affordable resources coupled with skill sets, in general, is another benefit of software development outsourcing, especially in Ukraine.
Ultimately, the risk of turnover insolation is another huge benefit. If you put all of your eggs in one basket, bring all development staff here, get it smart on the product, and your employees decide to leave – you are lost.
Lots of missed deadlines, failed project delivery, unsatisfied clients, and financial losses are risks that are considered by software development outsourcing, which allows you to diversify the IP and product development efforts.
Apart from the mentioned above benefits, IT outsourcing allows your business to get the following opportunities:
- increased organizational flexibility
- reduction in overhead
- expanded ability to invest in market opportunities
- increased speed to market.
Software Development Outsourcing: The Key Challenges
We fell into a trap of trying to go with a low-cost provider, and low cost is not always the best route – we learned that the hard way. We also struggled with language barriers and being able to articulate and communicate in an effective way.
The second challenge we faced was the cultural difference.
You can speak the same language, but the meaning and the sunbelt below the surface can oftentimes appear different.
The third challenge of software development outsourcing may be a round-the-clock development process.
While I said it might be a benefit, it can cut on the other side as well.
For example, if you have mistakenly communicated something, you’ve got to wait for another day to pass before you get to correct that.
So it can pronounce good but provide bad effects as well.
How to Choose An Offshore Software Development Company?
Going back to our history, we first tried to remove ourselves from the anecdotal conversational proposal stage. Rather, we would have wanted to o take a look at the products a software development company has delivered.
“ We quickly got to the product type concepts which allowed us to get a true sense of what they were about, what they could deliver, what the accuracy was, and what the translation factor was. ”
That’s what we really started refining.
We went through this journey more and more and it certainly kick-started this last leg of the journey that we are still on today, which we are having great success with.
Based on our experience, I would recommend you consider the following short steps on your way to finding a reliable and expert software development partner:
- Be prepared to spend some time on the evaluation of an offshore software development company you consider
- Don’t rush
- Leverage your network for those who may have recommendations
- Do your research
- Ask for a proof of concept that demonstrates the quality of their work. Did they listen? Did they understand your requirements? Did they meet the expected outcome?
At the end of the day, they will show you PowerPoints and PDFs that will be quite similar.
Ultimately the best test is to go a low-risk to no-risk proof of concept or pilot to give you the best evidence.
Software development outsourcing may become a hard and long process to find the right partner.
However, we believe our Ascendix story will help you simplify, accelerate offshoring, and become a valuable learning experience and effective guide for your company.
So, if you are looking for reliable outsourcing software development companies with solid expertise and large experience in building high-quality digital solutions, feel free to contact us and we will be glad to provide you with a free estimate of your project development requirements.
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Having 24 years of CRM consulting experience, Wes has been on multiple advisory boards for CRM applications over the years including Salesforce, Dynamics 365, and no less than 10 other CRM platforms. Wes is a frequent guest of podcasts, speaker, and author of posts on CRM topics.
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