Cut Offshore Costs, Protect Margins, and Accelerate Growth

Transform your offshoring strategy with Shift Ahead Technologies: lower TCO, faster delivery, and real growth through an outcome-based model and real-time collaboration. Escape hidden costs and margin bleed for bigger results.

Offshore That Funds Growth and Protects Margins: Escaping the TCO Trap

Let’s talk realistically. If you’re the Head of IT Operations, you are likely tired of the same dozen offshoring pitches over and over again that promise exactly the same things. A spreadsheet would show a very attractive deal: reducing engineering costs by half, freeing internal resources and putting the big money back into your own growth initiatives.

But then things get really rough. That seemingly nice $25 hourly blended rate is a mirage. After adding the 20% overhead for project management, the long waiting hours and the constant e-mail chasing about poorly translated work descriptions, actually no savings are realized and instead money is merely transferred from engineering to indirect costs. To add to that, your highly skilled internal resource is being bogged down to the point where they get transformed into glorified technical babysitters.

The real Total Cost of Ownership (TCO) is exactly how legacy offshoring gets buried. The data indicates that a simple mistake made in the initial development phase and then discovered in the end-stage testing costs 15 to 20 times more in the fixes than it did to fix a similar mistake if caught at the initial stage. Throw in the fact that technical debt typically accounts for 10% to 20% of the budget for a new product release, that offshore saving is gone really fast.

The Breaking Point: A Case Study in Margin Bleed

Shift Ahead team has already been through quite some time observing how many tech leaders were deceived by the old-fashioned "headhunter" method of offshoring, so we realized that there had to be a radical change. Offshore work should be your margin’s fuel; it shouldn’t ruin your operating profitability.

This Is the Point of Inflection: A Story of Operating Cost Leak

We had a very close relationship with a software giant that had become completely immobilized. Initially, they used an off-shore vendor of a colossal size to reduce their burn rate and they planned to invest the released capital in their big-cloud infrastructure rollout of a new ERP system along with an AI.

The company’s progress with deployment was slowed significantly. The fragmented external communication channels and the harsh time-zone challenges caused an issue fix (a fix for a little mistake for example) that was meant to take two hours often being dragged over to 48 hours.

The internal IT Ops team was using all the time and effort to manage the offshore developers rather than moving their own architecture forward. What the company needed was not low-priced manpower. Their business was driven by the delivery of the software and they needed a development style of thinking that matched that.

The Shift Ahead Framework: Repairing the Leak

In order to recover the marginal operating profit and safeguard the company’s internal roadmap, first we took away the traditional offshore arrangement and second we introduced a new operational model that differed significantly from the old one.

Step 1: time-and-materials model

It is essentially impossible in traditional project environments to measure the amount of work that can be done. This type of work is rewarded on a time-and-materials basis which encourages effectiveness. Client have to pay for the full ten hours the developer took even after he fixed the error he himself made.

So we gave up that way of payment and made the client switch to an outcome-based agreement. Once we had tied the payment to the velocity that they wanted to keep up for the releases, the SLA (Service Level Agreement), the number of completed features – the entire thing made the developer lose the motivation through a repeated loop of rework and at the same time the company would still be paying them for it.

Step 2: get rid of the "lost in translation" tax

For complex enterprise systems, the usual 15-minute daily stand-up meeting is hardly more than a waste of time. So the solution we found for these situations is to stop thinking about the offshoring team as a separate entity. ​‍​‌‍​‍‌

· Our​‍​‌‍​‍‌ requirement was that all working hours would overlap so that we could do real-time, cross-border work.

· We had the onshore UX designers and enterprise architects embedded into the offshore delivery team itself.

· This was enough to eliminate the communication gap and also project management was significantly reduced.

Step 3: Automate testing of code at point of development

Leaving it to the internal team to check every offshore code manually is nothing but a guaranteed recipe for piling up technical debt.

From the very first days of our collaboration, I set up a solid process of Continuous Integration/ Continuous Deployment (CI/CD). We also moved on to code validation via algorithms and automated security benchmarks. This was the best possible time to detect defects.

We managed to avoid all those expensive and time-consuming activities of fixing bugs after they were already deployed in the system, which had been eating away at the client's budget silently.

Getting Back to Real Growth – Recovery of the Company

This change was much more than a rumor; as the company had no other way, they had to make changes with the money they had to spend on these. The client’s effective TCO went down by 34% at 9- and 17th months through our framework.

Anyway, this was not the client’s main success. They didn’t mind the time spent if the job was worth it. They were just glad their internal IT Operations team could get back to doing what they really wanted to do and get rid of the external team overhead.

Actually, the only time they were spending was what the client’s own team really required. The client used all these freed hours for their AI and digital workplace projects in the most effective ways possible.

Identifying and recruiting international talent is not the main problem these days. It is the integration of talent within your current systems that does not burden your employees, which is the major issue.

At Shift Ahead, we offer engineering teams that you can use to supplement your own without having any negative impact on your revenue stream. If you’re fed up and want something really good, it’s time to make a global strategy ​‍​‌‍​‍‌revision.