In the era of globalization, offshore software development has become a common practice for many companies looking to leverage cost efficiencies, access a broader talent pool, and speed up their development cycles.

While everyone has heard that time zone differences can be problematic, it’s essential to delve deeper into why this is an issue, the potential solutions, and when it becomes a win or loss for the company and stakeholders.

Offshore Software Development – The Impact of Time Zone Differences & How To Mitigate

In the era of globalization, offshore software development has become a common practice for many companies looking to leverage cost efficiencies, access a broader talent pool, and speed up their development cycles. However, one of the critical challenges that can make or break an offshore software development project is the time zone difference. While everyone has heard that time zone differences can be problematic, it’s essential to delve deeper into why this is an issue, the potential solutions, and the additional costs these solutions might entail.

Why Time Zone Differences Matter

1. Open Communication Leads To Success

    Synchronous Communication: The first thing to address is when development teams are in significantly different time zones, synchronous communication becomes challenging. Real-time discussions, which are crucial for quick decision-making, clarifying requirements, and resolving issues, are often delayed by several hours. This must be on the top of your list when moving software development offshore.

    Asynchronous Communication: If synchronous communication is not addressed early your project can become reliant on asynchronous communication methods like emails and project management tools, which, while useful, can slow down the overall pace of the project. Questions might only be answered the next day, causing a ripple effect of delays and loss of assets to other projects while they wait.

2. Coordination and Collaboration

    Meeting Scheduling: Scheduling meetings that are convenient for all parties can be difficult. Often, team members have to join calls early in the morning or late at night, leading to reduced productivity and potential burnout. This is simply something you will have to deal with and some solutions are provided below.

    Collaborative Work: Tasks that require close collaboration, such as pair programming or brainstorming sessions, will suffer due to the lack of overlapping work hours. Once again, out is a know issue but will change the way your software is developed and the way your teams collaborate.

3. Project Management

    Monitoring and Supervising: Effective project & delivery management involves regular check-ins and updates. Time zone differences can hinder the ability of project manager’s and the delivery manager’s ability to provide timely feedback and supervision, leading to potential oversight of issues. This is something that must be addressed.

    Milestone Tracking Tracking project milestones and ensuring that all team members are aligned on project goals can become cumbersome when working across different time zones, but should be considered important.

4. Cultural and Contextual Misunderstandings

    Cultural Differences: Different time zones often mean different cultures, even from the West cost to the East coast.. Misunderstandings can arise from different working styles, communication norms, and business practices, which can further complicate collaboration.

Solutions That Help Mitigate Time Zone Challenges

1. Flexible Work Hours

    Shift Adjustments: Implementing flexible work hours or overlapping shifts can help ensure that there is some overlap in working hours between onshore and offshore teams. At least five hour overlap is preferred.

    Core Development Hours: Establishing core hours where all team members are available can facilitate better communication and coordination.

2. Effective Communication Tools

    Use of Collaboration Tools: Leveraging tools like Slack, Microsoft Teams, and project management platforms like Jira can help maintain continuous communication and keep everyone on the same page.

    Regular Updates: Requiring regular status updates and check-ins can help keep track of progress and address issues promptly.

3. Dedicated Project Management

    Local Project Managers: Having a project manager and delivery manager who can manage the team in their time zone and coordinate with the onshore team can bridge the gap effectively.

    Round-the-Clock Support: Implementing a follow-the-sun model where different teams hand over tasks to each other can ensure that work continues around the clock without delays.

4. Dedicated Senior Onshore Software Consultant

    Onshore Consultant Project Lead: A project and delivery manager is one thing but having someone intricately familiar with the code and technology onshore can head off issues that extend projects. A senior consultant that knows how to lead a team, jump into unique situations, and has multiple projects behind them that can be verified can help identify issues early and suggest changes before it’s too late.

5. Training and Cultural Sensitivity

    Cross-Cultural Training: Providing cross-cultural training to all team members can help mitigate misunderstandings and foster better collaboration while helping to retain internal participants on the project.

    Clear Documentation: Maintaining clear and detailed documentation of requirements, processes, and expectations can help avoid miscommunication and the loss of the knowledge base as offshore developers move around.

Cost That Must Be Considered In Making OffShore Work

1. Labor Costs

    Flexible Work Hours: Paying employees for flexible work hours or shift premiums can increase labor costs on both sides of the ocean, however if hired with this in mind you may be able to offset this increase.

    Trusted Local Delivery Managers: Hiring additional project & delivery managers or team leads that are willing to be on call at all hours of the day and night, depending upon time zones impacting development will increase management costs, though there are specialists that can be hired for this role. In many cases, companies simple transplant a trusted manager at the offshore location. However, it is important to remember that this person has to balance two cultures, ensuring not to offend the people in their new home, often causing issues as they try and balance requirements and expectations at home and fitting into the new culture. No matter which solution is selected assume there are costs added on the project/delivery management side of the project that must be calculated into the decision to select a way forward.

2. Effective Communication Tool Costs

    Communication and Collaboration Tools: Investing in premium versions of communication and collaboration tools can be an added expense, but communication is the backbone of every project, as you know, and without ongoing and concise understanding of expectations on both sides, your project will move off the rails quickly. Find the right tools and make them the standard, whether already in place or new.

3. Training and Development

    Cultural Sensitivity Training: As mentioned above, cultural sensitivity training in the right hands can help eliminate issues with offending offshore teams that have set expectations of work and schedules. My relatives from overseas were invited for dinner and showed up two hours late, assuming this was normal and expected. Providing cross-cultural training and team-building exercises can incur additional costs but need to be part of the decision to move offshore, or nearshore.

4. Operational Adjustments

    Entire Team Adjustments: From stakeholders to QA & Testing, the entire team must be on the same page. No matter their location, ensure that this is set in stone and insure the costs that are part of the adjustment. They are typically up front and only repeat for specific roles.

5. Training and Cultural Sensitivity

    Cross-Cultural Training: Providing cross-cultural training to all team members can help mitigate misunderstandings and foster better collaboration while helping to retain internal participants on the project.

    Clear Documentation: Maintaining clear and detailed documentation of requirements, processes, and expectations can help avoid miscommunication and the loss of the knowledge base as offshore developers move around.

In today’s globalized software development environment, companies often face the decision of choosing between onshore and offshore development teams. Cost is a significant factor in this decision. This portion of the article provides a detailed comparison of the obvious costs involved in both onshore and offshore development scenarios, including the potential impact of project extensions.

Comparing Obvious Onshore and Offshore Software Development Costs

In today’s globalized software development environment, companies often face the decision of choosing between onshore and offshore development teams. Cost is a significant factor in this decision. This portion of the article provides a detailed comparison of the obvious costs involved in both onshore and offshore development scenarios, including the potential impact of project extensions.

Project Overview

      • Project Duration: 12 weeks
      • Weekly Hours: 40
      • Team Size: 3 developers & 1 Delivery Manager
      • Offshore Team Time Zone Difference: 6 Hours

Onshore Project Cost Calculation

    Development Costs:

      • Hourly Rate per Developer: $150
      • Total Hours per Developer: 40 × 12 = 480
      • Total Cost per Developer: 480 × $150 = $72,000
      • Total Cost for 3 Developers: 3 × $72,000 = $216,000

    Delivery Manager Costs:

      • Hourly Rate for Delivery Manager: $180
      • Total Hours per Week: 10
      • Total Hours for 12 Weeks: 10 × 12 = 120
      • Total Cost: 120 x $180 = $21,600

    Total Onshore Project Cost:

      • $216,000 + $21,600 = $237,600

Offshore Project Cost Calculation

    Development Costs:

      • Hourly Rate per Developer: $65
      • Total Hours per Developer: 40 × 12 = 480
      • Total Cost per Developer: 480 × $65 = $31,200
      • Total Cost for 3 Developers: 3 × $31,200 = $93,600

    Delivery Manager Costs:

      • Hourly Rate for Extended Hours Delivery Manager: $180
      • Total Hours per Week: 70 (~14 hours/day billed for 24hr availability – 5 days/week)
      • Total Hours for 12 Weeks: 70 × 12 = 840
      • Total Cost: 840 x $180 = $151,200
        (Note: Typically an FTE U.S Based employee at a higher salary rate of $260,000 < to to experience level required in project management and tech knowledge - also typically manages more than one team at the same time.)

    Total Offshore Project Cost:

      • $93,600 + $151,200 = $244,800

Offshore Project Cost with Trusted Delivery Manager Living Offshore

    Development Costs:

      • Hourly Rate per Developer: $65
      • Total Hours per Developer: 40 × 12 = 480
      • Total Cost per Developer: 480 × $65 = $31,200
      • Total Cost for 3 Developers: 3 × $31,200 = $93,600

    Trusted Delivery Manager FTE Living Overseas Costs:

      • Annual Salary: $260,000
      • Weekly Salary Calculation: $5,000 ($260,000/52)
      • Total Salary for 12 Weeks: $5,000 × 12 = $60,000
      • Overseas Living Expenses (Monthly): $5,500
      • Overseas Living Expenses (Total 12 Weeks): $16,500
      • Travel (Total 12 Weeks): $8,000
      • Total Overseas Placed Delivery Manager: $84,500

    Total Offshore Project Cost w/ Overseas FTE Delivery Manager:

      • $93,600 + $84,500 = $178,100

Offshore Project Cost for Each Week Project is Extended

    Offshore Extension Costs:

      • Development Cost Per Week: 40 × 3 x $65 = $7,800
      • Delivery Manager Cost Per Week (U.S. Based): 70 × $180 = $12,600
      • Total Cost Per Week: $20,400
        or

      • Development Cost Per Week: 40 × 3 x $65 = $7,800
      • Delivery Manager Cost Per Week (Overseas based): $5,000 + $1,269 + $667 = $6,736
      • Total Cost Per Week: $14,400
This analysis demonstrates that, purely from a cost perspective, the offshore development option with a trusted delivery manager living offshore is significantly more economical than both the onshore option and the offshore option with a delivery manager covering both time zones. The offshore trusted delivery manager scenario shows substantial cost savings, making it an attractive option for organizations seeking to reduce expenses.

However, it’s crucial to note that this comparison does not account for several often hidden fees and additional costs associated with doing business overseas.

Costs To Offshore Not Included Above:

    Adjustment Costs for Onshore FTE Team: Transitioning to an offshore model can require significant adjustments for the onshore full-time employees, including changes in workflows, processes, and management practices.

    Cultural Training Courses: Successful offshore collaboration often necessitates cultural sensitivity training to bridge gaps between different working styles and communication norms.

    Communication Tools: Effective communication tools and platforms are essential for maintaining seamless interaction between onshore and offshore teams. The costs of these tools can add up, especially if premium versions are required.

    Legal and Compliance Costs: Operating in different countries involves navigating various legal and compliance requirements, which can incur additional expenses.

    Travel and Accommodation: Regular travel to the offshore location for onshore team members and vice versa can further increase costs.

    Unexpected Fees: Various hidden or unexpected fees, such as currency exchange rates, international banking fees, and local taxes, can also impact the overall cost of offshore development.

While the initial cost savings are evident, it’s essential for organizations to conduct a comprehensive analysis that includes these additional factors to make an informed decision. Balancing cost with the potential challenges and hidden fees is crucial for ensuring the success of any offshore software development project.

Let’s face it, every company needs to consider their costs and if offshore development is where the leadership team determines the cost savings must come from, consider the content of this article to ensure a smooth transition and a successful project outcome that does what is intended, save the company money!