So why bother?
I suspect most initial interest (certainly from the UK) is around saving cost. The fact is that a typical Indian developer day rate is around 1/3 the cost of a typical UK developer. So you've got to ask the question - are we really saying that having a remote team is more than 3x less efficient than having a team on your doorstep? Surely we can save some money here?
Nobody really assesses efficiency in this way, so the question is actually quite difficult to answer. I'm not aware of any research which compares developer efficiency between an in-house developer and a developer next to him who has been provided by a third party. So lets take a developer on a journey ..
Step 1: Employ him through a third party
This one is relatively easy to calculate. From a line management point of view straight away i'm going to be employing contractors at a 30% premium over in-house permanent staff. Granted I might get some subject matter experts, but if I really want someone special, i'm going to pay more than 30% on top of permie rates, and it's unfair to paint permies as unskilled inexperienced resources - that's just not true.
Step 2: Add some layers of management
Ok, so we now have a more expensive resource, but we're going to give him or her a slightly different agenda to that which we would set ourselves. A percentage of his/her time will be spent filling in local timesheets, attending local team meetings, company briefings, training courses, or helping colleagues who have nothing to do with their primary client. I say 4 hours per week or 10% less efficiency. Of course we then have to pay for the management overhead - likely a share of a line manager - lets say 15% in total.
Step 3: Move him 4000 miles away
Go along the equator and this means for every day they work, they are disconnected from the rest of their team for around half of the working day. If I said you weren't allowed to discuss anything with anyone for 2.5 days per week, how less productive would you be? How much more time would you spend planning for those 2.5 days where you could communicate? Conservatively I reckon another 10% less efficiency - it could be more if there is a sizeable local team with whom he needs to communicate, but could be less if most of his communication is around him offshore.
On top of this, we now need to employ some local account managers and a small administrative team to keep the client happy - add another 5%.
Step 4: Change his culture
A tough one to assess, this one, but the impact ranges from language difficulty (ever agree something on a conference call only to discover that something else has been done a few days later?) to fundamental differences in behaviour to deal with the same situation. For example, the relatively hierarchical system in India naturally prevents a team from directly reporting failure if this is known to be undesirable. More likely, the team will do everything within its power to achieve, including enlisting more people to assist. On many occasions this will succeed (but will permanently affect the team behaviour in the future) but on other occasions it will fail, and fail seemingly without warning to the customer. In order to mitigate against this risk it would be reasonable to assume that at least 2 hours per week are dedicated to smoothing out these wrinkles, or 5% in real terms.
The total obvious inefficiency above? Around 65%.
That's not far off the 70% required to break even but you only need to get the rates wrong (lets make sure your offshore blended rate is < 30% of your onshore rate) or allow your offshore organisation to recruit candidates who don't actually compare like-for-like with your onshore staff, and you'll be the wrong side of the break-even line..
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