The Dirty Truth When It Comes To Offshore vs. Onshore Software Development

Quite a while ago ago I talked to a company which was looking to kick off a bigger software project. They never went ahead with it and it was just another deal which did not bear fruit. Nothing unusual about it.

What makes it newsworthy though is that the CEO of the company reached out a few months ago and asked if we were to able to pick up the maintenance and service for the software they had developed.

Obviously a pretty easy thing to do. We priced it out, arranged for the delivery of the software (source code) and got to work. As is customary in those situations we had a few developers read through the code with the goal to familiarize ourselves with the code and the functionality.

As part of the code review we found some developer comments (once again…nothing unusual). What made it a bit unusual was that burred in the code were clear references as to which company had actually written the code.

This is where things got interesting. Below is a quasi recap of the the conversation I had with the CEO, our client.

Steve: So….when XYZ (company name embedded in the code) developed the API they…

CEO Interrupts me: Who is XYZ ?

Steve: The guys who developed the code

CEO: No..they aren’t

Steve….(pause…does not say anything)

CEO: What makes you say that ?

Steve: Well..there are clear references in the code that they are the author of the software you delivered

CEO: What ?…I don’t understand…we had it written by XXX

The CEO (our client) then took it upon himself to get to the bottom of the issue. Did not take him to long to find out as to what had happened.

The company he had contracted with to develop the software had outsourced the entire development to a provider in India.

The CEO was rather flabbergasted that this was possible. He had paid premium pricing (his words) assuming that the product was going to be developed onshore in the US. Doing the math by using our rates he figured he had spent about 250k more than what he should have paid.

Obviously 250k can be a lot or very little money for a corporation. In this case the company is privately owned and the CEO happens to be the majority shareholder. Company is doing well…so money was (or is) not the issue.

The issue for the CEO was simply that he felt he had been taken advantage off…led to believe that it was an onshore development when in reality all of the work (or vast majority) was done offshore.

And this brings us to the dirty truth every CEO/CIO/Decision Maker should know.

A lot of software development billed at domestic developer pricing is parsed out to providers offshore.

Decision makers should be aware that not in every case what is sold as a domestic development is actually developed domestically.

There is obviously a certain added comfort level for a US company to deal with a US based software development company. The CEO/Decision Maker might feel more comfortable…but the truth of the matter is that the company might not be exactly getting what it has paid for.