“Penny Wise and Pound Foolish”: Good Advice Generally, Critical Advice in Outsourcing

In every engagement, no matter how thorough the vetting process or how hands-on the client is, we almost inevitably get the question: “what’s the rate?”

We get it. Budgets are tight. Clients want maximum value for their spend.

BUT.

It’s important to understand - and really factor in - the true cost of the hourly rate, not just the headline number. What do we mean by that?

In the early days of the global talent economy, when nearshoring/offshoring was still a new and emerging practice, there were secrets to be had. CTOs and VPs of Engineering would whisper to each other over after-work beers about a team in Ukraine that crushed code for pennies.

Those days are over.

Don’t get me wrong; there is still amazing talent to be found. But just as the cat is well and truly out of the bag for clients on jurisdictions like Eastern Europe and Latin America, so too the vendors understand what competitive market rates are for these skills. 

The information asymmetry will never fully disappear, but it’s getting very, very small.

It’s always tempting when you see a quote 20 or 30 percent under market. We rationalize. “How bad can it be?  The sales lead speaks good English, I’m sure I can make it work.”

And so it begins.

Quality is quality, no matter the market you’re operating in. Yes you can always find cheap talent, but understand the true, hidden costs.

  • Teams will likely require more oversight and management, and quality controls are likely to be weaker
  • Management time will be high-friction, with language barriers often present in the team members (even if the team lead speaks fluently)
  • Both technical skills and cultural nuance/presentation is likely to be less polished, leading to frustration or worse


Remember that the real risk is not wasted budget (although that’s bad enough!) but wasted time. Getting 3-4 months down the track only to realize that the vendor won’t deliver what you need will be fatal to the project - and can be serious trouble for the broader company too, on larger engagements.

Each jurisdiction has benchmark rates which give you an indication of where Great/Good/OK/Bad sits. One advantage of a partner who knows these jurisdictions well is they are well positioned to advise you on which pond to fish in based on your requirements.

If budget sensitivity is the primary driver, then make sure you’ve got internal competency - or an external partner like Fuel - to help you manage the engagement carefully and ensure you get the result you’re after. 


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