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The Counterintuitive Economics of Off-Shore Teams

Haircuts and poor communication

5 June 2017


There is a common hypothesis that the cost of development can be reduced by sending work offshore, leveraging favorable exchange rates. Assuming that cost saving is the objective, then off-shoring is not fit for purpose. There is nothing inherently wrong with distributed teams — unless the team has been distributed with the intent to save costs.

Humans can be terrible communicators even when we're talking face to face. Putting an ocean between team members tends to increase the reliance on Web-based tools to manage work. As aficionados of Agile, we only need to consider the value of "individuals and interactions" to see how tools can become a source of frustration. Reducing a team's ability to have meaningful interactions can swiftly herald a greater dependency on tools, documentation, and process.

Let's assume that you've successfully managed to reduce your costs by shift some of the work to a different country or time zone. That cost saving will ultimately present a risk that the deliverables are below the expected quality or are not delivered on time (or both, in many cases).

Instead of product development and projects, let's look at haircuts as a scenario:

You find out that there is a start-up hairdresser in town. They offer exceptionally low rates (let's say 30% below market value), and the only condition is that you have to write down the instructions for how they should cut your hair. Any feedback you have for the hairdresser needs to either be written down for them to read when available, or you can call them once you've left their premises. How consistent do we think the rate of customer satisfaction would be? Whose fault is it if the haircut isn't fit for purpose?

Chances are the hairdressers are talented and the instructions are accurate. Without the nuances of human interaction, though, a lot can get lost as the message is passed between team members. I'm certainly not a leading mind in the world of personal appearance, but personally I doubt this hairdressing company would join the echelons of Uber or Airbnb.

The global market has a lot to offer in terms of skill and experience. Quite often you can access people who will add exceptional diversity to your team. Diversity can be one of the greatest strengths of a cross-functional team. What we need to exchange, in return for accessing the international talent pool, is significant investments in the engagement of our off-shore team members. Otherwise you will get a haircut that isn't fit for purpose.
 

Opinions represent those of the author and not of Scrum Alliance. The sharing of member-contributed content on this site does not imply endorsement of specific Scrum methods or practices beyond those taught by Scrum Alliance Certified Trainers and Coaches.



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Comments

Tim Baffa, CSM, 6/5/2017 11:45:49 AM
Good topic and message. I'm personally unsure though how effective the hairdresser analogy is, as it does not really capture all of the risk present in offshore development/testing.

Communication challenges, contract-game practices, hand-offs, and lean waste (transportation, defects, waiting, etc.) all eat away at any potential savings from farming knowledge work out.
Aaron Tooth, CSP,CSM,CSPO, 6/5/2017 3:04:53 PM
Thanks for the feedback Tim, you've raise some valuable points. Finding analogies that convey the full depth and complexity of issues in the Agile space is challenging.

Off-shoring and distributed teams will certainly need an ongoing consideration as the landscape continues to shift.
Aaron Tooth, CSP,CSM,CSPO, 6/7/2017 6:35:11 AM
Thanks for the feedback Tim, you've raise some valuable points. Finding analogies that convey the full depth and complexity of issues in the Agile space is challenging.

Off-shoring and distributed teams will certainly need an ongoing consideration as the landscape continues to shift.

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The community welcomes feedback that is constructive and supportive, in the spirit of better understanding and implementation of Scrum.

 

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