Why You Shouldn’t Offshore Your Development
I was presenting an update of our progress to one of our investors. The partners seemed happy with the progress we were making.
One of the partners said to me, “Why don’t you build a team in India? It will be cheaper than continuing to hire here in the Valley.”
I smiled, and I politely responded, “That’s an interesting idea. I will look into it.”
In other words, “Are you out of your motherfucking mind!”
The request to offshore was a classic VC request from someone with no operational experience.
On paper, it was hard to argue with Samir’s request. Even if you assumed an offshore team worked at half the efficiency of our Silicon Valley team, the offshore team would cost less per product produced.
That’s the lure of building offshore. It just looks so good on paper that you know you’ll be able to make it work.
However the reality is much different.
Keep your supply lines short.
I told our other investor, Gill, about the request to offshore the design team. I assured him that I had no intention of going along with it.
“That’s good,” he said. “We need to keep our supply lines short.”
Gill was right. The overhead costs of managing a team 12.5 hours away would be a disaster.
It’s hard enough to manage an engineering team that is in the same building as you are. Now you add a bunch of other issues like:
- Time zone issues
- Language issues
- Cultural issues
- Skill level issues
- Travel issues
You are just asking for trouble if you go this route.
The interesting thing is there were a bunch of companies funded in our space with the model of a US executive team and an offshore engineering team. None of these companies succeeded.
The execution and management of a remote team is more difficult than you expect.
Even though the market for Analog Semiconductors is over $50B annually, the industry, like most industries, is very small. Everyone knows everyone.
I knew the teams that had pursued the offshore model. In each case, the problem they faced was execution.
It was much more difficult than they expected to build a successful remote team. Any savings they had were fictional. They would have been much better of building their team in the Silicon Valley.
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