Intelligent overseas production Featured

8:00pm EDT March 26, 2008

Success can be found in the smallest nuances of your business if you are open to seeing it. That’s something I learned firsthand when my business model at Real Time Intelligence took a hard right turn several years ago, and I took the unexpected opportunity to outsource my software development to countries in the former Soviet Union. Only then did I appreciate the difference between outsourcing offshore and truly offshoring.

Those terms sound similar, but our company’s experience taught us the difference between the two means the difference between crashing on a project with resources that don’t comprehend U.S. business concepts and meeting our clients’ expectations. Our 24-employee company develops technology for clients across the U.S., and some of them handle complex, mission-critical tasks. I understood that working with lower-wage developers in India or other emerging countries provides a tremendous boost to profit margins; a developer abroad earning $24,000 has the equivalent to one earning $100,000 in the U.S.

I was lured by that promise of high margins, but I learned it is more complicated than simply finding a partner for the work. With outsourcing, we started missing the target on our project scopes. Ultimately, we were achieving much lower margins than expected. There was a basic foundational problem: I was transferring the responsibility of satisfying my customer to someone else, and I was losing control. While some companies choose to endure that, we chose a different route. I studied the Ukrainian market and put together a business model centered on having a wholly owned business unit located in Ukraine. Almost immediately, we saw an improvement in our deliverables. With full control, you get all the benefits of global offshoring without the quality problems that show up during outsourcing. It’s tempting to make business decisions by impact on your balance sheet, but I continue to learn that the nuances decide whether those financials tell a good or bad story at the end of the day. In our experience, taking the time to understand the subtleties of offshoring the right way has been worth it.

DAVID HORVAT is CEO of Real Time Intelligence (www.rtintel.com) and a member of the Cleveland Chapter of Entrepreneurs Organization (www.eonetwork.org), an international organization of business owners dedicated to helping each other learn and grow.