Select a category Close

Contact Us

Drop us a line to see how we can help

We respect your privacy and will never share your data with any third party

5 Successful and 4 Bad Offshoring Examples

CEO Alcor
profile
Professional areas include business structuring of tech companies in Ukraine, business & team management, leadership practices.
22 February 2021
7 min

In an unprecedented 2021, it’s important to stay responsive and flexible. Today, more and more entrepreneurs are implementing innovative approaches for doing business, and currently the business process outsourcing (BPO) industry market size is estimated to be worth around $135.5 bn by revenue. According to recent data, this year it is expected to increase by 1.9%. Earlier I wrote an article about the offshoring trends of 2021 in case you want to read more about the basics of this practice. 

 

To keep you up to date, I’d like to share both great stories and not-so-good examples of offshoring. Businesses have always been looking for cost-effective solutions but in times of pandemic the bets go up. No doubt, it’s much better to learn from the painful lessons of others than to turn your own offshoring experience into a horror story. Therefore, let’s have a look at a summary of both triumphant and bad examples of offshoring practices. 

 

5 Successful Offshoring Examples

 

There is a great number of things to do first before actually starting the offshoring process. We all know that consistency is a key to success. Therefore, you should go through a definitive to-do-list when choosing how and where to offshore your tech business.

 

The first question is “where to offshore?”. Successful offshoring examples show that the choice of the destination country might be crucial for the outcomes. Eastern Europe is one of the most prominent and beneficial offshoring hubs. The list of real cases below serves as proof of this statement.

WhatsApp

Offshoring enables your in-house team to focus on the most relevant challenges your business is facing at a specific time. Right before WhatsApp was launched in 2009, the company offshored its software development to Eastern Europe. WhatsApp relied on offshore talent in keeping the backstage, providing design solutions, and taking care of core app development, while their in-house engineers were concentrated on client-related tasks, such as customer support. Soon after that, the messaging app went on top of the AppStore and Google Play. This situation even forced Facebook to overcome its biggest competitor by acquiring WhatsApp for $19 billion. At that time, it was the largest acquisition ever of a company funded by venture capital.

 

R&D centers in Ukraine

 

Google

Google is another big player in the list of examples of successful offshoring. In 2020, the corporation officially launched its R&D center in Ukraine on the base of CloudSimple. Acquisition of this company illustrates that there is always a place for advancement and innovation, even if you already have the world’s largest team of developers. CloudSimple is now a part of Google Cloud, and improves its VMware migration solution. There is also no doubt that the decision to offshore wasn’t preconditioned by the lack of expertise. However, it enabled a large reduction of business expenses due to offshore hiring. If you are also in need of Ukrainian IT talents, consider Alcor as a recruitment provider.

Amazon (Ring)

Amazon successfully used offshoring as a means of expansion. In 2018, it bought startup Ring with an R&D office in Kyiv, Ukraine. The startup is specialized in developing outdoor home-security solutions. Accordingly, this deal boosted Amazon’s competitiveness in the market. Alcor was happy to provide them with accounting services and payroll outsourcing. What is more, within a year the second offshore development hub was opened in the West of the country. According to recent comments, they praise the Ukrainian “big pool of IT talents at a high level of quality.”

People.ai

People.ai is a software product company, which owns a platform for B2B sales acceleration based on machine learning technologies. They opted for offshoring in order to find rare engineers to develop AI algorithms. A company based in San-Francisco decided to set up an R&D center in Ukraine. At first, they were collaborating with several service providers simultaneously, which resulted in confusion. After that, they delegated all back-office operations to Alcor. Our real estate managers prepared a perfect location, legal and finance teams offered the most beneficial structure of doing business in a foreign country, while Alcor IT recruiters were searching for top IT specialists. Alcor hired over 25 professionals and launched a fully equipped development office in only one month. The results exceeded all their expectations!

 

 

BigCommerce

Among the examples of offshoring, there is also the thriving experience of BigCommerce. It’s an IT product company which provides innovative solutions for e-commerce businesses. They wanted to expand but faced the lack of skilled IT engineers in the U.S. Their cooperation with international outsourcing companies appeared to be exhaustive and non-productive. Consequently, the IT company turned to Alcor for cost-effective solutions in developing their product and growing a professional team. We were pleased to provide comprehensive support for BigCommerce’s R&D center in Ukraine. In one month’s time the company settled into their brand-new office, and within half a year their team consisted of over 30 developers

 

Among other successful offshoring examples, there are also such companies as Reddit, Samsung Electronics, Oracle, and Huawei. All of them chose Ukraine as an offshoring destination because this country appears to be an attractive option for business growth and development

 

software-development-ukraine

 

4 Examples of Offshoring that Went Bad

 

Not every single decision to offshore is destined to be triumphant. This business move requires much thought and effort, otherwise failures are inevitable. Let’s have a look at the recent examples of offshoring that have gone bad.

Telecommunication Company & Wrong Choice of Provider

There are some reports about a giant telecommunication company whose decision to offshore resulted in a fiasco. They chose an Asian provider for collaboration, which was good at coding but not so good at the telecom business. Thus, they have wasted loads of time trying to develop business applications. The vendor’s role is to minimize the risks and possible negative sides, but in this case they only created more problems. The provided IT services were so poor that the company made a decision to send this process back to the in-house team. Consequently, the client received nothing but financial problems and a stressful legal battle with the offshore partner. This offshoring example shows how crucial the choice of vendor could be. It’s essential to select a provider with the proper expertise and track record.

Offshore Software Development during Covid-19 Crises

There were loads of deplorable cases of offshoring which happened during the worldwide quarantine. When the lockdown was announced in March 2020, dozens of IT service providers and offshored R&D centers found out that they couldn’t cope with the work-from-home model due to insufficient IT infrastructure. Asia, for instance, was considered to be a popular offshoring hub because of its low-cost solutions. However, when the reduction of expenses is a primary driver, the quality can easily be undermined. National lockdowns raised many concerns about the region’s ability to provide Western partners with business automation and IT services. Eventually, they may soon consider more reliable offshoring destinations in Eastern Europe. This story also teaches us to be prepared for any kind of catastrophic scenarios. Adequate thought must be given to risk analysis and management, as well as disaster-recovery plans

Product Company & Overpayment

Not long ago we were approached by a client which worked under an outstaffing model. It turned out that for months they were victims of crooked offshoring companies. Examples of fraud are striking. For instance, they were paying a fee for mid-level engineers more than twice larger than the average payment for such a specialist in Ukraine. What is more, there was no transparency on rent and utility costs, office equipment, and furniture. If your goal is to reduce costs and not break the bank, blind invoice payment is not the best option in 2021. Contrary to that, your own R&D center is the place where you can establish the rules. Alcor can serve you as a trustful partner who will navigate you in an unknown business environment. 

 

Healthcare App & No Employer Branding

Before the collaboration with Alcor, one of our clients made an unsuccessful attempt to open their own offshore development center without external help. The medical platform was trying to enter the Ukrainian market but faced significant challenges with recruitment. Selective senior IT engineers were uneager to join a no-name company. Therefore, the U.S.-based firm turned to Alcor for employer branding. After a full cycle of marketing promotions, including SMM services and PR activities, the company became renowned on the local market. The next step of collaboration with Alcor was the launch of an R&D hub with our comprehensive support. It was a happy ending with effective office management, arranged legal and financial operations, and a brilliant team of software developers

 

Final Thoughts

 

In a nutshell, the offshoring process doesn’t imply getting rid of responsibility. Quite the opposite, the client themselves are obliged to weigh all pros and cons, build a corporate strategy, choose the most beneficial country to offshore, and the right partner to collaborate with. Alcor would be pleased to take care of your separate operational tasks or provide full support for your R&D office in Ukraine.

 

software-R&D-Ukraine

 

Contact Us

Drop us a line to see how we can help

We respect your privacy and will never share your data with any third party

Case studies we are proud of

Rare software engineers for People.ai within one month
image
Case:
People.ai develops the AI platform for sales teams, which requires rare engineering skills. The startup decided to hire IT talents with a special technology stack in Ukraine and started to work with several providers at once that resulted in...
View case
image
R&D team of 30 developers for BigCommerce from scratch
image
Case:
BigCommerce decided to leave their IT outsourcing provider to keep product development in-house. They decided to open an offshore development center with their own team of engineers in Ukraine. Our cooperation started from office searches and hiring skilled software developers...
View case
image
Effective IT recruitment for Tonic Health
image
Case:
Tonic Health is a product tech company from the US that ventured to enter the Ukrainian labor market to build a team of developers. Having no recruitment providers, the company faced the challenge of hiring senior engineers...
View case
image

We provide turnkey services:

own-R-and-D-office-solution

Your own R&D center

Recruitment

legal and compliance services

Legal & compliance

real estate services icon

Real estate

payroll and accounting services

Payroll & accountring

additional services icon

Additional services

Recent articles

Popular Articles

Have a question?