Today, more and more IT entrepreneurs are implementing innovative approaches to doing business. Global tech labor shortage, increasing costs, and mounting competition are the key factors that force companies to become more flexible in order to operate efficiently in the fast-paced environment. That’s how business process outsourcing (BPO) came to the foreground, enabling IT enterprises to scale up faster and at the same time cut their expenses significantly.
Although there are multiple examples of corporations using offshoring solutions successfully, it’s not deprived of cases where companies were faced with challenges. Thus, I’d like to share both triumphant stories and not-so-good ones, so you wouldn’t have to go through the painful lessons yourself but use only the best offshoring practices for your IT business.
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 defined to-do-list when choosing how and where to offshore your tech business.
The first question is “where to offshore?”. Successful examples of offshoring companies show that the choice of the destination 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.
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 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.
This is another big player in the list of successful offshoring companies. In 2020, Google officially launched its R&D center in Ukraine on the basis of CloudSimple. The 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.
3. Amazon (Ring)
Amazon successfully used offshoring as a means of expansion. In 2018, it bought the startup Ring with an R&D office in Kyiv, which 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.”
Among other prominent examples of companies that offshore IT functions are Lyft. This US-based ride-sharing company is all about creating innovations that trigger customer unrivaled experience. Thus, to take the product development to the next level and strengthen their tech community in Eastern Europe, Lyft decided to establish their software R&D center in Ukraine (as this destination has exceptionally talented engineers). Since its opening in 2021, the company’s team currently consists of 20 IT specialists and is expected to grow to 100. Their Ukrainian software developers are mostly focused on data mapping, improving Lyft’s services.
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. Based in San Francisco, People.ai decided to open an R&D office in Ukraine. At first, they tried to outsource services to several 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 Ukraine, while Alcor IT recruiters were searching for top IT specialists. As a result, we hired over 25 professionals and launched a fully equipped development office in just a month. The results exceeded all their expectations!
Among the examples of offshoring companies, there is also the thriving experience of BigCommerce. It’s an IT product company that provides innovative solutions for e-commerce businesses. They wanted to expand but faced a lack of skilled IT engineers in the U.S. Their cooperation with international outsourcing companies appeared to be exhaustive and non-productive. Consequently, they turned to our IT BPO company for cost-effective solutions in developing their product and growing a professional development team. We were pleased to provide comprehensive support for BigCommerce’s R&D center in Ukraine. In a one-month period, our client settled into their brand-new office, and within half a year their team exceeded 30 developers.
The online resale platform of second-hand clothing ThredUP was looking for ways to expand its team abroad. The company decided to open a software R&D office in Ukraine, opting for Alcor’s solution. Our team provided them with legal support in terms of office lease negotiation and legal compliance. We also hired rare tech professionals (ML specialist, Java developer, .Net Warehouse developer), as well as took over payroll & accounting operations. Having a dedicated offshore team in Ukraine allowed ThredUP to achieve unbelievable results, raising $168 million in funding from the IPO and becoming the world’s largest consignment store.
Among other successful offshoring companies are also such companies as Reddit, Samsung Electronics, Oracle, and Huawei. All of them decided to hire developers in Ukraine because this country appears to be an attractive option for business growth and development.
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 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 is a living example that shows how crucial the choice of vendor could be. It’s essential to select a provider with the proper expertise and track record.
IT Offshoring & Inappropriate Destination
It’s not uncommon among IT enterprises to choose the wrong destination when offshoring business. An American product company wanted to expand its in-house team by hiring software developers in one of the Asian countries. They knew this destination was famous for a huge pool of IT specialists and low-cost solutions, so they thought it would be a good opportunity to both save their labor funds and scale up swiftly. However, when they got down to business, the reality appeared to be far from their expectations. Instead of getting fast and effective recruitment, they went through 20 job interviews, where only 2 engineers had outstanding programming and problem-solving skills, others were junior-level coders who overwhelmed their experience in CVs and got into the interview. They possessed limited skill stacks, insufficient experience, and low proficiency in English. To save the product quality from deterioration and avoid additional expenses, the American company stopped hiring in this location and found a different offshoring destination.
Therefore, when making a decision to go offshore, it’s crucial for tech business owners to scrutinize the available locations to select the most reliable and beneficial option. Eastern Europe has been gaining momentum among western product companies, as it has over 1 million competent programmers, a balanced price-to-quality ratio, a convenient location, a business-friendly environment, and cultural similarity.
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 then reinvest your savings in product elaboration, for instance, blind invoice payment is not the best option for you. 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 R&D hub 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 US-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 in the local market. The next step of collaboration with Alcor was the launch of an offshore development center 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.
Consider Alcor as Your Trusted Partner in Offshoring to Eastern Europe
The offshoring process doesn’t imply getting rid of responsibility, but quite the opposite. The clients 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 technical recruitment and separate operational tasks to ensure the smooth functioning of your offshore team.
By cooperating with us, you’ll hire seasoned software developers from Ukraine, Poland, Romania, and other Eastern European countries within one month. We can also provide you with all-embracing business support in case you need to establish a software research and development center. Alcor’s solution includes a whole spectrum of services starting from payroll & accounting, legal compliance to employer branding, and procurement of tech equipment. By choosing only the necessary functions to be covered, you’ll maintain full control over the expenses and team.