The Pros and Cons of IT Outsourcing: Globally, Nationally and Locally

Outsourcing is pretty much de rigueur for modern startups looking to conserve capital. But making outsourcing work for your startup isn’t always easy. One of the first steps is figuring out where to outsource.

There are a lot of choices. The first major decision is geographical. Should you outsource locally, nationally or internationally?

My company, GrowBiz Media, has outsourced Web design and development, both internationally and locally. Believe me when I tell you each comes with its own set of pros and cons.

Here’s a quick overview:

Outsourcing Internationally

When most people think of outsourcing, they envision coders in Southeast Asia working into the wee hours of (our) night. Turns out that many factors can make global outsourcing more difficult and expensive than it appears to be at first glance.

Pros: Low cost is the primary reason most companies outsource overseas. The time difference can also be a plus: You can send your changes to your team at the end of your business day, and have the code ready when you wake up the next morning.

Cons: The old adage “you get what you pay for” often holds true. Managing people thousands of miles away is difficult at best, so when calculating costs, consider that you may need to pay someone to oversee your overseas contractors. Language or cultural barriers can add to the complexity, and different time zones can cause as many problems as they solve.

Outsourcing Nationally

Outsourcing IT within the U.S. is gaining steam. Often called rural sourcing or near-sourcing, the movement is driven partly by companies’ dissatisfaction with the quality of overseas workers and partly by a desire to bring jobs back to the U.S.

The International Association of Outsourcing Professionals named near-sourcing one of its top trends for 2012. In places like Georgia, North Carolina and Arkansas, skilled tech workers can be found for a fraction of what you’d pay in Silicon Valley or New York, according to Rural Sourcing Inc., which matches companies with workers in “second- and third-tier” cities nationwide.

Pros: Lack of cultural and language barriers make communicating with U.S. workers easier and more convenient. The time zone differential may be a slight benefit, depending on where your business and your contractors are located.

Cons: You’ll pay more for outsourcing within America than you would overseas, and if your outsourced team is across the country, meeting in person will still take time, effort and money. Be aware that some American contractors will subcontract some or all of your projects to overseas workers. This can be fine, particularly if they’re familiar with them and their work. But when this happened with one contractor we dealt with, the results were not positive.

Outsourcing Locally

After our negative experiences with outsourcing overseas, GrowBiz Media turned to a local Southern California business when it came time to rebuild our SmallBizDaily.com website.

Pros: Face time is the major advantage of working with a local company. While most of our communication still takes place by email and conference calls, when we undertake big projects or major changes, we can meet in person to brainstorm ideas and sketch out plans. Another advantage: If you do end up hiring full-time in the future, good contractors often turn into good employees.

Cons: By outsourcing to workers in your area, you’ll have to pay the going rate - which can wipe out most of the cost benefits. As with national contractors, some local firms may outsource all or part of your work overseas.

Key Questions

Since all three options come with pros and cons, how do you decide what’s best for your situation? Consider these issues:

Timeliness: Is this a rush project that simply can’t be late? If deadlines are essential, having the team accountable and close at hand could trump all other considerations.

Complexity: A simple project that doesn’t require much direction, has some “wiggle” time built into the schedule and has a bit of room for error may be most economically handled by an overseas team.

Personality: If you don’t have a problem with a more impersonal relationship with your team, overseas contractors could be fine for you. But if you’re a people person who needs face-to-face interaction, you may want to stick with local, or perhaps national, contractors.

Image courtesy of Shutterstock.