The Hidden Differences

From experience with other projects in India, the following hidden costs are identified:

• 25% loss of productivity (e.g., for every three engineers in the US, you'll need four in India)
• 40% turnover
  • 10 working days to replace an Engineer
  • 15 days to train his/her replacement
• 2 trips/year to India for the Engagement Manager
• 4 trips/year for one offshore Engineer

For the offshore case, these are best case numbers. In particular, productivity loss is bound to be higher. Because of intense competition for talent, outsourcing vendors in India will have to hire mostly junior people, with modest skills and little experience. Engineering managers with actual experience with offshore teams put it at 50% or higher.

For Mexico, the equivalent costs were as follows:

• 10% loss of productivity
• 5% turnover
  • 10 working days to replace an Engineer
  • 15 days to train his/her replacement
• 2 trips/year to Mexico for the Engagement Manager
• 4 trips/year for one offshore Engineer

To keep things simple, we used the same number of trips for both locales. However, there's no reason why you shouldn't take advantage of Mexico's proximity to make more trips to the nearshore site. This will help you keep a tighter handle on your nearshore operation. Likewise, you can afford to have engineers from the nearshore team spend more time in the US by making more, shorter trips as needed.

The Results »