There is a time and a place for everything–, even SAP project offshore activities. Unfortunately in the quest to save money the wrong approach can sound good on paper but cost you far more than the sales pitches would lead you to believe. The SAP offshore sales pitch uses enticing rates like getting an offshore developer for about 15 to 20% the rate of an onshore resource (about 1 / 5th to 1 / 7th the price). The initial reaction to all of the sales pitches is “wow, that will save us a bundle!” The truth is sometimes it does and sometimes it does not. And in many cases it can even cost you far more in hidden costs than local (higher priced) developers.
This is the first in a 3 part series on SAP offshore projects:
- Part 1 – SAP Offshore Project Development Experience (this post)
- Part 2 – Hidden SAP Offshore Development Costs
- Part 3 – Where Does SAP Offshore Development Make Sense?
I’ve worked on 3 projects where off-shore resources were used for the initial project and 2 others where they were used for upgrade. This is the “inside scoop” from my experience.
The Real Reason Offshore Development Seems So Cheap
Let’s set the record straight on one thing immediately, there is a REASON those rates are that cheap. In the global SAP world it has less to do with the wages of the host country than you might realize. In the SAP space there is still strong demand for strong SAP skills globally so market forces plainly dictate that real experience will pay market rate no matter what country it is. Work Visa requirements for many countries with high SAP skill demand will allow the importing of actual skills –, heck, they let massive numbers of total fakes and frauds in the United States so real experience (rather than faked) makes it easy to move out of these host countries for far higher wages.
When Off-shoring Might Cost You More Than Local Resources
When your SAP project depends on large amounts of custom development work you may be in for reverse “sticker shock” at the actual hidden costs. And by reverse “sticker shock” I mean it is like getting a car for 25% of what you thought you would have to pay BUT you find out the tires, battery, seats, steering wheel, and all of the key components of the car are “required” add-ons that you have to pay for separately. But they only show you the nice, finished, new car with all of the “extras.” The actual cost for a HUGE portion of the offshore development is hidden and that rate you were quoted is a joke!
Your “offshore” resources have very little if any actual SAP development experience no matter what kind of a sales pitch you are given. What you are “hiring out” is some smart college kid who is learning on your dime but *maybe* under the supervision of an experienced developer. Yes, the rates are lower but in today’s economic climate you could probably find some aggressive local college kids who would do as good or better, for the same wage, and without any language barriers. Maybe you should consider that and bring in one of those expensive local resources to train, shepherd, supervise, and teach them. At least then you have the skills in house.
Some of the huge costs that are buried for a new project are in the whole development process itself. SAP functional consultants, who are typically higher priced than technical or development resources, end up taking 2 -3 times the effort spelling out requirement details. That extra effort translates into hidden cost that you do not see but it creates a great target for the offshore resources to “blame” for why they are struggling–, “I’m waiting on the functional consultant…” or “the spec had to be re-written…” or “it didn’t have enough detail…” A truly experienced local resource already knows and understands the table structures, data sources, actual requirements, and has probably done similar SAP development work or reporting. With a higher level spec in plain English, rather than detailed design with pseudo-code required for offshore work, local SAP resources can churn out a polished first pass development effort which needs only minor tweaks, takes less time to test and adjust, and has better performance.
The actual cost for a HUGE portion of the offshore development is hidden and that rate you were quoted is a joke!
There really are situations where Offshore development is ideal for your SAP project, just don’t be surprised if the overall project “savings” you expect don’t materialize on a new project or one with complex development requirements.
How Can You Tell If You Are Being Bitten By Huge Hidden Offshore SAP Costs?
The one simple metric that will clearly illustrate if you are a victim of hidden offshore development costs is the total CALENDAR timeline for all development work. In other words, after you get past the excuses, the finger pointing, the supposedly finished items that are always being reworked, etc., the calendar timeline tells all.
No matter how many times the offshore development tries to suggest they are having problems getting “complete” functional specs, or how often they say they are done but have defect after defect to resolve, or whatever the excuse is, the simple calendar test will tell you the TRUE project impact. If it takes 90 calendar days to complete development to the point that it can be used (defects corrected, tested, and ready for production) then it doesn’t matter if they estimate and then claim completion at 3 weeks. The other 9 weeks to actual completion is project time that is taken from SAP functional resources, reworked development, business resources, etc. So there is a huge hidden cost no matter what claims sales people may offer.