Throughout the ’90s, software development executives have considered offshore development as part of their cost management strategy to keep spending down. They did this by outsourcing many functions and projects to Ukraine, India, Mexico, Costa Rica, Argentina, or Russia. On Friday morning last week, U.S. Citizenship and Immigration Services announced that it had already reached its congressionally mandated threshold of 85,000 visas for the new fiscal year, so we could see a massive bump in offshoring.
After nearly two decades of expansion, software makers have learned a lot of lessons on what works and what doesn’t in offshore software development.
When it comes to outsourcing, India pioneered the practice — with the size, skills, and maturity of its software talent pool, India became the destination for most companies seeking to offshore. However, despite its enormous talent pool, the cost savings came with countless shortcomings.
- Talent retention: India’s labor pool is becoming more expensive, and it’s getting difficult to keep top talent working on your projects. Many developers start on your project with minimal domain knowledge, learn their skills on the job, and then leave once the job is no longer challenging. Companies such as Microsoft, Adobe, IBM, EY and other large multinationals offer top dollar (often at a 30 percent increase) to attract your trained developers and make it incredibly difficult for you to hold onto them.
- Communications: Language and communications have improved over the years but are still imperfect, resulting in offshore workers misinterpreting instructions.
- Time zone differences: Work hour difference continues to be a challenge. Many Indian software developers have to work late into the night to accommodate our time differences. For larger implementations, you need an additional hire (an onshore coordinator) to ensure clear communications from the U.S. to the offshore team.
- Goals alignment: The talent pool of an outsourcing company does not have your company or vision in mind so they are motivated by the type of work and pay.
Over the years, I’ve built engineering teams in Denver, Romania, Berlin, New York, and San Francisco, and each location has its own strengths and weaknesses. Technology hubs in New York and San Francisco have world class concentrations of tech talent, but they are also fiercely competitive markets where top engineers can call their own shots.
Most recently I’ve been really pleased with Toronto’s engineering expansion initiative. The Toronto-Waterloo Corridor has always been in my radar over the years, through Blackberry and the University of Waterloo, and we are seeing an ever growing ecosystem of successful technology startups emerging there. Last year, Thomson Reuters made a large expansion of its Canadian operations with the creation of a new technology center in downtown Toronto. Google has a presence near Waterloo, and the University of Waterloo provides a sizable pipeline of students.
There are several reasons it makes sense to sourcing your software development work from Toronto:
- Increased engineering talent: Canada has a growing world class engineering talent pool. The University of Waterloo has one of the largest co-op programs, and the University of Toronto has a top engineering program. They are on the same eastern time zone as New York. In recent years, many former Blackberry engineers have transitioned into other sectors and seeded startups. The startup community and ecosystem in Toronto and the Corridor is now vibrant and diverse. Shopify, a leading e-commerce site with offices in Toronto, is pushing the envelope on multiple fronts, making startups in Canada bigger and badder. For example, on its engineering website, the company is sharing its work through open source and blogs on best practices. We’ve also seen a major push in Toronto around startups focused on data science and AI/machine learning. All in all, the number of tech savvy engineers to draw from is growing rapidly. More importantly, there are no language or cultural barriers.
- Easy travel: Travel from the Newark airport to the Billy Bishop airport (downtown Toronto) is 45 minutes, which accommodates frequent face-to-face meetings. Last time I checked, airfare is often under $400 round trip.
- Competitive costs: The Canadian government has long offered a research credit for firms that create intellectual property, and these credits can help offset development costs.
- Technology stacks are similar: There is a broad base of common technology knowledge across the U.S. and Canada on using such core capabilities as AWS, Azure, open source stacks, iOS, and Android.
Toronto’s tech scene is rapidly approaching that of San Francisco and New York. If you’re looking to staff or outsource a software development project, you’ll want to give it a look. There’s a lot of talent, opportunity, and innovation right across our northern border.
James C. Chou is CTO at WorkMarket. He was previously CTO of Shutterstock.