So it's a recession, cost cutting is rife, and there's plenty of articles and books around outsourcing to India or China. It all seems to make sense, US$12/hour for a developer to put together your amazing website, or integrate your backend systems. Great in theory, but in my experience not so great in practice. There's a couple of obvious reasons why it doesn't work so well, and here's why:

Greatest Profit for the Outsourcer

Put yourself in the shoes of an imaginary Indian outsource firm Hyderabad OutIT. Hyderabad OutIT has 3 markets, the U.K., the U.S., and NZ. You have 150 developers, across varying levels of skill. You grade your staff A, for the best and most experienced, B for some experience but still has a way to go, and C for the graduate programme and those with almost no experience. Given your each of your markets size and exchange rate, where would you send your A grade staff? B grade staff? And the lowly C's?

Based on this simple math, if you outsource from NZ to an outsourcing firm that services other markets, it is highly unlikely that you'll get the highest quality of staff that any outsourcer has to offer.

Communication

I've read some great books and articles about outsourcing to India, e.g. "The 4-Hour Workweek" by Timothy Ferriss and "My Outsourced Life" in Esquire magazine, and they rave about the English skills of their respective outsourcing experiences. I have tried some, and have found them lacking in this area. Many of the books and articles talk about accent neutralisation, but this does not in reality seem to happen to all the people you might talk to from your outsource partner, nor does it give them the experience in listening to the Kiwi accent!

However, possibly worse than this, is that due to the markets they service, outsourcing companies often have only 2 phone numbers - a U.S. one and a U.K. one. So thinking about call quality here, when you call your outsource partner to have your weekly project discussion, your call goes to the U.S. (or U.K.), then is routed to India (or China or anywhere), and then back again via the U.K. or U.S. Talk about lag!

Additionally, there seems to be a culture of agreement, even when the message isn't properly understood. Saying 'do you understand' will usually elicit an immediate 'yes' response, and then the result you get is completely incorrect. So instructions have to be well defined, communicated, written down and then asked to be paraphrased back to ensure understanding. And remember you're paying them by the hour here, as well as taking a lot of your precious time to work with this structure.

Timezones are also an issue, meaning your project has many meetings outside of normal business hours, cutting into personal time, and if you have contract local project managers, costing you more for the out-of-hours time. And then when you have an urgent issue at 9am, you have to wait a few hours for the country to wake up!

Local Skills, Local Dollar

Finally, there are many great local companies providing development skills, without the risk of exchange rate fluctuations, without communication issues, without international travel and accomodation costs, and being across town or a short flight away if you need them now. You can get around the table with them to discuss requirements or issues, and formulate plans. Though often not able to compete with the numbers of reference projects due to the NZ market size, they make up for it with energy and can-do attitude that is inherent in the NZ culture. Not to mention the drinks you can share at the project-close party.

And yes, of course TEIQ is one of those great small companies.