The returns on offshore engineering capacity: cost, hiring speed and continuity

Offshore engineering is normally presented as a cost decision and evaluated on hourly rate. Rate is the most visible difference and the easiest to compare. In the engagements we run it accounts for the smallest share of the value delivered, and an engagement justified on rate alone tends to reproduce the problems described in our note on the offshore operating model.

This article sets out the four returns offshore capacity produces, the condition each one depends on, and the measurement that confirms it.

Fully loaded cost rather than rate

An hourly rate comparison understates the difference because it compares one line of a cost structure. The cost of an in-house engineer in Riyadh or Dubai includes salary, visa and residency processing, housing and transport allowance, medical cover, end-of-service benefit, workspace, equipment and the recruitment fee that placed them. Several of these are fixed on headcount rather than on utilisation, and they persist through periods when the roadmap is light.

Offshore capacity converts most of that structure into a single contracted monthly cost that moves with the number of engineers engaged. The comparison that matters is total annual cost per delivered engineer, including allowances and the end-of-service provision, set against the contracted cost for equivalent seniority.

• Condition. The comparison holds only where seniority is genuinely equivalent. Two engineers with the same number of years of experience are not interchangeable, and a rate that looks favourable against a senior engineer is often quoted against a mid-level one.
• Measurement. Total annual cost per engineer, with allowances and end-of-service included on the in-house side and management overhead included on the offshore side.

Hiring speed is the larger return

Senior engineering recruitment in the GCC runs on a long cycle. Sourcing, interviewing, offer, notice period, visa and residency processing and relocation in sequence commonly place a new senior engineer at a desk between ten and sixteen weeks after the role is approved. For a specialised skill the sourcing stage alone can exceed that range.

Offshore capacity draws on an existing team and a labour market with more engineers at every level of seniority. In our engagements an additional engineer joins an active programme within two to three weeks of the decision, with no visa dependency and no office expansion. For a programme with a committed delivery date, the difference between three weeks and fourteen is the difference between recovering a slipped quarter and renegotiating it.

The organisations that get the most from offshore capacity treat it as a way to change delivery capacity inside a quarter, which is something a local hiring plan cannot do.

• Condition. The receiving organisation must be able to onboard at that pace. Repository access, environment provisioning and a decision-maker available during the offshore working day are the constraints that most often delay a start.
• Measurement. Elapsed days from capacity decision to first merged pull request, compared with the equivalent figure for in-house recruitment.

Continuity on the codebase

Domain knowledge accumulates in the engineers who hold it. An engineer who has worked on a billing system for two years carries the reasons behind its exceptions, and that knowledge is expensive to rebuild. Engineering attrition in the GCC is driven partly by mobility between employers competing for a small pool of senior candidates, and a departure takes the knowledge with it.

A contracted offshore team changes this in two ways. Retention in the local market is generally longer at equivalent seniority, and the contract can require a handover period and a named replacement before an engineer rotates off. Both are commercial terms rather than aspirations, and both belong in the agreement at the point of signature.

• Condition. Continuity has to be contracted. A supplier free to substitute engineers at will produces the same knowledge loss as open-market attrition, with less visibility.
• Measurement. Median tenure of the engineers assigned to your programme, and the number of unplanned substitutions over the last four quarters.

Working coverage

Pakistan runs one hour ahead of Arabian Standard Time. A Karachi team working Gulf hours is available for the whole of a Riyadh, Dubai or Doha working day, which removes the overnight question-and-answer cycle that slows distributed delivery. The same position gives a working overlap with European mornings and an operational window extending past the close of business in the Gulf, which is useful for scheduled release work and for incident cover.

• Condition. Coverage is a function of the hours the team actually works. An offshore team on local hours in a market four or five hours behind produces a short overlap, and the overlap is what determines delivery pace.
• Measurement. Median time from question raised to question answered, measured in working hours.

Where the returns do not apply

Offshore capacity suits a defined product with an accountable owner inside the client organisation and a programme running beyond a few months. It suits poorly a discovery phase in which requirements are still being established through direct stakeholder contact, an engagement of one or two engineers where coordination overhead consumes the saving, and an organisation without a decision-maker reachable during the offshore working day.

The last of these is decisive. A team that cannot obtain a decision inside its own working day will either stop or proceed on an assumption, and both outcomes cost more than the rate saves.

How to evaluate a proposal

Four figures make offshore proposals comparable, and all four are answerable before a contract is signed: total annual cost per engineer at matched seniority, elapsed days from decision to first merged pull request, median tenure of assigned engineers with the number of unplanned substitutions, and median response time in working hours. A supplier unable to produce them from recent engagements is quoting a rate rather than a capability.