HACKER Q&A
📣 jwallyp

Considerations for building a near shore development team?


I am working on a project and we are rolling out an MVP in the next few weeks. There’s a lot of learning to be done but it is becoming quite clear that we will need additional engineering resources in the coming months as I am the only designer/engineer on the founding team. The other cofounder focuses on marketing/sales/operations and this split has worked well for us. We have access to capital but want to be frugal and stretch our budget. We are looking at building a near shore development team. The current members as US based and we want to hire in Mexico or Central America so we are in similar time zones and can avoid latency. These new hires would be treated like just the same as if they were joining locally, with stock incentives, salaries at top of their market, shared company culture, perks etc.

With that context what is any advise you all have for executing this strategy? Resources for finding and hiring talented near shore engineers (this is the biggest question)? Considerations for things like payroll? Any and all insights appreciated.

  👤 davismwfl Accepted Answer ✓
Oh boy. I can tell you this is not an easy out to save a few bucks. It is not inexpensive or many times efficient if you don't have experience doing it prior. I have had teams scattered around the globe since the late 90's, and I have done near-shore, off-shore, hybrids etc. For the past few years I have had the primary team I work with spread from California to Florida and India.

Some basics:

1. Stock options are not a good incentive with many other cultures, it is cash or nothing. This is because for them to own U.S. securities (stock, options, "property") is not easy, straight forward or even doable sometimes. And many cultures just don't care cause they don't trust US companies "options", so they want cash. Cash still is ok cause typically you can find lower salaries, but to find top quality don't expect to be paying $10-15/hr, you will still be in the $30-60/hr range (loaded) most places near shore for quality devs with experience working internationally.

2. Even staying on the same timezone or close timezones, you will find that different cultures work differently. So your planning, requirements and documentation will need to change, that could be minor or major. If you are working with many different cultures then essentially your level of documentation goes to the highest possible, which means you will become a document creator and very little else. In fact you will likely need help writing documents and then validating the results.

3. Costs to do this all legally and protect the IP internationally becomes a real expense. This balances out when you are hiring say 20+ people outside the Country, but for less than that the costs are hard to justify. Also, hiring as "employees" vs contractors is a huge difference in costs and associated liabilities.

4. No matter what anyone tells you, if you even set these people up as contractors you will have to prove to the IRS that they are not working in the US (and typically won't travel here for work) and depending on what treaties exist between the Countries you still may be required to pay taxes to the U.S. or to their Countries government directly. And even if you don't have to pay the ~30% U.S. tax on their wage because they are truly only doing work overseas and they are not US citizens than you will still have to file reports with the IRS about the money you are sending overseas and who the beneficiaries are. Some of this is for anti-terrorism and some just so they can track your money to see if you are doing anything illegal. To be clear, this isn't a massive stop all issue, but all depends on where the people are at and what citizenship they hold. It can be a very simple thing to do sometimes, and other times it is quite complex.

5. Even in the same timezone near-shore development will be slower than working with Remote U.S. workers. Cultural differences cannot be underestimated and unless you have done this before you will run into a lot of little things that add to the schedule you never would have thought of. Language differences can not be underestimated, even when the people speak English clearly if it is not their primary language and they haven't worked in the U.S it can be a major challenge. Idioms, and phrases we take for granted will not be understood so you spend a lot of time making sure things are clear and free U.S. specific dialect/phrases etc.

6. Perks, healthcare etc can all add a lot of headaches too, so this may not be doable in some cases. It will all depend on which Countries you use.

Near & off shore teams are very doable, but a lot of startups just say fuck it and don't do it legally or properly until they get larger and wind up finding out none of their IP was protected and they potentially have major U.S. tax liabilities. Many startups just never get to that point because they fold so it doesn't matter. Obviously having done this a lot, I am not against it at all, but I have seen a lot of nightmares. Smart people exist everywhere, the U.S. has no monopoly on intelligence, and yea economies being what they are you can save money in some ways going offshore. But if you are talking about needing 3-5 developers I don't agree you will find the savings you think you will. What you have to think about seriously, is if you do this especially hiring them as employees you go from a startup in a single Country to being a multi-national company, which many Fortune 500 companies fail at, so you really have to think through this.

I have had this chat with quite a lot of people and just had it the other day with someone and it blows my mind how little thought people give to how difficult of a problem this is to solve properly. And if you need 3-5 devs it is just never worth it IMO. You will get further faster just hiring locally or at least remote in the U.S./Canada.