We therefore ran a controlled experiment, pitting a team of AI-assisted software engineers and quality analysts against a ‘human-powered’ group who were only allowed to use their own brains.
Here’s what we did and what we discovered…
How we ran the experiment
In all, a total of 52 of our people took part in our experiment, over a series of two hackathons.
We split them into two groups:
- One assisted by AI tools, with 30 engineers and 8 automation quality analysts (QAs)
- A control group that was purely human-powered, with 12 engineers and 2 automation QAs – allowing us to baseline the potential gains of using AI
We gave each group three hours to perform the same task.
For the engineers, the task was:
- Develop a .NET Web API to dynamically process mathematical expressions
- Implement a custom PEMDAS-based algorithm for expression evaluation, without using any third-party libraries
- Write unit tests to validate the functionality of the solution
- Test the implementation using five provided edge cases
And for the automation QAs:
- Write three automated functional test scripts for specified scenarios
- Test these functions using the provided test web shop application
The tools used by the AI-assisted team were:
The results
We expected the results of this experiment to be positive in favour of the AI team, but we were still amazed by the difference the AI tools made in terms of enhancing speed and quality.
Here are the overall outcomes we recorded…
On average, when compared to our human-powered team, our AI-assisted engineers were able to:
• Complete the coding nearly 2x (44%) faster
• Conduct the unit tests just over 2x (51%) faster
• Cover nearly twice as many (83%) more edge cases
And when we compared our fastest human-powered engineer with our fastest AI-assisted engineer, the results were even more impressive: the AI-assisted engineer was nearly 5x (78%) faster.
We also compared a human-powered engineer with one who already had experience using AI tools (in this case, GitHub Copilot). We found that:
• For the coding, the AI-powered engineer was 4x (75%) faster
• For the unit tests, the AI-powered engineer was 6x (83%) faster
This demonstrated to us that, as our team of engineers become more experienced with AI tools, our productivity gains will increase even further.
For the QAs, we also saw a significant improvement in the times it took the AI-assisted analysts: the average overall time was just over 2x (54%) faster with AI.
And, as with the engineers, we compared the two fastest times, and found that the first AI-assisted QA to complete the task was 9x (89%) faster.
A comparison of AI tools
We also aimed to make some comparisons between the four different AI tools that we used in the experiment, in particular with regard to user experience, productivity gains, and security and IP protection.
For user experience: GitHub Copilot came out on top. Our developers rated it as a robust and mature tool, suited for .NET application development. It offered consistent suggestions and responses as well as strong context management. Cursor and Codium came in joint second place.
For productivity gains: Cursor came out on top, allowing our team to be 3.2x (69%) faster than human-only developers when it came to completing the full task. GitHub Copilot was in second place, making the team 2.7x (62%) faster.
For security and IP protection , we found the following:
• GitHub Copilot transmits code snippets from the integrated development environment (IDE) to GitHub in real time to generate relevant suggestions. Once the suggestion is created, both the prompt and the suggested code snippet are immediately discarded—but note that this is only the case for the Business and Enterprise licence options.
• Cursor provides a Privacy Mode that can be activated during the onboarding process, ensuring that no code is stored on their servers or by their sub-processors.
• Qodo: Paid licence user data is not used to train its AI models. The data is deleted from their storage after 48 hours. Also,
they provide an option for a zero-retention policy, where data is removed immediately if users specifically request.
All three tools are certified for SOC2 compliance.
(Note that we didn’t assess Tabnine as we felt the model wasn’t mature enough and its users struggled to complete the task.)
Conclusion and our next steps
Our experiment made it clear that AI could offer us some huge benefits in productivity and quality. In every aspect of the tests we conducted, from coding to unit tests to automated test script production, there was a clear time saving – in most cases very significant. It will also enable us to improve the quality of our outputs, as AI-generated code was able to give us broad edge case test coverage.
Furthermore, we expect our efficiency gains to improve further as it is clear that development speed increases with experience when it comes to using AI tools. We found that just a short amount of training significantly accelerates outputs.
As for the future… Our product owner colleagues also ran an experiment to understand how AI can accelerate and improve the product discovery process. We are now looking at how we can use their AI-generated requirements as prompts to build applications – ultimately with the possibility of using AI-assisted processes from an initial description of requirements right through to final outputs.
Meanwhile, right now, we’re already starting to reap the benefits of AI-assisted development with some of our clients, delivering even greater value for them.
If you’d like to find out more about how AI-assisted software development can benefit your business, get in touch now.
Aleksandar Karavasilev, CTO at Damilah
But my husband, who at the time had more experience than me in using AI, suggested I was asking the wrong question. He recommended that I reframe it as: “Are there any scientific articles that prove placing a chopped onion in a room will help with a cough?”
This time, the response was far more credible and useful (and, it turns out, onions do really help).
I learned an important lesson here: although the potential for AI is enormous, when most people engage with it for the first time, it’s usually in a superficial way, often leading to poor results. In order to gain maximum value from the tools, and improve outputs, it’s worth learning the best ways to provide context and specificity, while also asking for an answer based on relevant sources.
Putting AI to the test
At Damilah, we’re very excited about the transformative potential of AI. We have, therefore, been exploring how it can augment our business activities and help deliver greater value to our clients. For example, our engineering teams ran a series of hackathons to calculate whether using AI tools could accelerate software development and improve quality (in a nutshell: yes, it can – hugely).
At the same time, we wanted to test whether AI could do the equivalent for our product discovery and inception processes – and if so, in what ways. So we ran an additional hackathon to examine this. In it, we asked three teams to work on a fictional brief, using a variety of AI tools, including ChatGPT and Perplexity (using Claude).
As with our engineering colleagues, the results were astounding.
We discovered that AI could significantly reduce the amount of time we spent on discovery – by anywhere from 20% to 50%, depending on the task and the tools being used – and with results that matched the quality of the work done without the assistance of AI.
And, most importantly of all, it revealed areas where AI could free us from routine, repetitive work, allowing our people to focus on higher-value activities.[
Accelerating and improving workflows
Specifically, we identified two primary ways that AI can accelerate and improve workflows:
- Jump-starting a project: For example, when preparing for a client interview, we can use AI to generate an initial list of questions based on the context we provide. These AI-generated prompts serve as a springboard, helping us refine ideas faster, and ensure we’ve covered everything.
- Enhancing existing work: In other cases, we can input a draft of some work we’ve already created, prompting the tool to polish and improve it, as well as asking whether we may have missed something. This approach allows us to benefit from AI’s ability to enhance clarity and suggest useful amendments and additions.
Another of our most impactful findings from the hackathon was the way in which we could use AI to accelerate the creation of wireframes with Figma. This aided our conversations with developers while showing similar levels of quality outcomes compared to when we use the traditional discovery processes.
And a real game-changer has been using AI tools for writing acceptance criteria. Traditionally, creating detailed, actionable user stories (which list the requirements that a developer has to meet) is time-consuming and mentally draining. Now, however, by giving a well-crafted prompt to an AI tool, we can generate acceptance criteria in a matter of minutes. This not only saves time but also ensures consistency, freeing our teams to focus on other priorities (more on that later).
AI as an enabler
Despite these extremely encouraging results, we aren’t getting carried away with AI. While it accelerates and enhances many of our processes – and we’re already using it to speed up workflows in live environments with clients who have agreed to us using AI tools – we also believe there should always be a human involved every step of the way.
For us, quality is paramount, so our product owners will always review and refine the AI outputs to ensure they meet our standards and our clients’ needs.
We’re also conscious that an over-reliance on AI may lead to diminished problem-solving skills – a phenomenon akin to forgetting basic arithmetic because we’re accustomed to using calculators. To counter this, we view AI as an enabler, not the be-all and end-all, so will always ensure our people develop and maintain those key analytical capabilities. Above all, AI’s purpose is to enhance human creativity and decision-making, not replace them.
Furthermore, we’re wary of the common problem of ‘garbage in, garbage out’. That is, as I found out with my first experience of AI, it’s essential to take the time to learn how to craft well thought-through prompts and to train the model. AI tools can only become that valuable enabler and accelerator if we ensure we have the skills and patience to do this.
Focusing on value-creation
By learning to use AI in the most effective ways to perform routine and time-consuming tasks, we’re enabling many of our people to spend more time focusing on high-value activities, such as deepening their market understanding, engaging more effectively with stakeholders and shaping product roadmaps.
And, perhaps most excitingly of all, it means we can experiment with bold ideas that we perhaps wouldn’t have risked testing previously as we’d be concerned about the time it would consume. Instead, it enables us to ‘fail fast’ in our search for innovative solutions that genuinely solve our clients’ problems and help them to meet their objectives.
In fact, if I was a potential client looking for a software development partner, I’d always choose a firm that has already successfully established AI tools into its processes. That’s because their teams will be unburdened by all the mundane, repetitive work, and able to truly focus on building a highly creative partnership that delivers outstanding results.
To discuss how our AI-accelerated workflows enable us to deliver greater value for your business, get in touch now.
Iskra Ristovska, Principal Product Owner at Damilah
And who could blame them? As technologists, we’re all excited about what AI can do for us, and we’re all asking the same question: how can we leverage AI tools to improve productivity and help our teams – and our clients – achieve their objectives?
Fortunately, those developers didn’t stay annoyed for long, as we let them use AI in a second hackathon.
Here’s what we did…
A series of controlled experiments
We wanted to establish some clarity, for ourselves and our clients, regarding the impacts AI can have on software development. We fully appreciate that some companies are just beginning to explore AI-assisted development, while others are already integrating it into their workflows. But wherever you are on this journey, the potential of these tools to deliver real, measurable value is undeniable – and we were keen to understand that in greater detail.
So, we designed a series of controlled experiments. First, we split our engineers into two groups: one using traditional methods (the disgruntled ones); the other using AI tools like GitHub Copilot (the far happier ones). We then gave each team a series of identical tasks to complete, which included developing code and testing it.
Then, in the second hackathon, we expanded the experiment to include a wider range of AI tools, such as Cursor, Codeium and Tabnine, and gave the developers short training sessions on using them effectively.
And the results were striking. While the engineering teams using traditional methods delivered great work in a reasonably good time, the ones using AI completed the tasks far more rapidly – sometimes nearly five times faster – and with a higher degree of quality, finding edge cases more effectively and producing better unit tests.
For quality analysts, the impact was even more pronounced: AI-assisted testing was up to nine times faster and improved the ability to identify edge cases, leading to significantly higher-quality outcomes.
Overall, across all our experiments, we found that the average time taken to complete an entire task was around twice as fast.
What’s more, a team of colleagues conducted a hackathon to test the value of using AI to accelerate and enhance our product discovery and inception processes – with equally astounding results. (find out more here)
Delivering added value for our clients
We are now starting to roll out the usage of AI into live environments with our clients, while leveraging the learning from our experiments.
One of the key benefits we’re finding is that – as well as the significant acceleration in pace – AI removes much of the boring, repetitive or time-consuming work, such as writing unit tests, troubleshooting code and referring to community forums for solutions. This allows our developers to focus on more interesting – and more valuable – activities.
For instance, in a recent live case with one of our clients, two developers struggled for hours to resolve a specific issue. When they finally turned to an AI tool, they fixed it in just 10 minutes, enabling them to move quickly onto a higher-level task.
Another value-driver is that we’re able to share the results of our experiments with our clients. We understand that many of them do not have the time or resources to run hackathons of this kind, due to the day-to-day pressures of their business. But, thanks to our partner-shoring.
approach – where we build fully integrated teams with our clients, all working towards the same goals – the insights we have developed are available for our mutual benefit. This includes not only productivity metrics, but also operational best practices, the ways AI can be integrated into workflows, and identifying the most effective AI tools for specific tasks.
Addressing the risks and challenges of AI
Despite the outstanding success of our experiments, we are also fully aware that there are several risks and challenges that need to be addressed with the adoption of AI.
We believe that security and the protection of intellectual property (IP) should always be a primary concern, and that is no different when it comes to the use of AI. To mitigate this, we’ve implemented strict policies and only use tools with advanced security safeguards. For example, the tools will immediately discard any code snippets or prompts that we use once they have generated a suggestion.
Another important challenge is ensuring that our engineers maintain ownership of their code and there is always a human in the loop at every stage of development. In its present state, AI cannot replace human judgement and expertise. While it nearly always generates great suggestions, it’s still up to our people to validate them, adapt them to our specific needs, and check for errors.
Where next?
As for the future… we’re truly excited. The pace of AI development is astonishing. In just a couple of years, we’ve seen transformational advances – and the next five years promise exponential improvements. As AI tools mature, the opportunities for end-to-end software development based on a series of high-level business requirements are becoming increasingly feasible.
In the meantime, we’re committed to staying ahead of the curve. By continuously exploring new tools and refining our workflows in a constant search for improved quality and efficiency, we’re not just enhancing our own capabilities – and keeping a smile on the face of all our developers – we’re driving valuable innovation that delivers measurable benefits for our clients.
To discuss how our AI-enhanced development – and the experiments we’ve been conducting – can benefit your business, get in touch now.
Aleksandar Karavasilev, CTO at Damilah
More than anything, companies should be considering how they can achieve a better balance in their workforce. UK-based businesses will always need to have employees in this country, especially those who are in customer-facing roles. However, when it comes to other positions, such as software engineers, it’s even more important to take a carefully considered view on where to base them.
Near-shoring – or, partner-shoring, where a client and near-shore partner work closely together as a single team to achieve common goals – is a solution that can not only help to keep costs down, but also reduce your risks and increase flexibility when it comes to resourcing.
It’s not just about the money…
One of the most obvious and immediate benefits of partner-shoring is financial, which can be a huge upside, especially when a lot of businesses are just beginning to emerge from some challenging years.
What’s more, partner-shoring can offer a greater degree of certainty, where your labour costs are fully known. Any company that has just hired a lot of UK-based employees will now be reeling from the shock of the Budget, as few anticipated the NI hike, or for it to be quite so extreme. And, of course, there’s no certainty that the costs to employers will stop there – there may well be further increases in taxation to come.
By partner-shoring, it’s possible to agree costs in advance and only pay for the work that is produced for you – so, for example, not having to cover people’s sick leave or parental leave which can often be an unknown quantity.
Having clarity on costs in this way makes it a lot easier for companies to plan ahead, particularly in these uncertain times when a wide range of external factors beyond mere NI rises – such as volatile market conditions – can create significant challenges for businesses.
Added to this is the enormous benefit of flexibility. The ability to scale up and down relatively painlessly is a valuable attribute for many businesses, and having a near-shore partner allows you to do this seamlessly, while the responsibility of employee protections remain the concern of the business you’re partnering with.
Acting responsibly for maximum value
That said, it’s important to emphasise that outsourcing some of your company’s labour requirements shouldn’t mean acting irresponsibly or turning to an unethical supplier that exploits its workforce.
In the outsourcing sector, there are undoubtedly bad actors in relatively deregulated markets who will underpay their employees and offer them few, if any, benefits in order to keep costs as low as possible.
In my experience, there is no value in this for anyone involved. Companies that do not invest in their workforce will earn very little loyalty from their employees. This can lead to not only lower productivity and poor outputs, but also high attrition rates that result in large amounts of key knowledge being lost on a regular basis.
On the other hand, near-shore firms that invest in their people and constantly work hard to ensure they have good employee experiences will always deliver fewer risks and greater benefits – and therefore greater value – to their clients. And that’s exactly what we believe in, here at Damilah. We invest heavily in training to ensure we enable our people to reach their full potential, as well as offering an attractive benefits package. By doing this, our employees pay us back many, many times – and our clients also reap the rewards of this.
In particular, we are proud that our annual staff turnover rate is just 2%. This saves on the expense of recruitment and onboarding (thus helping to keep costs lower for our clients), ensures that essential knowledge and experience remains within the company and is there for our clients’ benefit, and increases the quality, consistency and speed of our outputs.
Look before you leap
One final point to make is that, although the severity of the measures regarding NI may have come as a shock to many, you should avoid making a knee-jerk reaction.
It may be tempting, for example, to immediately cut your UK workforce or instantly put a freeze on recruitment, and transfer as many roles as possible overseas. While this may ultimately be the wisest course of action for certain businesses, it’s important to take a considered approach to finding the optimum balance in your workforce, rather than immediately jumping to the first solution that springs to mind. It’s also worth taking the time to find the right partner to work with.
Here, the benefit of experience and expertise can really pay dividends and help you to deliver the value for money and flexibility your company requires.
At Damilah, we have decades of experience that we are happy to share, as well as a team of highly skilled and motivated near-shore employees who partner effectively with our clients to deliver outstanding outcomes.
To find out more about how you can minimise the impacts of the Budget on your business, get in touch now to discuss our range of services.
Iain Bishop, founder and CEO, Damilah
But these aren’t just heads. These are people – and because you’re a good manager, you care about them. You’ll have spent time helping them develop their careers, improving their technical and other skills; and you’ll have got to know them as individuals and maybe socialised with them, their partners and families.
When the scale-down happens, in the first instance you may need to put a lot of roles at risk, creating widespread uncertainty as people worry about their livelihoods. Then you may have to lose some outstanding colleagues whom you’ve nurtured over the years and may count as friends.
It’s really, really hard.
What’s more, you may get away with this once by explaining it’s a one-off situation that won’t happen again. But what if it’s not? Rarely will you be able to go through a similar process again without risking the best of your team quitting and leaving behind a demoralised group with whom you’ve destroyed all trust and the great working relationships you once fostered.
I’ve been there myself several times. So, over the years, I’ve developed a highly effective strategy for avoiding this kind of problem, that allows you to scale up and down quickly and painlessly. It involves a three-pronged resourcing strategy: your own on-shore team, a partner near-shore team, and your own near-shore team.
Rather like the way in which we all use cloud-based services to expand and contract the tech resources we need as and when required – and only pay for what we use – this strategy enables you to grow and reduce your team in a flexible way while optimising costs.
The difference, of course, is that we’re talking about people here – humans who have feelings, livelihoods and dependents – meaning the stakes are so much higher than when we’re dealing with tin and wire.
So, here’s my advice on how to make this strategy work to everyone’s advantage.
1. Establish your core on-shore team
This is the obvious place to start. This team will tend to be comprised of people who may have been with your organisation for some time. They are likely to have deep domain knowledge and a lot of the technical skills and understanding required to build and maintain your products.
2. Work with a partner to integrate a near-shore team
Here at Damilah, we call this ‘partner-shoring’. This means leveraging the cost benefits of near-shoring by partnering with a firm that can provide a high-quality team capable of collaborating with your own in a seamless fashion.
The costs won’t be as low as with your own near-shore team (see below), as the partner firm will need to take a margin. But the advantages of using a third-party to help you navigate the challenges of near-shoring are many.
First and foremost, it allows you to scale up rapidly with people who are known entities and ready to go from day one. And you don’t need to worry about aspects like recruitment, HR, career development and so on, as the partner firm will deal with those. You’ll just need to manage the projects.
It also gives you the flexible bandwidth to handle the peaks and troughs of workloads in a cost-effective way, as you can bring people on- and off-line as required. As well as giving you the mechanism to scale up quickly, it protects you from the risk of having to scale down in the future, as this is the first team you can cut, and with the least amount of pain. In general, their jobs are more likely to be safe as they can be deployed on other accounts within their company as it seeks new clients.
Additionally, it enables you to build an understanding of the different culture, legal frameworks and myriad other challenges of running a team in an off-shore location – which leads onto the final step…
3. Build your own near-shore team
This may be less expensive than working with a near-shore partner, but it’s far harder to do.
The big advantage, beyond cost, is that it can give you access to the kinds of talented people that are more challenging to find in your own country. For example, it may be easier to recruit a team that is younger, with a better gender balance, and with technical skills that are harder to hire back home.
This kind of team can add a huge dose of energy and enthusiasm to your home team – and a smart blend of mature, on-shore experience with youthful, off-shore passion and determination can be powerful.
Building up a strong near-shore capability can be time-consuming – think nine to 12 months minimum to become established. But once you get there, it can add a lot of value to your business.
Making it work
The key to success is to ensure all three teams blend effectively. And the way to do that is to foster a culture of transparency and collaboration, where autonomous teams with the same goals and mindset will work closely together to deliver outstanding outcomes aligned to your business requirements.
It’s therefore important not only to look for compatibilities in ways of working, but also in ways of problem-solving.
Face-to-face contact is always helpful here – both in the office and outside. If two people have shared a beer in the past, when there’s a challenge it’s always easier for them to pick up the phone and thrash it out than if they’ve only ever communicated by email or Slack.
Put simply, your near-shore teams should feel like extensions of your home team.
We can help you learn more about the best ways to plan, implement and maximise value from this three-team strategy. To find out more, get in touch now.
And the following articles in this series will help you build a greater understanding of the challenges of near-shoring and how to create maximum value by doing it:
• The future of near-shoring: ‘partner-shoring’
• The challenges of setting up a near-shore team
• How to select the right near-shore partner
• How ‘partner-shoring’ can support a scale-up
Iain Bishop, founder and CEO, Damilah
But how can you tell one potential partner from another? Here are some key questions to ask during the selection process:
How do you know you can trust them?
Nothing matters more than this. If you have any doubts whatsoever, walk away. A good first step towards finding a reliable partner is to seek recommendations, demand references, and ask their customers questions like: What are they like to work with? Have they delivered the right outcomes for you? How have they dealt with problems? How collaborative are they?
How good are their technical skills really?
Every potential partner will tell you that they have amazing technical skills. Really, really talented people. The best in the industry. But how do you know how good they are in reality? It’s important to talk to the technical leadership to see if they genuinely understand your technology and what good looks like. It can also be worth interviewing the people who’d be working in your team.
Do they understand how to build secure systems?
Today, all systems need to be secure – and by using tooling as part of the build process, teams can ensure security is embedded throughout the development process. So, are all the people in your partner’s team security aware? And are they given appropriate training on the subject?
Are they focused on delivering value?
Too many near-shore teams will prioritise billable hours over delivering genuine value to their clients. However, for both you and your potential partner, value – rather than actual cost – should be top of mind. In particular, going with the cheapest option might not always result in the best value for your organisation. If your partner doesn’t have the right technical or collaborative skills, for example, poor outputs and delays could end up costing you dear in the long-run.
Is there a commercial awareness right across the business?
The advent of the public cloud has introduced a completely novel dimension to designing new systems. Architectures must be cost-effective in their use of cloud services, which means those designing them must have a current knowledge not only of the services available, but also the pricing implications which may depend on usage patterns.
Are they in a suitable near-shore location?
Here, you’ll need to consider issues like cultural alignment and time zone differences. It’s really hard to make agile development processes work well if your teams’ working days barely overlap or your potential partner doesn’t have an ethos of close collaboration.
Do they have good English language skills that run deep in the business?
Check that everyone speaks good enough English to enable peer-to-peer contact between your team and theirs. If all communication has to go through a project manager, as they’re the only one who speaks your language, misunderstandings and delays will become inevitable.
Do their people collaborate easily?
Having a naturally collaborative culture will make communication at all levels much more straightforward. Everyone needs to be able to communicate easily and transparently so that issues and opportunities can be discussed openly.
The best way to find answers to all the questions above, and reassure yourself that you’re selecting the right partner, is to spend time with them. Find out if they’re happy for you to visit their offices as often as you wish. Insist on meeting the people you’ll be working with – and not just the senior management and sales team – and ask them some tough questions. The more time you spend doing this, the more you’ll find out what the business is really like to work with.
Finally, once you’ve selected your potential partner, or drawn up a shortlist, it’s often a good idea to put them to the test before committing to a contract. For example, you could give them a problem to solve – and even if it’s not a live issue, the way they go about finding a solution can be very revealing as to the way they operate.
Alternatively, you could engage them on a small, live project and measure them on how they handle it. This is a very low-risk way of assessing whether the potential partner is likely to be a good fit for your own organisation. Here at Damilah, we’d be more than happy to discuss any of the above questions with you and explain our ‘partner-shoring’ model to you – where our near-shore team will collaborate seamlessly with you to deliver high levels of shared value.
To find out more, get in touch now to discuss our range of services.
Iain Bishop, founder and CEO, Damilah
This can also potentially allow your business to near-shore non-software development activities such as customer support, IT support and other admin functions where face-to-face contact with customers is not required regularly.
There are, however, risks associated with making this successful – but it is definitely possible with a high level of commitment and awareness. So, having set up off-shore teams many times in my own career, I’d like to share some guidance on the main challenges you’re likely to face and the measures you can take to reduce those risks.
Choosing a location
This is the first thing you’ll need to think about – and there’s a lot to consider here. Most important are the level of technical skills in the market and the overall standard of English. For an initial understanding of these, it’s worth finding out what the technical universities teach in that region.
You should also have a good grasp of the local IT market – for example, is there a talent pool big enough for you to recruit from? And are there big, attractive tech firms in the region, such as Google or Meta, who’ll be competing with you for talent?
Within the country, there may be different cities with various pros and cons. For example, people are likely to demand higher salaries in capitals, but the supply will be better; whereas a smaller city might suit your needs if the costs are lower and supply is sufficient. There may also be more of certain types of skills in some cities than others due to other companies based there.
You’ll also need to think about local laws and regulations, such as how difficult it is to set up a business in that country, and the ease with which you can transfer capital. Plus there’s the local political situation to take into account, in terms of how stable the country is and whether it encourages IT companies to set up there with favourable tax regimes and other incentives.
Additionally, it’s prudent to consider the perception that having an office in some countries may give to your investors and customers. For example, some nations may have more of a reputation for corruption than others.
Finally, you’ll need to consider the cultural differences between the UK and your potential location. Do people there tend to work in a way that is compatible with the culture you want to create? And is close collaboration between them and your UK employees likely to be successful?
Overall, when deciding on the right country, there’s no substitute for actually visiting the place – multiple times – to find the answers to these questions for yourself.
Understanding local cultural and working practices
Once you’ve decided on your location, even if you believe the local cultural and working practices are compatible with your own, you’ll need to build a good understanding of the differences, to ensure you don’t fall foul of any misunderstandings.
For example, in North Macedonia, where Damilah is based, salaries are based around net income, rather than gross payments as we’re used to in the UK. Therefore, if the government raises income taxes, you might find yourself having to increase salaries to maintain your employees’ level of income.
What’s more, in the emerging countries of Eastern Europe, there’s often strong competition for the best people, so it’s important to cover as many bases as possible to both attract and retain them. Therefore other benefits, as well as salaries, need to be competitive compared with what other companies are doing in the local market.
HR practices should be very good, too: in particular, ensuring all employees are given the training and support they need to help them reach their full potential. Training budgets are often the first to be cut back in mature western businesses. But for the enthusiastic, ambitious talent you want to hire, it’s crucial that you provide them with the tools to allow them to grow, or they will soon leave you to learn new skills elsewhere.
Overall, it’s vital to listen to your colleagues and be flexible if they make suggestions for activities, celebrations or training. For example, International Women’s Day is very important in North Macedonia and, with a 50-50 gender split at Damilah, colleagues expect the company to buy gifts for all the women and have a celebratory lunch.
In short, employees need to know they have a voice that is heard, and that you care about them.
Finally, if you’re comparing countries, it’s important to understand what on-costs there are in each location. This will give you an accurate picture of cost-to-company (CTC) and allow you to make a fair evaluation.
Hiring a team
This will, of course, be the most critical part of the project – and potentially the hardest.
You may well find yourself up against a tricky battle for talent. As a new player in the local market, you’ll be faced with the question of why anyone should choose to work for you – unless you’re prepared to pay salaries that are over the odds. This can be exacerbated in places where people are generally risk-averse when it comes to leaving their current employment – which tends to be prevalent in former communist countries where a culture of entrepreneurialism and risk-taking is less deeply embedded than the UK.
In such cases, it’s helpful to spend time building a brand for your company in the local market utilising social media. People are more likely to want to work for you if they know who you are and can see other people enjoying working for you.
You’ll also need to be sure that you’re hiring people who will fit into the kind of culture you want to create – and not employees who are simply in it for personal gain.
Therefore, the most important first hire you could make is a head of HR – someone you can really trust, who knows the local people and culture and can make sound judgements when it comes to recruiting the right team. A person like this can help to remove a large element of risk from the project, but they can also be hard to identify and attract to your business.
Choosing the right model
Rather than going it alone, and taking on the large risks highlighted above (and see our list of ‘gotchas’ below too), there is another way.
It’s always worth considering an alternative model. Closely partnering with a company that has in-depth local knowledge, plus a proven team with the right levels of experience, can allow you to maximise the undoubted benefits of near-shoring, while minimising the risks for your own organisation.
This is a model that we at Damilah like to call ‘partner-shoring’.
7 near-shoring ‘gotchas’
Here are some of the most common traps that, in my experience, organisations fall into when attempting to set up a near-shore team:
1. Mistakenly hiring people who are only in it for themselves and their friends
This often occurs when there’s a lack of understanding of the local culture and customs.
2. Failing to establish the right culture from the start
You might want a culture of transparency, honesty and close collaboration. The team you hire might have other ideas – and it may be hard to control that remotely.
3. Overpaying your people
If you don’t have an existing brand presence in the country, talent may not choose to work for you unless you’re prepared to pay over the odds – thus negating one of the key benefits of near-shoring.
4. Failing to comply with local laws and regulations
Without a deep local understanding, it’s easy to fall foul of, for example, different tax and accountancy practices. Things can get messy very quickly.
5. Your team quitting en masse before you’re big enough to cope with the loss
This could happen, for example, if a big player like Google comes to town with a more attractive offering for talent than you are able to give.
6. Failing to keep head office under control
For example, your HQ may want to enforce working practices, hiring practices or pay rises that are not appropriate for the location in which you’re operating.
7. Not listening to your employees
Employees in a near-shore location are as important as any others employed in your business. You need to listen to them and have the flexibility to adapt to local cultural needs and expectations.
Want to avoid these and many other pitfalls? To find out more about reaping the benefits of near-shoring without suffering the pain, get in touch now to discuss our range of services.
Iain Bishop, founder and CEO, Damilah
Here’s how you can make it work:
The scale-up challenge
Often private equity-backed owners will be looking to invest in the product to significantly grow revenue. Typically, this may involve transforming a monolithic on-premise software product to a modern SaaS offering, or extending the product into other markets.
Whatever the plan may be, it’s likely to create a need to rapidly expand the engineering team. This could be in terms of head count, and potentially also to bring in new expertise if the scale-up involves a significant technology shift and the necessary know-how doesn’t already exist within the business.
Going outside the business to solve the problem
A highly effective way to solve this problem is to bring in expertise from outside, as hiring and building a team internally can be time-consuming, costly and risky.
That’s why turning to a near-shore partner, with flexible teams and talented people who have done this many times before, can reap big rewards. They will be able to offer, for example, experience and understanding of how to use public cloud in a cost-effective way, how to build cloud-native SaaS products, and so on – while maximising the benefits of modern standards and approaches, such as automation, continuous testing and rapid delivery cycles. This can be a very cost-effective way of putting an outstanding final product into users’ hands as quickly as possible.
An added advantage can be the way in which you can easily scale the development team up or down. For example, a private investor may often begin to reduce their levels of investment after year two or three as they look to grow their bottom line prior to exiting after five years or so. In turn, that may require a scaling back of the engineering team, which is harder to do if it involves laying off internal employees.
Setting up autonomous teams
None of this is likely to work well unless you create autonomous teams that remove as many dependencies as possible – as dependencies are the biggest productivity killer when it comes to software development. If completing a task depends on input from another team or individual, working at pace frequently becomes impossible – which is exactly the opposite of what a major scale-up needs.
Instead, an autonomous team will have all the skills and experience necessary to forge ahead successfully and at pace. They will be able to handle everything from talking to end users about their needs, and creating a roadmap and product strategy, right through to production and deployment, with all the necessary DevOps, engineering, testing, and product people in between that are required to get the job done.
The Spotify model
In my opinion, autonomous teams are the only way to scale rapidly – and using the Spotify model is an example of a good way to build and maintain such teams.
At the top, there is a tribe leader, who may be responsible for multiple teams, each one containing all the skills necessary to complete a project. The tribe leader is empowered to make decisions and move people around their teams as necessary.
Then, across those teams, there are special-interest groups called guilds. These are collections of people who have the same areas of expertise, and they are used for sharing knowledge and advice across teams. Each guild will have a leader, who is a specialist in their field, but may not be from the management team.
And there are also chapters, which are a way of managing and mentoring individuals, without the need for multiple layers of line management.
Overall, this model is an effective way of running large teams, because the CTO can focus on supporting the tribe leaders and then only managing by exception – in other words, not having to focus too much on details unless there is a specific problem, in which case they can go in deep to help find a solution.
Leveraging the benefits of near-shoring
The crucial factor to bear in mind throughout all of the above is that it is not necessary for an team to be physically co-located. As long as its members have the necessary autonomy and the ability to collaborate seamlessly, they can be anywhere. This allows you to leverage the cost and flexibility advantages of partnering closely with a near-shore company – or ‘partner-shoring’, as we like to call it.
Over the years, I’ve helped many businesses to rapidly scale up and significantly increase their value by deploying these methodologies.
To find out more about how we at Damilah can help you to do the same, get in touch now to discuss our range of services.
Iain Bishop, founder and CEO, Damilah
Or maybe you’ve engaged a far-shore ‘partner’ in India who always says everything is fine and on time, but frequently delivers late and with sub-standard quality.
These are, of course, generalisations – but they have happened too frequently to me, and others I know, to be outliers.
Either situation is extremely frustrating, potentially costly, and will fail to produce the kind of results that you and your organisation require. That’s why, at Damilah, we have developed the ‘partner-shoring’ model – a different way of approaching near-shoring.
What do we mean by partner-shoring?
Using this model, the client and supplier work seamlessly together towards common goals. Some people in the team may be from the client side, some from the supplier – but to an outsider it should be virtually impossible to tell which is which. That’s because they collaborate as genuine partners to build the best possible product within the constraints set by the business.
The teams are also fully autonomous, containing all the skills necessary to deliver the products end users are looking for. This maximises productivity by removing as many dependencies as possible, which often tend to slow progress.
How does partner-shoring work in practice?
Here’s a good example of the collaborative culture we foster at Damilah. With one of our clients, the autonomous team is led by a triumvirate comprising a product manager, an architect and a delivery manager. One of those roles is provided by the customer, the other two by us. But they are all equal in status – and we call them the Three Amigos, as they work so closely together on projects.
The product manager aims to create the ideal product to meet customers’ needs. The architect works out how to do this, the challenges involved, and how long it will take. And the delivery manager looks after putting the plan together and ensuring everything is delivered on time and of high quality.
Above all, the Three Amigos are mature and experienced people, equals who are constantly working together on discovery, understanding what needs to be built, and prioritising work based on business needs, difficulty and time requirements – without the traditional ‘them and us’ client and supplier relationship.
Why does it require a near-shore team, rather than a far-shore team?
We believe this gives our clients the best of both worlds.
In the first instance, you can leverage the cost benefits of working with an off-shore team. But, at the same time, this kind of partnership is hard to achieve when the teams are far apart in geography, time zone and culture. On the other hand, if the people involved can spend time face to face, working together, planning, resolving challenges – and even socialising – then positive working relationships will form and truly enable close collaboration and velocity.
If your European-based team has to travel for an entire day to reach a remote part of the world, then suffer from jet lag, they will probably be reluctant to visit their partners very often. And that’s not to mention the difficulty of getting expensive travel costs approved. As a result, the kind of closeness and effective teamwork that comes from frequent contact is unlikely to arise. On the other hand, if the partner is just a few hours away, with a one-hour time gap, it can make all the difference.
Furthermore, although there may be some minor cultural differences between teams in the UK and, say, Eastern Europe, these are likely to be far less pronounced than between the UK and South or East Asia.
What are the main benefits of partner-shoring?
Working with a partner whose team feels like an extension of your own, and is fully aligned with your own business requirements and goals, allows you to successfully leverage the advantages of near-shoring with a company that is already established in the overseas market.
That means your partner can ensure people are rewarded appropriately while you also benefit from their deep market knowledge and understanding when it comes to aspects such as local regulation and cultural differences. In other words, you can build confidence in the process, the people and the location with minimal risks.
There are also the benefits of reduced churn that tend to come from a well-run near-shoring operation. In many Indian off-shore firms, for example, it’s common to see annual employee turnover at rates as high as 25% or 30% – whereas our Damilah team in North Macedonia has a rate of around 2% on average.
And, last but not least, there are the advantages of transparency. If a development team works as a black box – where the client knows very little about what’s going on until the product is delivered – you’ll frequently hear that everything is going well… until the day of delivery. And then you might hear that there’s been a problem – and delivery will be delayed for a month or three.
Such issues are common among teams in geographies like India, where culturally people are reluctant to deliver bad news. On the other hand, European teams tend towards more transparent working practices. This makes it easier to be aware of problems as they arise, allowing you to find a solution – such as prioritising certain features or narrowing the scope – while still hitting the delivery date, rather than being trapped in a last-minute situation where you have no way out.
If you’d like to find out more about the ways partner-shoring could benefit your business, and how Damilah can help, get in touch now to discuss our range of services.
Iain Bishop, founder and CEO, Damilah
1. What goes up, may come down again
Scaling down a team is one of the toughest tasks a CTO may face, as the process is not just about numbers, it involves people whose skills, careers and personal lives are impacted. Losing valued colleagues creates uncertainty and can strain workplace relationships, undermining team morale and trust.
When the opportunity comes to scale up your core team, it’s a good idea to remember that things may cause this to reverse in the future and so taking a more blended approach to resourcing should be considered, rather than hiring to maximum capacity in your core team.
2. Damilah’s Three-Pronged Strategy
Iain Bishop outlined a proven approach for managing scalability through three interconnected team structures:
- Onshore Core Team: The bedrock of your operations, with deep industry expertise and long-term commitment.
- Partner Nearshore Team: A scalable, third-party resource that provides flexibility without the burden of hiring or layoffs.
- Your Own Nearshore Team: A directly managed team, offering greater control and access to diverse skill sets while being adaptable to shifting demands.
This strategy enables you to adjust resources efficiently, supporting both growth and contraction without disrupting core functions.
3. Cultivating a Unified Culture
Maintaining a consistent company culture across both onshore and nearshore teams is critical. A culture built on transparency and collaboration ensures that even as your team evolves, everyone stays aligned with your organisation’s values and objectives. This alignment is key to sustaining high productivity and morale through transitions.
4. Balancing Autonomy with Alignment
Empowering teams to work autonomously can drive innovation, but alignment with the company’s overall goals is essential. Effective communication, regular interactions, and shared goals help keep all teams, regardless of their location, moving in the same direction. This balance ensures that autonomy doesn’t come at the cost of cohesion.
5. Cost Optimisation Without Compromise
Reducing costs while maintaining the quality of your workforce is one of the biggest challenges during downsizing. The three-pronged approach allows you to trim expenses through flexible resources, such as partner-shoring, while safeguarding your core team’s expertise. This method helps you manage financial pressures without sacrificing the talent that drives your business.
Additional Resources