Don’t let the low price for offshore digital product design for startups fool you

Deep Kalina • 3 weeks ago

When hiring an agency for digital product design with team members offshore, a drop in price shouldn’t be conflated with a drop in quality.

“You always get what you pay for, unless you don’t.”

Here’s a term you don’t hear every day unless you’re an economist—agglomeration economies.

If you visit www.merriam-webster.com, you’ll find that the term refers to the trend of building competence and services in “a large, densely and contiguously populated area consisting of a city and its suburbs.”

They would be analogous to business hubs, where lots of the same types of businesses are located in the same area.

Let’s go back to the car example. If you have a bunch of car factories in one area, it would make sense for car part suppliers to be in the area too. That would reduce transportation costs.

And at a car manufacturing hub, talented people who are interested in building and/or designing cars would be attracted to the area in order to put their skills to use.

Now, let’s work through another example. Digital product design for startups requires specially trained people who are attracted to cities with agglomeration economies built around the technology sector.

Over the decades, these densely packed hubs of talent have sprung up in India. It’s a virtuous cycle of business investment attracting a large number of skilled workers to specific areas. 

Through the power of agglomeration economies, a company looking for someone to build digital products can find a wealth of workers in India who are willing to do quality work at a cheaper price than technology professionals would charge in less densely packed areas.

Table of Contents:

Diving into Agglomeration Economies

Digital product design for startups
Digital product design for startups

Economists probably love this stuff. They notice something happening in the real world, and they want to describe the phenomenon and be able to make predictions.

New Economic Geography is a theory, but it also can be seen as a filter on a lens that shapes how you see something. At heart, it’s an approach to figuring out why some regions seem to attract a disproportionate share of economic activity.

Economist Paul Krugman writes, “…suppose that there are two regions of the kind we have been discussing and that they have the same tastes and technologies. There is room for mutual gains from trade, because the combined market would allow for both a greater variety of goods and a greater scale of production.”

However, Krugman argues that, if there are impediments to trade, a mobile workforce will move to the more populous area to find better wages and more amenities in the community.

In such a case, skilled workers become concentrated in one area, and businesses continue to invest in the area. Governments and universities add their contributions. If all of the elements come together, the virtuous cycle of agglomeration occurs.

This creates advantages that firms in the hub benefit from:

  • good supply networks
  • steady supply of trained workers
  • infrastructure built for the industry

Sharing, Matching, and Learning

Picture a hub for digital product design for startups in India. Talented people have left their homes to find work, companies opened up to employ that workforce, so more talented people go to that area looking for jobs.

Three mechanisms can summarize agglomeration economies:

  • sharing
  • matching
  • learning

In such densely packed areas, firms tend to share infrastructure, facilities, suppliers, and workers, and transportation costs are reduced. 

In addition, agglomeration creates a deep pool of specialized workers who are able to match their skills with the needs of companies. This increases tenure and institutional knowledge.

On the learning front, closely packed companies have inevitable knowledge spillovers. In order to keep growing, companies also have incentives to invest in the workforce, who become more highly skilled at performing digital product design for startups.

Through sharing, matching, and learning, a digital hub can provide less expensive services than other regions based on the cost advantages of having large-scale operations.

Growing Talent Pool for Digital Product Design

Digital product design for startups
Digital product design for startups

When it comes to digital product design for startups, technology products and engineering professionals in India can produce quality products and services at reduced rates compared to their Western counterparts because of agglomeration.

Korn Ferry reports that there will be a global technology shortage of 85 million workers in the next ten years. Western countries will be the hardest hit.

However, Korn Ferry also expects India, which has the world’s fifth-largest economy, to be on track to have a talent surplus by 2030.

India emphasizes affordable STEM education and will continue to produce top talent capable of producing a full range of technology-related products.

The country’s agglomeration economies have resulted in technology intensity, also known as research and development intensity. So not only is India a prime source of talent, but it’s also a hotspot for innovation.  

In addition, India benefits from another aspect of agglomeration. Talent combined with cutting-edge technology results in increased productivity. Technology professionals in India can produce more results in a quicker amount of time than professionals working in more technologically diffuse areas.

All of these factors come together to allow India’s mobile app and web developers to offer high-quality products at rates much lower than competitors from other countries. That helps explain a growing surge of work for offshore development teams in agglomerated areas.

Modern connectivity and project management tools popularized in the wake of the COVID pandemic bridge the distance between U.S. companies that need digital products and Indian professionals who can get the job done.

Now, the conversation moves from an obscure term, “agglomeration economies,” to a phrase most learned in high school or, even, grammar school, “supply and demand.”

The world and US in particular has a demand for technology workers, and India has the supply. And if Korn Ferry’s prediction comes true, India could have an oversupply in the not-to-distant future.

Working with the Right Team for Digital Product Design for Startups

Intuitio Labs is an Atlanta-based company with people spread throughout the U.S. with development teams in India.

One of the difficulties in working with offshore development teams is dealing with different time zones. It can be challenging for someone working with an offshore team for the first time to navigate that barrier. 

At Intuitio Labs, we turn that reality into a positive.

Our representatives in the U.S. are available to answer questions during regular business hours. While our customers are sleeping, our experienced and talented team members in India are busily designing and building mobile apps and websites.

The second most common challenge that is brought up by companies considering working with offshore teams is transparency. 

At IntuitioLabs, we have invested heavily in building the infrastructure and processes for us and our clients to leverage remote and offshore teams to their utmost capacity. Templatized project management boards, automated email project tracking updates, close to real-time status boards, sprint demos, and established communication channels via email and slack all contribute toward mitigating–if not eliminating–the challenges faced by remote teams.

By using teams in India, we reap the many benefits made possible by agglomeration economies while also providing our customers with high-end products at reduced prices.

It’s definitely a bargain worth bringing up at dinner parties.

To find out what kinds of digital product design for startups we can build for you, visit us at www.intuitiolabs.com.