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I am looking into the possibility of sending some work to an offshore consulting firm. They are requesting Terms of 50% deposit upon acceptance of SOW, 50% delivered upon delivery of programming. Is this standard practice for offshore consulting? I normally bill my customers as work is done / completed.

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That's known as a split payment fixed bid and is a normal way many businesses handle projects. However, 50% upfront does seem a bit high. – AlanBarber Oct 4 '12 at 19:18
"delivery of programming" would scare me - does this mean they wish to be paid when they send you the source code? At a minimum, the final 50% should be only after acceptance/project completion based on the criteria in the contract. Because you often don't have the same ability to communicate well & frequently with offshore developers (e.g. if you meet it may only be once), it can be much more important to have detailed specifications, tests and acceptance criteria. – fencepost Oct 4 '12 at 22:27
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Is this a project with less than 4 weeks of work? If so, it seems defensible, but if it's anticipated to last longer than that, monthly billing with agreed-on milestones is more appropriate, with perhaps a escrow or small initial deposit making more sense. – JasonTrue Oct 4 '12 at 23:49

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Partial advance payment is common, and symptomatic of a fundamentally lower level of trust between companies that are more distant (geographically, culturally, and legally) than "onshore" consultants. However, a 50% advance is rather high and might be a reason for concern, or it might just be something they expect to negotiate on and end up with 25%.

In any case, offshoring development is prone to failure and requires continuous involvement on your side to improve the chances of success. I would only do it if you can bear the risk of having it fail completely. If it is successful, both you and the offshore firm have then more reason to trust each other: you might trust them with more important work, and they might not require advance payment.

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Keyword here is completely, I often see people speak of offshoring as though they're not worried because the worst scenario is they get something shoddy, but reality of offshoring is it often fails completely, as in delivery of something that doesn't compile or even begin to meet any business requirement whatsoever. As you said, you can stay on top of these things to get something worthwhile out of it, but people need to be aware the level of risk they're taking. – Jimmy Hoffa Oct 4 '12 at 19:15
@Jimmy Hoffa: then again, it's not as if that never happens with onshore or even in-house development projects. – Michael Borgwardt Oct 4 '12 at 19:26
Absolutely true. I was just saying it's good that you point it out as frequently that possibility doesn't come to mind for folks because most industries don't present that scenario. Like a mechanic being asked to change you oil and coming back to find out they just checked the air in your tires. This is not a common scenario. – Jimmy Hoffa Oct 4 '12 at 19:33

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