Offshore software development is no longer just a cost-saving measure. It has demonstrated its value as a powerful strategic alliance, bridging businesses with global technology experts. Companies no longer simply delegate tasks. They focus on building long-term partnerships. Offshore teams bring diverse expertise, unique skill sets, and fresh perspectives. These collaborations offer lasting benefits.
Several factors drive this shift towards offshoring. Increasing demand for top IT talent, coupled with the rise in the gig economy, has resulted in talent shortages in many places. The push for agile development, especially among startups, has led to a significant rise in demand for engineers as companies strive to innovate and scale rapidly.
Offshoring provides access to a global pool of qualified professionals at competitive rates. In fact, a Deloitte survey found that 57% of CEOs choose outsourcing solely to hire talents at a lower cost. However, lower costs don’t always equate to top talent. Cutting corners on talent for the sake of savings can result in costly iterations, redundant efforts, and skyrocketing expenses down the line. That’s why striking the right balance between cost and quality is essential for lasting success.
Before signing with an offshore development team, it’s crucial to conduct a thorough review. Start by understanding the nuances of offshoring, how it differs from other outsourcing options, and how to make informed decisions.
What is offshore software development and why should you consider it?
Offshore software development means the practice of hiring a team or individual developers from a different country to manage production requirements.
A recent Cognitive Market Research report projects the global offshore software development market to exceed $112.6 billion by 2030, with a robust (compound annual growth rate) CAGR of 15.2% from 2023 to 2030.
This shift from in-house team to offshoring is not an overnight phenomenon. It started more than two decades back. Silicon Valley IT companies started outsourcing to countries like India, Poland, China, and others to leverage the benefits of offshore development and achieve more than their planned business outcomes.
Cost Savings
Many companies hesitated to offshore product development due to challenges in overseeing production across different geographic locations. But that changed during the COVID-19. Adoption of cloud and digitalization of the work methods But offshore software development companies, with their ability to reduce cost worries, changed the equation.
Developing software on-site is costlier than getting the same thing off-site. Mostly, it is because countries from Asia, South America, or East Europe have lower living cost, which in turn, reduces developer charge. Businesses from the developed countries can cut the development cost by 40% to 70% through collaborations with vendors of these regions.
With lower development costs, these companies can also extend your product runway during economic meltdowns. One of our clients, a world-leading mobile ad platform, faced a similar challenge. They needed to scale rapidly to meet a 1200% yearly growth rate, all while keeping response times under 150 milliseconds and reducing ad servicing costs.
By optimizing their infrastructure, streamlining processes, and leveraging big data for faster processing, we helped them achieve remarkable results. Their platform went from processing 22 million to 8 billion ad requests daily, with a 94% reduction in eCPM costs! They’re now equipped to handle 1800% yearly growth without major architectural changes. For details, See the full success story here!
Access to a larger talent pool
Many early-stage startups struggle with recruiting the right team. One of the major reasons is the cash crunch. When you have a limited budget and a strict timeline, spending time to build a perfect team can result in loss of business opportunities.
For growth-and-mature-stage companies, the problem is slightly different. They need people to scale fast or add features quickly. But there is a severe shortage of such people in the market. Gartner‘s study, although it was for emerging techs only, backs up this argument. 64% of respondents felt that tech talent shortage stops them from adopting emerging techs like AI and blockchain.
Things are different with offshore software development companies. They come with their own teams of product engineers, product managers, experts, people in R&D, QA specialists, and others. If you want to scale, then offshore teams can help you do that better by reducing liabilities of a space for people, upskilling them, and boosting the capabilities of the in-house team.
One of our clients, a leading digital fintech platform, wanted to build and launch a new technology product to capture the market demand. But a tight deadline and a limited engineering team bogged them down. That is when they decided to team up with us to streamline their process and fill skill gaps with our expert engineers. Together we launched the entire product in just 5 months!
Helps you focus on the business side
For a lot of early-and-growth stage companies, balancing both the business side and tech side is a challenge. It happens because most of the decision-makers are either good at managing business goals or handling tech requirements. They hesitate more while making tech decisions when they lack tech knowledge, and the product development process eats up the business development time.
A good offshore software development team takes charge of the tech decisions. By doing so, they free up time for the CEOs, founders, and others, which they can utilize to focus on core business.
You may interested in: complete guide on software development for startups.
Risk transferring
There are three types of risk associated with software product development- technical risk, schedule risk, and resource risk. Technical risks are a result of product complexities. Schedule risks happen when there is a delay in timeline. Resource risks stem from lack of expertise and resources.
With offshore tech partners, averting risks like these is easy. When decision-makers onboard teams, they should transfer these risks to teams and let them worry about how they secure the product roadmap. Product owners can always leverage team’s commitment to maintaining timelines, ensuring product quality with great code and scalability. Getting resources based on need is also their job, and it will save both time and money for the companies.
Read also: 6 Risks in Software Development that can impact business.
Time zone differences and 24/7 development
Offshoring mostly happens in Asian and Eastern European countries. With the US, they share a 10-12hours of time difference. The time difference enables the in-house team to assign tasks before logging out, allowing the offshore team to begin work immediately. By the time the in-house team logs back in, the offshore team has completed the task and delivered it, ensuring seamless productivity across time zones. It can ensure faster completion of projects, increased productivity, and shorter development cycles.
Also, for any customer-centric organization, 24/7 work is a boon. This system lets the client teams enjoy quicker turnaround time and enrich customer experience with better client support.
Increased flexibility
No one saw COVID-19 coming, just as few anticipated the economic downturn of 2008-09. Back in 2003, the concept of transmedia storytelling, now a major trend, was virtually unheard of. Such unexpected events often catch us off-guard, necessitating drastic shifts in the product roadmap.
Offshore teams offer the flexibility to scale quickly during peak times and deliver services that meet immediate market demands. This model allows companies to pay only for the services they use, significantly reducing cost burdens.
How is it different from onshoring or nearshoring?
Nearshore, onshore, and offshore software development are diverse approaches to outsourcing development work. While all these approaches involve delegating responsibilities to external teams, the key differences stem from geographic location, time zones, cultural alignment, and cost considerations.
Onshore vs. nearshore vs. offshore software development: A comparison
This comparison can help you evaluate outsourcing options between onshore vs nearshore vs offshore.
| Parameters | Onshore | Nearshore | Offshore |
| Cost | Higher | Moderate | Lower |
| Talent Pool | Limited (depending on location) | Moderate | Large and diverse |
| Communication | Easier (same time zone, language, culture) | Easier than offshore (potential time zone overlap) | More challenging (Time-zone differences, culture barriers) |
| Project Complexity | Ideal for very complex projects | Good for moderately complex projects | Can be good for well-defined projects with clear requirements |
| Legal/Security | Easier (same legal system) | Moderate | Requires careful due diligence |
| Scalability | Limited | Moderate | Easier to scale up or down quickly |
| Speed of Hiring | Slower (Due to competition for local talent) | Faster than onshoring | Fastest (As there is a larger pool of candidates available) |
| 24/7 development | Not possible | Possible with some overlap | Possible (taking advantage of time zone difference) |
Choosing the right option
Let’s use an example to better understand this: consider a fintech company located in San Francisco that is building a mobile banking app. They are undergoing rapid expansion and need to quickly scale their development team. To achieve this, they must choose between onshore, nearshore, or offshore development.
Onshore development, despite providing cultural alignment and equal time zones, is often prohibitively expensive. Nearshoring to a country, such as Mexico, can provide a combination of cost savings and cultural proximity, but can limit the depth of the talent pool. In contrast, offshoring to countries like Ukraine, India, Philippines, Vietnam, Thailand and others can gives access to a large pool of highly skilled engineers at competitive costs.
Offshoring can be an effective approach in this situation. Offshoring will give access to a large pool of talent with different skillsets and experience in the latest technologies, allowing the company to create a product without spending a lot of money.
For a deeper understanding of the in-house vs. offshore development models, this article offers valuable analysis: In-House Vs. Offshore Software Development Team. It provides additional insights to help you make an informed decision.
Choosing an offshore software development partner
When Skype started out, they decided to hire an offshore software development partner, and it proved to be a great decision. The team was great in terms of the internet and latest communication technologies, and, in no time, they delivered a prototype.
But onboarding a tech team requires a thorough analysis of the company and the offshore software development benefits it provides.
- Consider the partner’s experience and expertise
Experience counts. Hiring an offshore development company with expertise in the required field reduces tech worries. Such teams can easily own the product and make the needed changes as and when required. If they are experienced, they can add value to the product by sharing their domain knowledge with the product owners. This will help develop better product roadmaps.
Conduct research on potential development partners and ask for recommendations from colleagues or industry experts. Review their portfolios and client testimonials to better understand their skills. Also, ensure they are familiar with your chosen technology stack, understand your company’s goals, and can provide references from previous successful projects.
- Review their security protocols
Security is always a major concern. It would be better if you learn about the protocols of the offshore team beforehand and then sign the deal.
The review can reveal potential vulnerabilities and risks. If your industry is subject to certain regulations, such as HIPPA, DORA or GDPR, then the assessment can help you understand how compliant the company is. Apart from these, by adhering to the required regulations, offshore software development companies can protect you from customer loss in case of any breach.
- Understand their range of services
A case like healthcare.gov happens when clients go to multiple vendors for diverse skillsets. Different teams follow different methodologies. Getting them on the same page is difficult. It can affect timelines, push production deadlines, and increase costs for companies.
But releasing products can become easier with an offshore partner that is a one-stop solution provider and can handle sudden changes in the product roadmap. It also reduces distraction and simplifies product management processes.
- Look for a partner with a strong project management process
A strong project management process improves quality, increases productivity, and ensures customer satisfaction. It starts with identifying the user story and communication. The offshore development team aligns developers, QAs, experts, and all with the product vision and makes them aware of their roles, responsibilities, and project timelines. These steps reduce misunderstandings and iterations, and improve customer engagement. Then the team develops a framework for planning, executing, and monitoring the project’s progress, which improves quality.
Popular frameworks such as Agile, Scrum, DevOps and DevSecOps can provide the necessary structure. These methodologies focus on iterative development, collaboration, and flexibility, allowing for adjustments as the project progresses.
Teams can spot potential bottlenecks and streamline processes by breaking activities into smaller, more manageable components, resulting in increased project productivity and better outcomes.
- Consider communication and collaboration tools
Communication with an offshore software development company sometimes become a challenge when offshore developers are not proficient in English or the language you prefer to speak. If you hand-pick your team from the talent pool of the offshore team, then you will benefit more.
Collaboration tools like Slack, Microsoft Teams, and Zoom ensure better communication between teams working from distant locations. They also play a crucial role in knowledge sharing, tracking performance, assigning tasks, ensuring better project management, and in various team building activities.
- Comfort level with CI/CD
Continuous Integration/Continuous Delivery (CI/CD) ensures high quality, delivery on time, and helps to meet the client’s expectations. By integrating and testing code, it checks for bugs and identifies defects to deliver quality software. Offshore teams can streamline the development and deployment process with it and guarantee faster time-to-market.
Clients often hesitate to hire an offshore tech team because of time zone differences. However, if your vendor is skilled in CI/CD, these concerns diminish significantly. With CI/CD, code changes are automatically integrated and tested, minimizing time zone challenges. This automation not only reduces human error but also ensures consistent and reliable performance, making offshore collaboration smoother and more efficient.
Offshore software development challenges
There’s no doubt that hiring an offshore company to handle tech needs is a risky decision. It’s mainly because of the drawbacks these companies may have.
- Language and cultural barriers
Most of the client teams are from the US. But most of the offshoring teams are from India, the Philippines, Argentina, Brazil, Ukraine, Poland, and other countries where English is not the main mode of communication. This can lead to misaligned product vision and a higher number of iterations, which in turn, can trigger missed deadlines. Sometimes, these differences can spark some ethical questions as well.
Also, culturally these countries are quite different from each other. This means that the work culture would be different, along with the official holidays.
- Time zone differences can lead to communication difficulties
Communication with an offshore tech team typically relies on messenger services, emails, video calls, and virtual meetings. However, these interactions often lack the immediacy and impact of real-time conversations due to time zone differences. As a result, directions may not always be conveyed as effectively as needed.
One way to beat this is setting agendas before a meeting and keeping the discussion to the point. The other way is using platforms like Jira, Slack, or Trello that give better visibility into the flow of the work. This route works well when companies adopt a ‘push’ method where people proactively upload their work status than the ‘pull’ method where managers try to gather information about task status.
- Lack of control over the development process
Ensuring good code quality can be challenging when product owners lack control over what the offshore tech team is producing. A prime example is the 2013 launch of healthcare.gov, where the U.S. government hired multiple contractors and agencies to develop the site for the Affordable Care Act. Due to a lack of quality control, the site failed spectacularly. This issue is exacerbated when the offshore team includes inexperienced developers and is compounded by the physical distance between the client and the tech partner. Irregular communication, poor ownership, and tech teams that shift blame only worsen the situation, leading to disastrous outcomes.
On the surface, these look like insurmountable problems. But an offshore software development partner that prioritizes understanding product vision and is capable enough to lead the tech development can resolve this issue quickly.
- Intellectual property concerns
Security breaches stemming from weak intellectual property protection can cause significant damage. The Cisco-Huawei controversy is a prime example. In 2003, Cisco Systems Inc. sued Huawei Technologies Co. Ltd. for allegedly using their code, a breach that occurred due to a leak from a third-party vendor working with Cisco. This incident underscores the critical importance of safeguarding intellectual property to prevent such costly and reputation-damaging breaches.
Data, algorithms, code, and business secrets, anything that adds value to business should be protected. The first step should be having an audit for all the digital assets to ensure everything is reported, secured, and monitored. The next step should confirm that the offshore partners adhere to necessary norms. A wrong step can lead to reputational damage, financial worries, and legal troubles.
Offshore Software Development Team Best Practices
Sometimes, goals change, or products pivot. For instance, YouTube started in 2005 as a dating platform. Then the company opened the platform for anyone who wanted to share a video. Such a drastic change may call for rework and that is understandable. But businesses cannot do it every time due to a misalignment in the product vision with the software development team. They must follow some offshore software development best practices.
- Define your mission and vision
Companies must clearly define their visions and what they want to achieve as a company to their tech partner before they set the balls rolling. Often teams just think of the specs they need to resolve, and, in the process, they miss the bigger picture. Once they are aligned with the long-term plans, they can take ownership and put the product owners at ease.
Also, sharing the vision and mission will help companies to connect with the offshore software development center. The more they feel at one with the in-house team, the better they will perform.
- Set priorities
While explaining the roles and responsibilities to the new team, companies must set clear-cut instructions regarding priorities. In moments of crisis or time-crunch, if they spend more time on wrong requirements then you have to bear the brunt.
Well-defined roles and responsibilities create a sense of ownership. Once the dev team is aware of what is expected from them, they can plan their tasks better by creating smaller goals and monitoring quality and deadlines.
Enabling faster approvals from your side is also crucial. Things stuck at your end may hamper the project cycle. You can involve project managers to get things moving.
- Set realistic project goals
In the US, 43% of companies outsource their software requirements and 57% of them have increased the scope of their partnership. The numbers are increasing. Offshore teams bring a lot to the table like technical expertise, talents, specific skillsets, and other aspects. But they have their limitations too. Sometimes, to draw a larger margin between project deadlines, companies set unrealistic timelines, which affect productivity and quality.
For a productive partnership, businesses must understand their work methods first and set realistic goals accordingly. In fact, one effective way of doing this is having joint brainstorming sessions, as it can help in planning tasks in a better way.
- Security should be a priority
n a PwC survey, 31% of respondents reported experiencing security issues when outsourcing their software needs. However, these concerns can be mitigated by taking proactive measures. Companies can start by signing a strict NDA with the offshore development team, followed by regular reviews of network monitoring systems. They can implement authorized access controls for systems and project data, and avoid granting access to off-site client data critical to their business. These steps can significantly reduce the risk of security breaches.
- Adopt agile methods
The agile software development process relies on short, repeated cycles of operations. Adopting it ensures better productivity and reliability. But with offshore teams, sometimes, this method becomes a challenge due to communication issues.
With good teamwork and communication channels, these problems can be side-lined.
- Ensure an effective knowledge transfer process
Even the most skilled product engineers need time to familiarize themselves with the system, technologies, and product before they can deliver effectively. However, if this ramp-up period extends too long, it can lead to delays in the software development process, hindering overall project timelines.
Tech companies can minimize the impact of this challenge by setting up a proper knowledge-sharing platform. Effective onboarding of new members requires a thorough understanding of the project’s objectives, expectations, and the organization’s culture and work processes. A knowledge transfer platform should ensure it and also provide training on the company’s software development practices, tech stacks, and methodologies.
You may interested in: Steps to Hire an Offshore Software Development team
Conclusion
A good offshore software development team that is aligned with the product vision and works as the extended part of the in-house team can easily meet the tech needs. But collaborating with the right one may take some digging. To do it right, tech companies must make themselves aware of all the pros and cons.
In the last 21 years, Talentica Software has collaborated with over 200 tech companies to build multiple tech products. While doing so, we have developed a process to meet the specific needs of each of the product development stages.
To understand how our offshore development teams can help you with your product development. Talk to our experts now!
Frequently Asked Questions (FAQs)
How do I find a good offshore software development company?
Choosing the ideal offshore partner requires careful consideration. Here are some important factors to consider:
- Experience and knowledge in your industry.
- Excellent communication and project management skills.
- Security protocols and data protection methods.
- Profitability and value proposition
What offshore software development services are available?
Offshore development companies provide a variety of services, including bespoke software development, mobile app development, UI/UX design, and quality assurance (QA) testing.
Can you give us some examples of offshore software development?
Many companies in many industries use offshore software development services. For example, a bank in the United States may collaborate with an offshore software development company in India to create a new mobile banking application.
Similarly, a web-based company in Europe can delegate the development of its backend infrastructure to a team in Eastern Europe.
What are the advantages of working with an offshore software development company?
Advantages include cost reductions, access to a larger talent pool, and the ability to develop 24/7.
Is offshoring software development right for my business?
Consider your budget, project requirements, and risk tolerance to see if outsourcing is a suitable option.
