Offshoring Software Development: Here’s All You Need to Know

Oct 15,2020

A Complete Guide to Understanding Offshore Software Development

What is offshore development?
What is the difference between onshore, nearshore, and offshore?
What makes offshoring software development so popular?
How does offshore development work?
What are the advantages of offshoring software development?
What are the disadvantages of offshoring software development
What are the latest trends in offshore software development?
How to choose the right offshore software company?
Best practices to follow while offshoring software development
Final thoughts

What is offshore development?

Offshore development simply is synonymous with outsourcing. It means you’re sending your software development to be done remotely by people who are located in different geography. Though ‘offshoring’ is perceived as risky in ROI, many software companies are considering offshoring software development as it can actually help a lot. Often, the main reason for outsourcing is the lack of human resources required for software development or lack of needed qualification level.

From simple coding to custom development, mobile application development, software support and maintenance, and website design and development, you can outsource tasks to a third-party offshore software development company.

Offshoring development will spare you from the challenge of hiring and training new staff and at the same time ensure you get the best quality software delivered to you in a short time. Offshore application development is used by many of the world’s largest and most famous corporations, so there is no question about its effectiveness.

In 2019, the global IT outsourcing market was valued at USD 333.7 bn which is only expected to grow further in the coming years. The inevitability of digital transformation is motivating organizations worldwide to offshore their software development needs. Offshore development companies thus become an extremely important part of the global economy.

What is the difference between onshore, nearshore, and offshore?

Onshore: Onshore outsourcing is when you decide to hire software developers within your country. Most companies find this option convenient and approachable.

Nearshore: Nearshore outsourcing is when you decide to outsource to developers from countries with a similar time zone. Typically, customers count on geographic proximity and cultural similarities.

Offshore: Here, the company of the service provider is located in a different country from yours. It can even be in a different continent with a notable time zone difference.

What makes offshoring software development so popular?

The main reason for its popularity is financial profitability. With offshoring, it is possible to minimize staff expenses within the customer’s organization as well as cut expenses such as rent of premises, equipment, social security, and deployment of development. In many of the developed countries, hiring and paying skilled in-house developers have a significant impact on the budget.

Some of the popular offshore countries in the world include India, China, Russia, Ukraine, Poland, Taiwan, Vietnam, S.Korea, etc.

On average, you can expect your offshore software development vendor to approximately charge the following rates per person per hour of work;

Asia and Africa: $18-$40
Eastern Europe: $25-$50
Central America and South America: $30-$50
North America: $95-$170

Depending on the requirements, engagement, and pricing models, the above charges may vary. To find out the actual outsourcing rates, you need to directly communicate with the vendor.

How does offshore development work?

When you consider teaming up with a software development company located in a different country, you can:

Delegate the project to an individual developer or an offshore development company
Delegate only certain parts of the software or the whole project to the remote team
Hire a dedicated offshore development team

If you hire a dedicated team or an individual, you will have complete control and ownership over the development progress which ensures that your remote workers are in touch with one another. This may not be a great idea unless you are a product management enthusiast.

If you turn to the services of a development agency, you won’t have to worry about finding the right resource to manage the working processes. Most of the issues such as what if a team member falls sick or quits will be taken care of by the company instead.

What are the advantages of offshoring software development?

1. Shared responsibilities and competent skills

Offshore development companies are more likely to share and manage the risks during projects, as they depend on the end-result as well. Also, deadlines facilitate a faster process.

2. No training or administration needed

Outsourcing companies need to stay competitive, hence they will have the requisite expertise. So, you need not worry about training the resources. Additionally, operational and administration costs will be negligible as you will not have to take care of office space, equipment, recruiting, etc. All these will be handled by the offshore software development company.

3. Faster time-to-market

Offshoring development ensures that your product reaches the market faster and on time. When qualified people work round the clock to develop your product, you can rest assured that you’ll be getting quality software at the end. Additionally, an external person or team can help improve your business processes and let you leverage creativity and innovation at each stage of the software cycle.

4. Lower cost

There’s no denying that maintaining an in-house IT team having expertise in the latest technologies is both challenging as well as expensive. By outsourcing your software development, you do not have to invest in IT infrastructure or worry about recruiting and training employees.

What are the disadvantages of offshoring software development?

1. Differences in language and culture

Differences in language and work ethics, cultural issues, what’s offensive and what’s not, etc., could lead to unpleasant situations if not known beforehand. For instance, working hard could mean something different in Spain and the UK. So, you will need to be thorough about the culture of that particular country before offshoring.

2. Core communication issues

Different time zones, working hours, bandwidth, etc may slow down communication. This could even hinder monitoring and resolving everything timely. A clear interpretation of roles and mechanisms, strong leadership, and an active management of culture by adapting to either the customer’s or the vendor’s corporate culture is an effective way to manage cultural differences.

3. Security

Data security is one of the biggest challenges faced by enterprises today. When offshoring your data, it’s important to validate the vendor’s trustworthiness and respectability w.r.t. ensuring data security. As a best practice, it’s recommended to sign a Non-Disclosure Agreement (NDA) or the confidentiality agreement between both parties (customer and offshore partner) which strengthens the confidentiality of data and relationship terms.

4. Quality of work

While offshoring may be cheaper, it does not assure the accurate skills or commitment to do the job. There’s always a chance of hiring a team with no proper skills. It’s important to conduct the vendor’s background check before outsourcing your requirements.

What are the latest trends in offshore software development?

Software development involves complex processes and is never an easy task. Developers and agencies have to embrace new technologies and trends to stay relevant and competitive.

Here are some of the latest trends in offshore software development:

1. Automation

Automation plays an important role in reducing human dependency, risks associated with manual labor, and costs. Apart from innovation and faster responses to changing business environments, technologies such as RPA contribute heavily to reducing administrative overheads.

2. Cloud computing

Cloud computing offers scalability and flexibility and plays a vital role in offshore software development. More and more companies are realizing the benefits and possibilities of cloud computing and leveraging it. Soon, cloud-based applications and cloud infrastructure will be the way of life in offshore software development enabling companies to address the growing needs of businesses across the globe.

3. Artificial Intelligence(AI)

AI is taking the world by storm and software development is no exception. AI is specifically used to improve the quality of code and testing as well. Developers can combine AI technologies such as natural language processing, machine learning and business rules to build better software in a short span of time.

How to choose the right offshore software company?

There are plenty of offshore software companies across the world and finding the right one can be a daunting task. While word-of-mouth is still one of the best ways to ask for a reference and talk about the offshore team and ask important questions, there are still many other things to consider.

Firstly, groundwork is important. Finding the right offshore development company needs evaluation and time. One important tip is to contact several agencies and compare what they have to offer.

Along with checking the portfolios of software outsourcing companies, take your time to go through their social media handles, blogs, resources, endorsements, and codes if possible. You can even consider making a test run of a potential partner company related to technical requirements as it will help you make an informed decision.

Here are a few tips to choose the ideal offshore custom software development company:

Visit the websites of several offshore development companies
Check their portfolio and analyze their past and ongoing projects
Understand the experience the company has in the industry you are interested in
Learn the company rating on websites such as Goodfirms or Clutch
Read reviews and testimonials from clients
Learn about the professionalism of the programmers
Learn how the company can support the applications if you develop any issues with the development
Find out if the project development is iterative/ agile (that is, doing the work parallelly with continuous analysis of the results and adjustments in previous stages of work) or not

Best practices to follow while offshoring software development

Get introduced to all the developers who are supposed to work on your project
Make sure to have a full-time on-shore as well as an offshore team leads as they can establish necessary coding standards, help solve technical issues, and mentor the offshore team
Use videoconferencing to arrange regular meetings to handle any issues and resolve the same in a timely and efficient manner
Use appropriate tracking tools (project management tools) to plan tasks efficiently and prioritize work accordingly

Final thoughts

The demand for offshoring software development keeps surging as organizations want to optimize their business processes and align their strategic planning with their operational strategies. Outsourcing your IT necessities can be a boon in times of financial and natural adversities because offshore development companies like Fingent implement business continuity planning and disaster recovery plans to fulfill obligations and deliver services without interruption.

Our specialists and developers have several years of experience to complete complex tasks. We have expertise in offshore application development, cloud application development, system integration, and more. Hire our services and discover the benefits of partnering with us! Talk to our expert to learn more.

“Bhuvana is a Senior Content Specialist at Fingent. She loves to research and develop creative and unique content related to technology and marketing. When not involved in full-time writing, you can see her pitching into editing and proof-reading all sorts of marketing collateral crucial for the company's branding.”