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.
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:
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
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.
Stay up to date
on whats new
Get a free
Talk to our experts today
about your business
While outsourcing is becoming the popular route to develop apps, it is a double-edged sword that has its ups and downs. Many enterprises take the plunge into the world of outsourcing without a proper understanding of the benefits and risks. Such companies often act in haste and repent at leisure.
Here is a run-down of the major benefits and risks or challenges associated with outsourcing the app development work, as the first step towards deciding on outsourcing.
PROs: Outsourcing Delivers Cost Advantage
The major raison d’etre for outsourcing is cost savings. Outsourcing the app development work to a third party provider often results in reduced costs compared to undertaking the development work in-house. Despite the need for frequent updates to keep the app up-to-date, app development is a dedicated project, outside the scope of the daily routine of the in-house IT team. Indulging in the app development process in-house would require gathering dedicated resources and fresh talent, all involving sizable capital investment. A third-party outsourcing partner comes with up-and-running infrastructure, and app development is their core focus rather than a distraction from their core activity. They invariably pass on the resultant cost-savings to the enterprise.
The cost benefits of outsourcing become even more profound when outsourcing is combined with offshoring. Offshoring the development work to a third party in India, East Europe, or some other third-world country ensures the delivery of high-quality app at a fraction of the cost it takes to develop the app in-house and considerably less compared to entrusting a local outsourcing party. The low wages given to the developers employed by the outsourcing partner aren’t necessarily exploitative, as it corresponds to above-average wages in tune with the third-world country’s cost of living.
The average cost of building a standard app is anywhere between $150,000 and $450,000, with almost half of this cost going to deploying the required infrastructure and features. Outsourcing the app development process reduces the total cost of app development to anywhere around $10,000 to $80,000.
Outsourcing Delivers Accelerated Time to Market
The benefits of outsourcing extend to much more than cost savings. Often, cost savings is accompanied by accelerated time to market. A competent outsourcing partner would have at their ready disposal a talent pool of highly seasoned and experienced developers, who would be able to accomplish the most challenging of tasks in double quick time, without slowing down for guidance, get trained on a new technology, or even indulge in trial and error. Also, the outsourcing partner agrees to complete the project in a time bound manner, without any hold up due to sick leaves, key talent putting in their papers or any other disruptions.
The fast turnaround perfectly suits today’s fast-paced business environment, where the ideal time to roll out an app is always yesterday. A recent survey reveals over 40% of respondents quoting the time taken to develop an app in-house as anywhere between six months to one year, completely unacceptable in today’s fast-paced world.
Outsourcing Enhances Quality of Work
Outsourcing generally enhances the quality of the apps, with the client leveraging the outsourcing partner’s talent pool, rich experience, knowledge, and the latest infrastructure readily, in a highly scalable manner. The outsourcing partner has an extra motivation in delivering high-quality work, which serves as the best advertisement of their skills, and the major source of repeat orders and referrals.
A related advantage is the transfer of risk. An outsourcing partner assumes all risks associated with the project. The partner guarantees delivery on time and on the budget, with penalties for delays. The client also has the option of terminating the contract if things go wrong, rather than be stuck with a dud project.
With outsourcing, the company pays for the result. Developing the app in-house means the company pays for the effort, with an uncertain result.
CONs- Risk of Leakage of Sensitive Information
For all the benefits of outsourcing, it also comes with significant downsides. Involving a third party and external outsourcing partner into the mix comes with the risk of leakage of confidential information. A successful app requires close integration with the business process, for which the outsourcing partner requires first-hand information on the nitty-gritty of the business. The outsourcing partner also gets their hands on sensitive information regarding the customers of the business.
The antidote to such risks is a strong non-disclosure agreement and IP protection agreement, backed by appropriate legal and organizational measures.
Challenges of Expectations Mismatch
While an outsourcing provider may be technically competent and roll out apps in a time-bound manner, there is an inherent risk of an expectation mismatch. There is always a risk of the development team executing do something different from client expectations. Worse, the development team may not gather requirements clearly enough and effect an inherent flaw in the app design, which may be difficult to rectify at a later stage.
A seamless and robust communication system mitigates such risks. An open communication style, clear points of contacts, and a culture of accommodation are indispensable for outsourcing to succeed. A thorough requirements analysis, backed up by solid documentation and a detailed description of the product requirements is another essential requirement.
However, the best of communication systems come to naught if the stakeholders are not there to communicate. A flowing schedule, with a readiness to be available round the clock, is an essential ingredient for success.
Outsourcing May Result in Loss of Flexibility
Scope creep has almost become a way of life in today’s highly fluid business environment. Requirements change by the day, and a new app may require co-opting changes right through the gestation lifecycle, and even afterward. An outsourcing project goes according to the laid down upfront agreement, with limited scope for flexibility. Renegotiation the contract to co-opt changes midway may be expensive, and anyway impractical.
The solution is to co-opt a partner who understands the business and is flexible to accommodate changes as it is realistically possible. Accelerated time to market anyway reduces the need for such sudden changes. Again, while outsourcing offers a ready access to skilled talent without the associated HR costs, it is still a challenge to identify a good partner and make sure the partner can walk their talk.
Successful companies put their heads down and work diligently to overcome the challenges, and in the process reap the best of both worlds. Roping in a sound partner who is competent not just on the technical side, but also experienced and versatile enough to understand the nitty-gritty of the business, helps.