Why Offshore Software Development Actually Works
01 September 2021
Software development companies face many challenges. From getting clients to optimizing marketing campaigns, these companies struggle to succeed in today’s competitive market. This is especially so for new startups.
If a company doesn’t have a large budget, it is hard to afford qualified professionals to start and boost the project.
To manage their IT requirements, they need to find the right professionals and hire them. Most of them are needed on a long-term basis to meet the project’s goals. This is one of the main reasons why companies turn to offshore software development.
By hiring an offshore team, a software development company can achieve the desired results faster and cost-effectively. Not to mention, they can access more resources. Maybe the right professionals for the company’s success are not in its home country. But it may be possible to find them through offshore outsourcing.
Startups can find partners, employees, tools, and many resources overseas. They have the opportunity to work with offshore developers, web designers, app builders, and a wide variety of talent.
Also, combining the offshore team with in-house collaborators can bring many benefits. This helps businesses increase reliability, productivity, and efficiency.
This article presents a guide on how to approach offshore software development. We analyze important aspects that outsourcing companies must consider. This includes choosing an offshore team, coordinating the workflow between the in-house and overseas teams, and the advantages of software outsourcing.
Offshore software development: the definition
We can define offshore software development simply. If a company uses an offshore development team to build software that will be used in its country, they are using this approach.
This takes place when the outsourcing company is in a different time zone than the core business. An example of this would be an American company outsourcing tasks to an Eastern European team.
But outsourcing can be done in different ways. Companies can delegate tasks to entire teams, companies, or freelancers. They can delegate complete projects or specific tasks.
Types of software outsourcing
- Delegate tasks to an offshore team of experts.
- Delegate tasks to a freelancer or agency.
- Delegate a complete project or specific tasks.
The tasks performed by an offshore team can be diverse. A team of professionals can handle a variety of offshore software development services. This includes app building, designing a user’s interface, or creating a dashboard.
In some cases, the project leader has only an idea. Then, the offshore development team is in charge of designing the project, planning the workflow, and bringing this idea to life.
How do offshore teams work?
As stated above, teams can have various tasks and responsibilities. These will depend on the overall strategy of the product owner.
Project leaders who want to be deeply involved in the creation process can hire a freelancer or agency. Thus, they can design their plans and hire people that will best implement them. The product owner must understand that this requires more involvement in the work process. They must develop the strategy, set out instructions, and supervise the workflow.
Project managers who don’t want this type of involvement can choose a different option. A core company can hire an offshore software development company rather than a freelancer. The company will handle all the stages of the process. Usually, they have a team in place that can do the necessary tasks.
Creating software requires a combination of talents. App creation needs at least a good designer, a software developer, and a QA engineer. It is hard to find one single freelancer with all these skills.
Also, it is important to establish the deliverables, i.e., what the offshore team is expected to do. Most software development services offer fully customizable options.
The outsourcing company will stipulate the exact deliverables and time frames. Yet, we can divide the more common tasks into three categories.
Offshore software development categories
Delivery team. This is a team of dedicated professionals that work on specific tasks. They work autonomously in parallel with in-house professionals.
Staff augmentation. This is a group of people hired to work with the company’s IT department. They work as an “extended team.”
Project outsourcing. This is when a company hires a team to create a project from scratch. This team is in charge of all the processes and tasks needed to reach the desired goals.
Why Offshore Software Development Actually Works
Outsourcing tasks (or whole projects) to an offshore team can be beneficial. Companies can reduce costs, optimize resources, access more tools, and find great talent. This section lists the benefits of offshore software development.
Nine benefits of offshore software development
1. Reduce costs and optimize earnings
Thanks to offshore outsourcing, companies can develop their projects at lower costs. Hiring full-time employees in one’s country is not always profitable.
Moreover, hiring workers in the long term might be expensive. In most cases, employers must comply with job regulations and pay for vacations, leaves, social security taxes, and retirement funds.
By hiring professionals overseas, companies can avoid these costs without compromising quality. Eastern European developers are known to be highly skilled. In most cases, they are equal or better than American developers.
Also, the cost of living in this region is usually lower. This creates a win-win situation where the company reduces costs, and the offshore team receives an adequate income.
Companies can reduce costs and get quality work by outsourcing to Latin America, Eastern Europe, or India. The hourly rates for the best professionals in these areas are usually $35-$50 per hour.
2. Access the most talented teams
Outsourcing software development tasks brings many benefits. Besides reducing costs, companies can get the best professionals in a particular field.
There are different projects and objectives. Yet, a truly innovative project needs a top offshore software development team. To develop a profitable IT project, the owner must hire talented and creative people. This talent can be found offshore.
There may be no one in the owner’s country with the required skills to carry out a project. And, if there is, this person’s fees will probably be quite high.
Offshore software development not only helps a company find talent but also reduces costs.
3. Improved focus on business and customer base
By outsourcing a project to the right people, a company owner can focus on other important matters. Project owners can concentrate on other areas of the business.
It doesn’t matter how good an app is if no one buys it. Without proper advertising, even the best projects can fail.
Knowing that their project is in good hands, owners can grow their brands, develop a marketing strategy, create the right niche, and find the best advertising software. Thus, when the product is ready, there will be a strategy in place to optimize revenue.
4. Industry expertise
Project owners should ask themselves: What makes a professional truly great? How to find the top offshore software development professionals? The answer is “expertise.” This is true for all areas, but especially IT-related projects.
The IT and web development industry is a young one. It has been developing during the past three decades. Thus, the best professionals are the ones who have been working in the field during these years. This is because their careers have developed hand in hand with the industry.
Project owners must remember that there is nothing like good know-how to develop a project effectively. By outsourcing overseas, they can find the best professionals in the IT field.
5. Well-designed strategy
Every successful project needs a well-designed strategy. This is especially so when hiring offshore developers.
Organizing a workflow between different people from various regions, cultures, and time zones can be challenging. This is why coordination is key.
Project owners should clearly establish deliverables, deadlines, and expectations. Also, they should make sure that every team member is given realistic goals. Each member is a thread in the project’s fabric. The strength, durability, and usefulness of this fabric will depend on each thread.
The success of the project depends largely on the long- and short-term goals. A project owner should create the right strategies and know when to implement them.
This ensures clarity in the work process. Hence, it will be easier for the project’s managers to supervise the operations and optimize results.
6. Workload optimization
Software development is a tricky process. In many cases, it’s hard to predict the exact amount of work a project will require.
By hiring offshore professionals, project managers can scale up and down according to current needs. If a stage of the process should require a heavier workload, then the manager can hire more developers. They would work only at that stage and for those specific tasks.
This helps optimize costs and time. There is no risk of overpaying, and managers spend less time recruiting people.
In this regard, hiring a dedicated team is the best option. They can balance the workload themselves according to the project’s needs at the time. Also, they can recruit people if necessary.
7. No employee training
Training people takes time and resources. In today’s competitive market, most project managers don’t have the time to conduct training. Luckily, offshore software development companies provide a solution.
These companies can afford to train staff because development is their main service. They make their living by providing services to other companies overseas.
It makes sense for them to train employees that will work with them in the long term. This training can also be useful for future projects. Sometimes, they even provide their employees with paid training sessions.
Offshore outsourcing is an excellent strategy to handle new projects. With this approach, companies don’t have to spend resources retraining their current staff. The extra tasks can be outsourced to offshore developers.
8. Faster Time-To-Market
By working with an offshore partner, the development process is faster. This helps companies to release their products on time. This is especially helpful on time-sensitive projects.
An offshore development partner helps the process run smoother. They can make sure that the best professionals are working on the project around the clock.
A project owner can rest assured that he will get a quality product right on time for market release. This approach also helps boost projects by achieving goals faster.
9. Ongoing support
In the IT industry, a project doesn’t end when the app is ready for the market. All software requires maintenance, customer support, and troubleshooting. The amount and complexity will depend on the software’s characteristics.
Offshore teams can provide software development services while the app is up and running. Good ongoing management is key to remain competitive in today’s market. Hence, project managers should consider this when choosing their offshore team.
The perfect development partner is the one that can complete the project on time and provide reliable maintenance.
Important factors to consider when hiring an offshore software development company
When working with an offshore development team, it is important to consider several factors. This section includes a guide to reach goals faster and more effectively.
Establishing clear objectives is key for the success of offshore software development. Companies must set goals in the short and long term and time frames for accomplishment. This helps create a realistic view of the project and design a plan.
Deciding the features and targeting an audience
Before starting a project, it is necessary to decide its characteristics. This will depend entirely on the targeted audience.
Project owners must understand who their potential clients are and what they are looking for. Companies must research and analyze the market by talking to users of similar products.
It’s also important to study your competitors. A business owner should understand what competitors do and what technology they use. It is vital to know their weaknesses and strengths. Thus, software development companies can design competitive products.
By analyzing traffic sources, users’ devices, and other analytics parameters, project owners can make informed decisions.
Setting the project’s priorities
The first step for offshore software outsourcing is to establish goals, terms, and priorities. A project manager must outline a work plan for their teams.
Later on, the staff can make their own decisions, but they must understand what’s expected of them. This will give the manager a further reason to trust the team and the freedom to address other responsibilities.
Avoiding budget pitfalls
It goes without saying that the budget needs to be part of the plan. From the very beginning, the manager must estimate the costs of the entire project. It is also vital to assess the cost/benefit ratio to understand profitability.
When this is covered, work can start. Yet managers should be prepared for unexpected expenses along the process. These are quite common in software development projects.
Setting quality standards
Setting the right code and architecture standard is important to creating high-quality software. Managers should perform regular control checks. This will help supervise the project and ensure the creation of premium software. It helps to document standards and reports for an optimized workflow.
Protecting the project’s information
The software must comply with existing regulations. If the company owns the software, it will be regulated by the country of registry’s law. Also, earnings may be taxed.
This should also be considered for headquarters and branches. The product may be subject to tax in the country of incorporation and where the services are provided. This also depends on the UBOs and their country of residence.
Some jurisdictions require a license for certain types of businesses. This includes online payment providers, online gambling, and others.
Managers should consider international privacy laws. These must be considered when creating the project plan and marketing strategy.
When hiring offshore staff, it’s important to ensure confidentiality. The staff should not disclose private information as this may harm the project in the short and long term.
They should understand intellectual property rights and confidentiality terms. Many companies ask contractors to sign a DNA or non-compete agreement before hiring personnel.
Studying the legislation
When two or more countries are involved in a project, it’s important to consider legislation.
Companies should find out the government restrictions or conditions for developing software in a particular region. Having to deal with such issues after the project has started is extremely unpleasant.
Supervising the process
Managers should conduct regular supervision to ensure the process runs smoothly. It is important to have regular meetings and reports.
There are many apps for remote teamwork. These apps help organize the workflow, set deadlines, track performance, and assess objectives. The staff members can provide their reports and proof of accomplishment. This avoids time-consuming events like follow-up meetings or correspondence.
With this approach, managers can estimate the overall progress and take a new course of action if necessary. Project owners can set and reschedule milestones to optimize results.
While remote work software is effective, managers should meet with their staff occasionally. Some issues can only be addressed in a two-way conversation.
How to choose an offshore team
Choosing the best offshore software development company is no easy task. There are many teams of talented professionals in different areas of the world. They offer comprehensive and top-class development services.
One of the ways to find the best software developers is a good old trick: word-of-mouth. Yet, not all product owners have access to this information. Especially if they are taking their first step, they may not have a good reference to start with.
But there are many other factors to consider. Those factors can guide a person into choosing the most qualified team. This section lists the main steps to take before making this decision.
The time you take to research the software development market is not wasted.
This decision will probably affect the outcome of a project. Hence, product owners must search, contact, and compare different options. Checking a team’s previous projects and their success rate is a good strategy.
When you have found a team that looks reliable and whose portfolio you like, it’s time for the next step: checking references.
At this stage, project owners should deeply research the team’s work. Case studies, reviews, testimonials, and blog posts provide a good glimpse into the team’s performance.
It might be a good idea to contact companies that have worked with this team before. This can paint a picture of how they perform, handle problems, and stick to deadlines.
Checking standardized security protocols
Unfortunately, as technology advances, so do fraudsters. Scammers can also use every new tool designed for developing the virtual environment.
In this context, safety becomes a top priority. The chosen team must implement top-notch security measures, so the project’s information is safe. This includes intellectual property, logos, images, codes, corporate and personal data, and account and payment information.
Choosing the widest range of services
While someone’s objectives may be clear now, they can change in the future. This is especially true for long-term and IT-related projects.
If people want to launch a lengthy project, then they should be prepared. In this case, it’s a good idea to hire a team with a variety of services. This can help avoid issues and solve problems in the future. Also, it provides the project a holistic approach and flexibility.
When is the right time to hire an offshore development company?
Hiring an offshore team is highly beneficial, but it involves great setup efforts. In some cases, this is a cost-efficient option. Yet, this is not always the case.
How to know if a project needs offshore staff? This section lists a few situations when an offshore development company can be useful.
Lack of IT talent in the home country
Highly talented software developers are scarce. If a company doesn’t have top IT talent in-house and can’t find it in its country, then it’s time to go offshore. Serbia, maybe?
Mistakes that cost too much
When used to perform routine tasks, staff members can make mistakes. Companies and their employees tend to neglect some important details. Yet, a minor error can bring enormous consequences to the IT sector.
If this is the case, it might be a good idea to invest in an offshore team specialized in IT and tech solutions.
Cover the needs for special positions
Some projects require highly specialized skills. Also, some of these tasks require temporary positions, which top professionals are not always willing to take. This is a good time to look for offshore talent.
Even if a country does have top IT talent, it’s usually very expensive, like it’s the case in the US or Western Europe. Hence, outsourcing these tasks to offshore teams can help reduce costs. There are areas with a low cost of living where top talent is affordable.
Also, hiring in-house staff is costly. It requires infrastructure and other expenses like sick and maternity leave, social security contributions, etc. In these cases, it might be a good idea to delegate tasks to offshore agencies or freelancers.
Handling complex projects
Complex projects require a great deal of expertise and know-how. Product owners should not hesitate to hire offshore talent if it helps tackle such a project.
There is no point in hiring full-time employees for short-term projects. When the project is over, the person will have nothing to do. It is more cost-effective to outsource these tasks to a team offshore. This helps control expenses and optimize returns.
Ending thoughts on offshore software development
We can conclude that offshore software development is a profitable approach. Although not necessary in every case, it helps many projects.
By outsourcing software development tasks to an offshore team, a company can see many benefits. They can find high-quality work at lower rates, access top talent, and find the exact skills needed for a project.
With good organization, clear goals, security measures, and attention to regulations, an offshore team of developers can boost a project and lead it to great success.
If you enjoyed reading this article on offshore software development, you should check out this one about software development outsourcing trends.
We also wrote about a few related subjects like lean software development principles, how to hire a web development team, software development budget, business pivot examples, financial projections for startups, financial software development companies, IT outsourcing failures, and risk management processes.