Offshore software development has become a prominent choice for companies across industries due to dynamically evolving technologies, higher demand for product innovation, and a severe tech talent shortage. IDC forecasted that nine out of ten organizations by 2026 will encounter the IT skills crisis, leading to an estimated $5.5 trillion in losses caused by product delays, impaired competitiveness, and lost business.
If you’re contemplating offshore software development as a potential solution, you’ve come to the right place. In this article, we’ll delve into all essential information – the advantages and challenges of this development model, top outsourcing destinations, and provide a roadmap for successfully hiring offshore software development companies.
What is offshore software development?
Offshore software development involves outsourcing some or entire software development projects to external service providers located in another country. For example, the healthcare supply chain management GHX, which is based in the US, engaged LARION team to develop new supply chain data management platform
This approach can be utilized for a wide range of tasks, from basic coding and product design to custom software development, web and mobile application creation, and ongoing software support and maintenance.
For many companies, offshore development services offer an excellent solution for projects that require specialized expertise and high-quality deliverables that are difficult to source locally.
Offshore vs onshore vs nearshore software development
Offshore vs onshore
Unlike offshore software development where you employ external tech providers in another country, onshore development refers to contracting vendors within the same country. For example, a California-based tech firm outsources to a development team in New York.
Offshore vs nearshore
On the other hand, nearshore development is a middle ground between offshore and onshore. It involves outsourcing to a company in a neighboring country or a country within the same time zone. For instance, A U.S. company chooses to outsource to developers in Mexico or Canada.
The pros & cons of offshore software development
The talent shortage has led to a search for offshore software development firms in regions with abundant and cost-effective talent. However, it’s important to understand the advantages and disadvantages of partnering with an offshore IT development vendor before making a commitment.
Advantages of offshore software developments
Cost reduction
By offshoring software development to a country with a lower cost of living, you can immediately benefit from reduced development costs while still maintaining quality.
For a clearer understanding of potential savings, compare the salary of a US software developer with that of a developer in Vietnam. Glassdoor reports that the average annual salary for a software developer in the US is $130,426, whereas the same role in Vietnam averages $9,492 per year.
Additionally, offshoring eliminates the need for monthly commitments related to employees’ social benefits, insurance, and other perks.
Scalability
Startups often can’t manage the financial strain of maintaining a large, full-time development team, especially when the team may not be consistently busy. Offshore software outsourcing offers flexibility in terms of expertise, team size, and the duration of the collaboration. You can adjust the number of offshore software developers and the length of engagement based on your business needs without dealing with hiring costs and severance packages.
Large talent pool
Developing high-performing software solutions often require expertise in a range of IT skills. Depending on the nature of your project, finding local candidates with the necessary skills can be challenging.
Offshore outsourcing provides access to a global talent pool, allowing you to find specialists in various fields. Whether you need a machine learning expert or programmers proficient in less common languages, you can source the right talent from leading IT outsourcing regions.
Drawbacks of offshore software developments
Time zone and cultural differences
Offshore software development often involves significant geographical distance, creating challenges in time zone coordination and cultural understanding. For instance, collaborating with India developers necessitates overcoming a substantial 9.5 time difference. Additionally, not all Indian developers may be fluent in English, adding another layer of complexity to communication.
Project monitoring
Successful outsourcing hinges on effective communication between your team and the outsourced vendor. Since face-to-face meetings are not feasible, it is crucial to establish clear agreements on project requirements, milestones, progress reports, testing, and other essential documentation before the project begins.
Unlike managing an in-house team, you have less control over how an external vendor develops the software. You also lack authority over the vendor’s handling of sensitive information and their methods for keeping their developers motivated and aligned with project goals. However, some IT vendors, such as LARION, promote open communication and transparency to ensure clients effectively track project progress and ensure data security.
5 key steps on implementing offshore software development
Finding an offshore software development team can be challenging, but it is manageable if you have established a solid foundation. Here’s what you need to do.
1. Define your goals & requirements
Before searching for potential vendors, having a clear requirement is crucial for vendors to allocate resources effectively, estimate timelines accurately and reduce the risk of mismatched expectations and scope creep. What specific services are you seeking? Do you require a full-scale development cycle or simply coding assistance? Are you interested in augmenting your existing development team with additional engineers or building a dedicated offshore team? What specific technical expertise is essential for your project? What are the desired features and functionalities of your final product?
2. Vendor evaluation & selection
This step includes identifying potential vendors based on location, expertise, and reputation. Once a shortlist is created, issue a Request for Proposal (RFP) to gather detailed proposals and quotations. Carefully evaluate these proposals, considering factors such as pricing, contract terms, engagement models (fixed price, time & material, dedicated team), vendor capabilities (technical expertise, quality assurance, data security and privacy measures, etc.) and choose the vendor that best fits your needs.
3. Contract finalization
After selecting a suitable offshore software development company, the next step is to establish terms of engagement, including deliverables, timelines, payment terms, and confidentiality agreements
4. Project planning & execution
A kick-off meeting is essential for outlining the project timeline, milestones, and deliverables. In addition to agreeing on the architecture and tech stack, it’s important to establish communication tools and methods. This ensures efficient and timely communication while maintaining a clear record of conversations, decisions, and updates, which is crucial for tracking project progress and resolving disputes.
Based on the predefined requirements, the vendor begins coding and developing the software until its completion
5. Review & Feedback
During the project execution, it is essential to regularly review the quality and project milestones against the agreed-upon requirements and specifications. By continuously monitoring these aspects, you ensure that the project stays on track and any issues are identified and addressed promptly, maintaining alignment with the initial objectives and delivering a successful outcome.
Cost attributes of offshore software development
It’s impossible to determine an exact figure for offshore software development, as costs can vary depending on your project requirements. Here are some elements that affect your budget:
- Project scope: Offshore software development typically encompasses more than just app building. Many vendors offer additional services like quality assurance testing and post-release support, often as separate chargeable components
- Tech stacks: Building complex software applications demands a team with diverse technical skills. The more IT professionals required for your project, the greater the overall expense.
- Deadline: If you’re working under a tight schedule with little room for errors, the vendor might need to allocate additional resources to your project. This could lead to higher development fees
- Technical complexity: Depending on your app’s capabilities, supported platforms, UI/UX requirements, backend processing, and third-party integrations, the pricing for your software solution can vary.
Top 5 countries for offshore software development
Vietnam
In recent years, Vietnam has rapidly emerged as a top-tier destination for offshore software development. With roughly 430,000 engineers, Vietnam possesses an abundant workforce with a strong inclination towards STEM education and great English proficiency. Moreover, the country has multiple policies to encourage foreign investment while investing strongly in IT infrastructure, specifically Vietnam National Innovation Center (NIC) to promote digital innovation. Many international hi-tech firms have successfully kick-started innovation projects in the country, including NAB, Samsung, Intel, etc. Notable cities for offshore are Ho Chi Minh city, Da Nang and Hanoi
India
India has established itself as a global leader in the software development industry, with an estimated 5.8 million offshore software developers according to DistantJob. The country is known for its competitive pricing and extensive experience in various software development technologies. Like Vietnam, India has a government that encourages foreign investment through eased policies and regulations. Thriving tech hubs are primarily located in Bangalore, Hyderabad, and Pune
Philippines
With a large pool of approximately 190,000 developers, professionals in the Philippines are known for their excellent English skills, fostering seamless communication with global clients. Foreign investment is also highly valued, supported by a favorable business environment and tax incentives. Major tech cities include Manila, Cebu, and Davao. While the country offers competitive pricing, potential challenges include occasional political instability and natural disasters, which could disrupt infrastructure and project continuity.
Ukraine
The country is home to a thriving tech sector with over 200,000 software development professionals, renowned for their adherence to European standards and competitive pricing. Prominent tech hubs are located in Kyiv, Lviv, and Kharkiv. Nevertheless, political instability can introduce various uncertainties that might disrupt business operations, and create a challenging environment for long-term planning.
Poland
The country boasts a workforce of 50,000 highly-skilled IT professionals, noted for their technical expertise and problem-solving capabilities. Warsaw, Krakow, and Wrocław are the top cities driving the tech sector’s growth and innovation. However, compared to some offshore destinations like India and Vietnam, Poland’s labor costs are relatively higher. This can impact overall project budgets and cost-effectiveness for companies seeking more economical solutions.
Criteria for selecting an offshore software development partner
Choosing the right offshore software development partner is crucial for the success of your project. Here are key criteria to consider:
Criteria | Description |
Company profile & experience | - Domain expertise: Evaluate the company's experience in your industry or with similar projects. - Project portfolio: Review their past projects, clients, and technologies used. - Company size & structure: Assess the company's size, structure, and team organization. - Financial stability: Ensure the company is financially sound and can sustain the project. |
Technical capabilities | - Technology stack: Verify the company's proficiency in the required technologies and programming languages. - Development methodologies: Assess their alignment with your preferred development methodologies (Agile, Waterfall, etc.). - Quality assurance: Evaluate their QA processes and testing methodologies. |
Cost and Contractual Terms | - Payment terms: Understand payment structures and milestones. - Intellectual property rights: Clearly define ownership of intellectual property. - Contractual obligations: Review the contract terms and conditions carefully. |
Project Management and Collaboration | - Project management & collaboration methods: Assess their use of tools and practices. - Client involvement: Understand their approach to client involvement and feedback. - Change management: Evaluate their ability to handle project changes and scope adjustments. |
Why consider LARION as your offshore software development
With over two decades of delivering secure, scalable, and robust software solutions to businesses of all sizes, LARION has established itself as a trusted partner in the industry. Beyond simply coding, we focus on understanding your goals and adapting our strategies to provide solutions that address your challenges, driving growth and innovation.
Ready to elevate your business with world-class software development? Contact LARION today to discuss your project and discover how we can help you achieve your goals.
