Considering offshore software development but not sure where to start? If so, you're at the right place. In this guide, we'll cover everything you need to know before embarking on your offshore software development journey.
Let's start with the basics.
What is offshore software development?
Offshore software development is when you create your own software development center in a foreign country. This involves hiring a team and setting up an office in that country. 'Offshore Software Development' is often used interchangeably with 'Offshore Software Development Outsourcing'. Although they sound similar, they refer to different concepts. Offshore software development outsourcing is when you hire a third-party vendor located in a different country to work on your software projects.
As you may have guessed by now, in this guide, we'll focus on the outsourcing aspect of offshore software development.
Offshore development models
The offshore development model, or engagement model, outlines how you work with an offshore provider. It defines collaboration, roles, responsibilities, and payment methods. Let's explore a few of these models.
Project-based outsourcing model (fixed price)
This model works best for projects with clear, well-documented scope and predictable outcomes. The price is agreed upon as a fixed amount before starting the project. It’s usually most suitable when you’re working on a strict budget and don’t need flexibility in scope. However, if you decide to change the scope later, it’ll lead to additional costs.
Staff augmentation
Staff augmentation simply means expanding your team by hiring temporary workers to fill short-term jobs. Say you've got a great in-house software development team but you need one or two more developers to hit a deadline, then this is the way to go. Think of this as a way to fill skill gaps or accelerate your projects without the overhead of hiring permanent staff.
Dedicated development team
Opt for this when you need a team fully focused on your project. The service provider does the heavy lifting of managing the team, while you retain full control over the project’s direction and execution. The dedicated team works solely on your project for the duration of the engagement. This is ideal for complex projects that require continuous development, maintenance, and support.
Time and material model
As the name suggests, you only pay for the time spent by the provider's team and the materials (or resources) used in the project. This model is typically preferred for long-term projects with dynamic requirements. However, it can sometimes become quite costly.
Each model offers unique benefits and trade-offs. As the client, you should choose an outsourcing model based on your project requirements, the level of control you want, the flexibility you need, and your budget constraints.
Onshore vs nearshore vs offshore outsourcing
Offshore, or offshoring, is just one of the three most popular outsourcing approaches. The other two are onshore and nearshore outsourcing (often referred to as onshoring and nearshoring, respectively).
Onshoring
Onshoring means outsourcing your software projects within the same country that your company is based in. Think of it as hiring an external team, but instead of them being overseas, they are located within your own country. This gives you the advantage of working with teams that speak your language, work in similar time zones, and share a cultural background similar to yours, all of which can contribute to smoother communication and collaboration. If you really can't do without in-person meetings, onshore software development may be what you're looking for.
Nearshoring
Nearshoring is similar to onshoring but with one key difference: outsourcing is done to a neighboring country or one that is geographically closer to your own. This approach blends the benefits of onshoring, such as proximity, overlapping cultural traits, and similar time zones, with the cost benefits of offshoring to a country with lower labor costs. With nearshoring, in-person meetings are still feasible, though they require more travel compared to onshoring.
Both onshore and nearshore software development can be great choices based on what your project needs, your budget, and how you prefer to work and communicate. While they are flexible alternatives to offshoring, offshore outsourcing provides unique benefits that make it the preferred choice for many companies.
Offshore software development benefits
Let's explore some of the benefits you'll enjoy if you choose to hire an offshore development team.
Lower development costs
Probably the most obvious benefit of offshore software development is its cost-effectiveness. If you're based in a country like the United States, where hiring software developers is expensive, outsourcing your development project to a country with lower labor costs can significantly reduce your expenses. Now you might be thinking, "But doesn't lower cost mean lower quality?" Not necessarily. Offshore software development companies in countries like India, Malaysia, and Vietnam have a large pool of highly skilled developers who can deliver high-quality work at a fraction of the cost compared to their counterparts in more expensive countries.
Access to top-tier talent globally
Finding skilled developers is hard. We know this firsthand because we hire them too. Offshore software development allows you to tap into a global talent pool and access top-tier talent from around the world. This means you can work with experienced developers who have expertise in technologies and programming languages that might be difficult to find locally in your region.
Flexible development teams
Do you need more developers to speed up product development? or do you need to reduce the size of your development team because the project scope has changed? With offshore software development, you can easily and quickly scale your team up or down based on your project needs. This eliminates the exhausting process of hiring and training new employees in-house. You'll be able to ship your products faster and meet project deadlines more efficiently.
Time zone difference as an advantage
Time zone difference goes both ways: sometimes it can be an advantage and other times it can be a challenge. Think of it like this—the offshore development team, based somewhere in Asia, will be working on your project while you sleep somewhere in North America. We have experienced this in many of our engagements. Our teams will complete their tasks during their working hours, and when you wake up, you'll have new updates or completed work waiting for you to review. Pretty convenient, right?
Higher efficiency
What if you could focus all your efforts on growing your business rather than getting bogged down by the nitty-gritty of software development? Well, this is exactly what offshore software development enables you to do. When you outsource your development work to an offshore managed software development team, they take care of all the technical aspects of your project, freeing you up to focus on the business side. Hiring skilled developers, conducting code reviews, ensuring quality assurance, and day-to-day operations of the development team are all handled by the offshore provider. All you need to do is provide clear requirements and objectives, and they will take care of the rest.
Yes, offshore software development is great, but it's not all sunshine and rainbows.
Offshore software development challenges
Offshore software development comes with many challenges if it's not executed properly. Let's look at some of the most common challenges companies face and explore how we can avoid them:
Time zone differences
Offshore software development teams will usually work according to their local working hours, which may not always align with yours. Therefore, when working with them, you may find it difficult to schedule meetings. Communication may take longer than expected, and product development may slow down, as crucial decisions may need to wait until both teams are available for discussion. However, these are all issues that can be easily prevented or mitigated with proper planning and coordination. This is why, at Hivekind, we work closely with you to find suitable overlapping times for meetings. As a company, we've been working remotely from day one—since 2015. During this time we've refined and perfected our communication and coordination processes to ensure smooth and efficient collaboration, regardless of time zone differences.
Language and cultural barriers
It's important to recognize that when you outsource to an offshore provider, you're engaging with a team whose first language may not be English or your native language. Many offshore development providers still hire/have developers who are not fluent in English, which can often lead to miscommunication and misunderstandings. To ensure effective communication, you should always look for an offshore software development partner with team members who are fluent in the language you prefer to communicate in. Additionally, be aware of cultural differences, such as different approaches to work and local holidays, as these can also impact collaboration.
Security challenges
Security challenges are a major concern when it comes to offshore software development, especially given the prevalence of cybersecurity threats and risks of data leakage. So, make sure you're protected by a Non-Disclosure Agreement (NDA) and that the offshore team follows strict security measures to safeguard your intellectual property and sensitive information.
4 Things you need to do before outsourcing software development
We've covered the basics. Now let's dive into the important steps you need to take before outsourcing software development:
Make sure you and your team are ready for outsourcing: If you're reading this, you're already on the path to getting ready for outsourcing—great first step. Assess your business needs, determine the specific tasks or projects you want to outsource, and ensure that your team is prepared for collaboration with an offshore partner.
Clearly define your project requirements: Before outsourcing your software development, it's crucial to have a clear understanding of what you want to achieve. Create a detailed project brief that includes specifications, features, desired outcomes, project timeline, budget, and other requirements. This will serve as a roadmap for both you and your offshore development partner, helping to align expectations.
Research and vet potential offshore software development partners: Take the time to thoroughly research and evaluate different offshore software development companies. Websites like Clutch.co and GoodFirms are useful resources for finding reputable companies with good reviews and ratings. Additionally, you should check their portfolio, past project case studies, and client testimonials to get a sense of their expertise and track record.
Prepare legal and contractual agreements: Ensure that you have a comprehensive legal agreement in place, including an NDA, to protect your intellectual property and confidential information. This agreement should outline the scope of work, project timelines, payment terms, and any other relevant terms and conditions.
How to choose the right offshore software development company
Choosing the right company determines the success of your offshore software development project. Ever heard of any horror stories about outsourcing gone wrong? They are probably true and are often due to selecting the wrong offshore software development company. To avoid living your outsourcing nightmare, consider the following factors when choosing the right offshore partner for your project:
Focus and commitment: Some offshore development companies have teams that juggle multiple projects/clients at the same time, which can lead to a lack of focus and commitment to your project. Therefore, look for an offshore development company that provides a dedicated development team working exclusively on your project.
Communication: Evaluate the communication skills of the offshore software development company from your very first contact. Ensure they are fluent in English or your preferred language and that they have clear processes and channels of communication established. Additionally, consider requesting a call with the team members who will be working on your project to gauge their communication skills and proficiency.
Project management: Get to know the project management practices of the offshore software development company. See if they have a defined project management methodology in place, such as Agile or Scrum, which promotes collaboration, flexibility, and timely delivery.
Work transparency: Look for an offshore development team that values transparency and provides you with regular progress updates, milestone reports, and access to their project management tools. This will ensure that you stay informed and involved 100% throughout the development process.
Ownership of code and assets: You should have full access to all code and assets produced for your project. Make sure that the offshore software development company you choose outlines in the agreement that the intellectual property rights and ownership of code and assets belong to you.
Technical expertise: Assess the technical expertise and skills of the offshore company by reviewing their portfolio, client testimonials, and case studies. Focus on companies that have a track record of successfully delivering similar projects. A reliable way to verify this information is by checking their Clutch profile, where all reviews are verified and offer insights into the company's capabilities and client satisfaction. You can also check Clutch rankings to see where the company stands in comparison to other companies providing the same services.
Cultural fit: Consider the cultural fit between your organization and the offshore software development company. It's important to understand their work culture, values, and how they approach problem-solving. This will reveal how well the offshore team aligns with your company's culture and their potential to integrate seamlessly into your development process.
Offshore software development trends
Businesses like yours worldwide are undergoing significant changes to improve efficiency and cut costs in the wake of the pandemic. Economic uncertainties and the push for digital transformation have significantly increased the rate of offshore software development adoption. As a result, several offshore software development trends have surfaced.
Growing demand for cutting-edge skills: If you've been keeping up with the latest technology trends, you'll know that the demand for expertise in AI, machine learning, and the Internet of Things has skyrocketed. However, the supply of skilled developers in these areas is very limited. To offset this shortage and meet the demand for cutting-edge skills, businesses are increasingly relying on offshore software development.
Greater focus on cybersecurity: With the increase in cyber threats and data breaches, businesses are prioritizing cybersecurity more than ever. Offshore software development companies are recognizing this trend and implementing robust cybersecurity measures to ensure the protection of their clients' sensitive data and intellectual property. They are investing heavily in advanced security protocols, conducting regular security audits, and enforcing strict data protection policies.
Adoption of No Code/Low-Code development: To accelerate software development and reduce coding efforts, many businesses are adopting No Code/Low-Code development platforms. These platforms allow them to test ideas faster and bring products to market more quickly, resulting in higher cost savings and productivity gains. We are seeing more and more offshore software development companies incorporating No Code/Low-Code development platforms into their processes to meet this growing demand for rapid application development.
Change in outsourcing destinations: While traditional outsourcing destinations like India and China still dominate the offshore software development market, there's a noticeable shift towards emerging countries such as Brazil, Poland, and Malaysia. This change could be linked to shifts in geopolitical dynamics and the availability of skilled talent. The change in outsourcing destinations provides you with a wider range of choices for offshore software development while considering factors such as cost, skills, and geographic location.
Conclusion
Offshore software development outsourcing has become an increasingly popular strategy for businesses looking to lower costs, access skilled talent, and stay competitive in the rapidly evolving digital landscape. However, success hinges on selecting the right offshore software development company. By looking at things like commitment and focus, communication, project management, transparency in work, code and asset ownership, technical skills, and cultural compatibility, you can make sure you find a reliable offshore development partner.
Good luck with your offshore software development endeavors!
