What is “Offshore Development”?
Recently, we had a discussion about the pros and cons of near shore development. However, we should probably also take a look at offshore development, especially since that’s the method that we employ at CodeStringers.
The term “offshore development”, technically, refers to the practice of hiring a team or individual developers from a country other than one’s own, primarily to design, develop, test, and maintain software. However, in practice, the term often means outsourcing development to a country that is several time zones away from the client.
Offshore development started as early as the late 1960s when Tata Consultancy Services was founded to provide low-cost development to US and European companies. Offshore development became more ubiquitous, however, in the 1990s when the Y2K scare and the dot-com boom caused a surge in demand for software developers that domestic markets couldn’t fill.
What Are The Pros and Cons of Offshore Development?
Cost Savings: The “elephant in the room” is that companies usually choose offshore development because it is cheaper than developing in-house. For example, a senior software developer in the US can cost $200k/year or more. Whereas a developer at the same experience level could expect to make $100k in Eastern Europe, and closer to $50k in east and south Asia.
Access to a Larger Talent Pool: Offshoring allows you to tap into a global talent pool, accessing skills and expertise that might be scarce or expensive in your home country. Many Eastern European and Asian countries have a large qualified talent base because they emphasize coding skills in their educational system, and because software development is culturally popular as a career choice.
Flexibility and Scalability: With offshore vendors, it’s often easier to scale the team up or down based on project requirements, largely because of the aforementioned larger talent pool.
24/7 Productivity: The time difference can be a benefit. While your local team rests, the offshore team can continue working, leading to round-the-clock progress.
Communication Barriers: Language and cultural differences can lead to misunderstandings. Therefore it is important to have someone with strong communication skills on your team when you’re dealing with an overseas development organization.
Time Zone Differences: While this can be an advantage, it can also be a challenge when trying to arrange meetings or get real-time feedback.
Quality Concerns: Not all offshore teams maintain the same standards. It’s vital to vet any potential partner carefully.
Is it cheaper than hiring your own developers?
This is the million dollar question. The short answer is: yes, offshoring can be cheaper than hiring local developers due to the wage differences between countries. However, the real cost savings can vary based on project complexity and hidden costs.
Another big factor is… who is the company and the country that you’re outsourcing to? At CodeStringers we’ve found that Vietnam has successfully mitigated most of the alleged “cons” to offshore outsourcing listed above. Vietnam has an abundance of skilled technologists with strong English skills and with a high level of understanding of US culture and business practices.
Ultimately, everything depends on the specific needs and goals of the client organization. However, we strongly believe that, if you hire the right firm, offshore development will give you the best “bang for your buck”.