Comprehensive Guide to Offshore Software Development: Key Insights and Essential Information

Jan 11, 2024 | Blog Post

In the old days, companies turned to offshore outsourcers for one reason only– to cut costs. But those days are gone. Today, offshoring your development can be done for a whole host of reasons, only some of which are financial.

Overview of Offshore Software Development

What is Offshore Software Development?

The definition is somewhat baked into its title. Offshore software development is a business decision to rely on an internationally-based outside resource to build your software.

Companies usually choose to outsource in the first place because they feel that their core competency is NOT technical development. Or as Peter Drucker famously said, “Do what you do best and outsource the rest.”

They choose the offshore option because working with certain overseas countries brings one big advantage. It allows businesses to access a global talent pool without the financial burden associated with in-house development.

In the context of offshore software development, a business, often referred to as the client or outsourcing company, collaborates with an offshore software development provider. The provider, based in a different geographic region, assumes responsibility for the planning, execution, and delivery of software development projects on behalf of the client. For instance, a company based in the United States might opt to hire offshore developers in Vietnam to create a sophisticated enterprise resource planning (ERP) system.

What is the Difference Between Onshore, Nearshore, and Offshore Software Development?

When it comes to software development outsourcing, understanding the geographical dynamics of your partnership is key. The choice between onshore, nearshore, or offshore software development can significantly impact your project’s success and cost-effectiveness.

Onshore

Onshore outsourcing occurs when a client opts to hire software developers within their own country or region. For example, if a New York based company outsources to a firm based in Toronto, that would still be considered onshore outsourcing.

The advantages of this approach are:

  • The business hours of both partners overlap, so that the client can do things like daily check-in (or “standup”) meetings.
  • Culture and language are the same or similar, so misunderstandings and miscommunications are less frequent.

The disadvantages of onshore outsourcing are:

  • It is the most expensive option because labor and overhead costs are high for the outsourcer.
  • There is tough competition for the best talent because the FAANG companies (Facebook, Apple, Amazon, Netflix, Google) can offer better compensation and benefits than the outsourcers can.

Nearshore

Nearshore IT outsourcing takes place between countries with similar time zones, such as the USA and Latin America.

The advantages of this approach are:

  • The business hours of both partners partially overlap, so it’s relatively easy to find meeting times between the two parties.
  • It’s more cost-effective than the onshore option.
  • With the advantage of time zone differences, work can be done almost around the clock. While one team rests, another can continue the development process, ensuring continuous progress and quicker delivery times.

The disadvantages of onshore outsourcing are:

  • There are cultural and language barriers. Although Americans usually think that they understand Latin American culture and language, their overconfidence often leads to misunderstandings.
  • The talent pool is smaller than in Asia. This is mostly because of the smaller overall population but also because fewer people choose a career in software development.
  • It’s getting more expensive to do business there as more companies are competing for fewer resources.
  • There are possible security risks in countries with uncertain political environments.

Offshore

The term “offshore” is used when the geographical separation between client and outsourcer is 6 or more time zones. Generally it refers to outsourcing to Asia, however if a US-based firm were to work with a Ukrainian-based outsourcer, that would also be considered “offshore”.

The advantages of this approach are:

  • There is a huge talent pool. According to CodeNinja, 6.5 million software developers live in Asia, and another 700k live in Eastern Europe.
  • It’s the most cost-effective option because of lower standard-of-living and overhead costs.
  • Its easier to scale resources up or down because there are lower job switching costs.

The disadvantages of onshore outsourcing are:

  • The cultural and language barriers are the greatest.
  • The work days don’t overlap, so it’s hard to find times to video conference, etc.
  • There is a history of intellectual property theft in certain countries.

For more on the on-shore vs off-shore discussion, you can refer to the following blog articles:

What Services Can Be Outsourced?

In the realm of software development, outsourcing is a versatile strategy that can be applied to various service areas. Companies looking to optimize their development processes can explore outsourcing for a wide range of services, including:

  • Custom software development: Building bespoke software solutions tailored to your specific business needs.
  • Web application development: Creating web-based applications and websites for various purposes.
  • Mobile app development: Developing applications for iOS, Android, and other mobile platforms.
  • Quality assurance and testing: Ensuring the quality and functionality of software through testing and validation.
  • UI/UX design: Crafting user-friendly interfaces and experiences for software applications.
  • Maintenance and support: Providing ongoing support and updates for existing software systems.

How to Choose the Right Offshore Software Development Outsourcing Company

When selecting a premier software company, consider these crucial factors:

Effective Communication and Workflow Compatibility: Seamless communication and workflow alignment are paramount in offshore software development. Ensure your outsourcing partner is proficient in your preferred language, typically English, and that their working process aligns seamlessly with your development cycle.

Identify Cultural Fit: Just because there are international culture differences doesn’t necessarily mean there will be insurmountable intercompany cultural differences. Make sure you “get along” well with the people you’ll be working with.

Robust Security Measures: In a world where technology is ever-evolving, cybersecurity cannot be overlooked. Verify that the software company you choose adheres to the latest security protocols to safeguard all data and software products, regardless of the development model you opt for. Also be sure to ask how the company manages the risk of intellectual property theft.

Access to Exceptional Software Talent: Opt for a company that offers access to top-tier software engineering talent. Whether it’s for product development, web development, or routine IT services, the right IT company should provide skilled professionals to meet the specific needs of your project.

Track Record of Quality: Investigate the prospective company’s history by reviewing references, past client experiences, and completed projects. This research will offer insights into their performance, workflow approach, and the quality of their software outputs.

Comprehensive Service Range: Your current needs might evolve, so choose a company with a broad spectrum of expertise. The best outsourcing companies offer a diverse array of services, from project management to product development, and have the capacity to handle your project comprehensively and expertly. This versatility ensures they can adapt to your changing requirements.

Things To Do Before Beginning Work With an Offshore Development Company

Before initiating a project with an offshore development company, it’s important to follow these five preparatory steps:

  • Define Project Objectives: Clearly articulate the goals you wish to achieve through offshoring. Understanding your objectives helps in tailoring the software solution to meet your specific needs.
  • Establish Your Priorities: Determine the most critical aspects of your project. Identifying what’s most important for your business and clients guides the offshore team in aligning their efforts with your priorities.
  • Outline Your Vision: Have a well-defined vision of what you want to accomplish. A clear vision aids in moving swiftly from conceptual stages to actual development, ensuring the final product aligns with your expectations.
  • Identify Specific Requirements: Every project has unique needs. Assess different technological options and expertise required for your project, considering factors like the size of the development team and the project budget.
  • Prepare Comprehensive Documentation: Effective documentation is key to a smooth process. It ensures clarity and helps your offshore team in choosing the right strategies to meet your project deadlines and budget efficiently.
  • Create A Communication Plan and Stick To It: You have to make sure you properly manage the communication challenges associated with an offshore project. For example, find at least one time a week for a video conference. You should also make sure that you have systems in place to monitor expected vs actual progress.

By following these steps, you can set a strong foundation for your collaboration with an offshore development company, ensuring a more streamlined and effective project execution.

How CodeStringers Maximizes The Benefits of Offshore Development and Manages Its Risks

CodeStringers stands out in the software development outsourcing industry by creating a “best of both worlds” offshore experience. We commit to keeping our promises in delivering a quality product, as expected, on time. Here’s a summary of how we do this:

  • US-Based Executive Engagement Manager: We assign a high-level executive in the U.S. as the engagement manager, offering expertise and easing communication due to proximity and language.
  • Comprehensive Engagement Management: Beyond project management, we offer free senior-level consultation on various aspects from product architecture to market strategy, becoming an integral part of the client’s leadership team.
  • Free Release Plan Development: We assist in creating release plans, including feature definition and preliminary designs, without a discovery fee, allowing clients to understand our approach and value.
  • Commitment to Deadlines: For MVPs, we guarantee meeting the release date, even if our initial estimates are off, by allocating extra resources at no additional cost, except in cases of scope change by the client.
  • Balanced Team Structure: We provide a team with appropriate seniority and experienced management, ensuring high-quality oversight, all included in our pricing, unlike larger outsourcers who might lack this structured approach.

Final Thought

You’ve just explored an extensive guide on offshore software development by CodeStringers, packed with valuable insights. It’s a lot to take in, but this information is key to understanding offshore development and ensuring you benefit fully from your outsourcing choices.

As a prominent IT solutions provider with our headquarters in the US and a software development team in Vietnam, we’re well-versed in the challenges businesses encounter when outsourcing to an international vendor. We invite you to share your experiences with us, and let us assist you in overcoming obstacles and optimizing your success.

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CodeStringers is an uncommon custom software development company that brings innovation, craftsmanship, and integrity to the development of best-in-class cloud, web and mobile software products. Our model of engagement is unique. We have senior executives with decades of experience lead each client engagement to provide product and technology wisdom and expertise. We complete product planning at no cost, so we can arrive at accurate budget and release date estimates. And we contractually commit to our estimates. We apply our values of integrity, craftsmanship and innovation to all that we do. We call that “upsourcing“.

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