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Onshore vs. Offshore Software Development Company: Which one is better?

May 6, 2021 | Blog Post

Updating legacy systems or developing new software applications, whether for internal use or customer use, tends to require many resources. While larger organizations have in-house IT departments that can develop and update whatever software they need, most smaller businesses do not have such capabilities. Simply hiring employees with the proper IT experience and expertise can significantly exceed the typical budget of a smaller to mid-sized company. The lack of resources is the main reason why most businesses will outsource their software development. By outsourcing software development to a third-party vendor, smaller companies can avoid hiring additional employees to set up an in-house development team. Instead, they can focus their time, effort, and resources on growing their business.

If you have decided to outsource, generally, you will have two options: You can outsource to an onshore development service or offshore development service. This article will outline the advantages and disadvantages of each solution so that you can find the best solution for your business.

Onshore Development

Onshore development is when you outsource mobile, web, or custom software development to a business or individual located in the same country as your business. For many years this seemed to be the only option for outsourcing software development.

Advantages of Onshore development

A lot of companies tend to choose local companies to develop their software. There are several advantages such as:

  • Ability To Collaborate In Person: In-person meetings are much easier if you outsource development to a local company. Even if the company is in a different state, in-person meetings will be much less challenging than when the company is overseas. In-person meetings make it easy to build relationships with the company you’re working with and communicate your wants and needs. This even applies to virtual meetings because time zone differences are less of a challenge.
  • Clear Communication: Speaking the same language and understanding the same culture will significantly contribute to the project’s success. Clear communication is crucial to making sure your company and your developer understand the same business problem and will help ensure that the project meets all of your requirements.
  • Fewer Iterations To Achieve Quality Application: Onshore development often requires less iteration to have quality software because communication will be much easier. Questions, inquiries, and information will be responded to immediately due to the same time zone. Design and development teams will work in tandem without any communication barriers to complete the project on time.

Disadvantages of Onshore development

  • Cost: The fact is that developers just cost more in the US and Western Europe. It’s primarily a supply and demand issue. There are relatively few talented developers in these countries compared to the size of the software sector. And the FAANG companies can pay a heck of a lot more than a startup can. 

Offshore Development

Offshore development refers to any mobile, web, or custom software development that you outsource to foreign providers, such as third-party software development services in India, China, Ukraine, or Vietnam. Offshore development has become more popular over the years.

Advantages of offshore development

Offshore development is increasingly popular because this form has many advantages, such as:

  • Lower cost: Companies often turn to overseas development to save costs. Although the cost of offshore software development services has become more expensive over the years, they are often still cheaper than US resources.
  • Access To A Wide Range of Skills: Theoretically, you will have access to a large talent pool when you choose to go overseas. China, India, Ukraine, the Baltic States, Vietnam, and others have many more tech resources than North America and Western Europe do. Kids start learning to code in grade school, and consequently, there are a lot of experienced individuals to choose from.

Disadvantages of offshore development

Although offshore development can save you a lot of money, it also has many disadvantages you need to consider.

  • Communication Barriers: If you choose a foreign company located in a country where English is not the primary language, communication can become a real challenge. Trying to communicate your software development needs, wants, and questions can be challenging if dealing with someone who does not know the language. Although many foreign companies will have people in leadership positions who can speak and understand English, communication problems can occur if it is not their native language, especially if they don’t understand the nuances of the language.
  • Cultural Differences: Cultural differences can be a communication barrier. For example, you might use specific phrases or terms that are commonly accepted in your industry or US businesses that people in other countries are not aware of and maybe misinterpreted. Such cultural differences can lead to misunderstanding and hinder your ability to convey what you need.
  • Difference In Time Zones: If communication is ineffective due to language barriers and cultural differences, foreign companies are in different time zones can add to the challenge. If you need to ask questions or raise concerns about your project, contacting the person responsible for communicating with you can be tricky. Your working hours could be midnight for them. You may have to wait all day for a response via email or other channels.
  • Inconsistent Quality: Many potential issues can affect the quality of your software development if you perform an offshore service. You have no control or visibility over who develops the software, meaning you rely on the foreign company to hire qualified individuals. If they’re hiring the cheapest software engineers out there, it could hurt the quality of their work.

Onshore Leadership, Offshore Budget

Onshore leadership, Offshore budget is a model that is being strongly developed in recent years. This operational model takes advantage of both models above while at the same time overcoming the disadvantages of each. This model is operated by having product managers and client facing customer service in North America or Western Europe. This makes the operation smooth as well as ensures software quality when it reaches the customers. Meanwhile, software development teams are built overseas to access high-quality human resources at lower costs.

CodeStringers is headquartered on the west coast of the United States with offices in Portland, Oregon; Santa Cruz, California; and New York City, where our leadership, who manages all client engagements, live and work. We proudly develop our software from our offshore development organization located in Ho Chi Minh City, Vietnam. Unlike some firms that will claim to have an offshore team when in fact it’s merely a collection of contractors, our Vietnam entity is a wholly-owned subsidiary employing 50+ full-time product managers, user experience and interface designers, software engineers and quality assurance engineers. We remain “boutique” to enable our US leadership to engage with clients and personnel in Vietnam to deliver world-class software at a fraction of the cost of in-house teams.

Christian Schraga & Vien Nguyen

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