What is Offshore Software Development: In-Depth Guide (2023)

Quick Summary:
Offshore software development has become increasingly popular in recent years, offering benefits such as cost savings and access to global talent. This comprehensive guide provides an overview of offshore software development, its benefits, and what you need to know to get started in 2023.

The software development industry is one of the fastest-growing sectors, and why would it not be when technologies are evolving at such a high rate? Regardless of which sector you operate in, staying technologically updated is the only way for a business to remain relevant and profitable.

Offshore software development practice has emerged as a savior for start-ups and SMBs. It enables them to hire experienced offshore developers for their software development projects at a nominal price, empowering them to stay competitive in the ever-evolving business environment.

If you are a start-up or SMB, curious to learn about offshore software development and how offshore software development benefits your business? This detailed guide is for you.

Here are the key takeaways from this guide

• What is offshore software development, and its importance in today's global market
• Benefits and Challenges of offshore software development
• How to hire an efficient offshore development team for your project
• Top countries to hire an offshore team from

So, let's explore the world of offshore software development without delay.

What Is Offshore Software Development?

Offshore software development is the process of hiring developers from an offshore country to build or upgrade software solutions. An organization chooses offshore development to hire technology experts that are relatively scarce and expensive in its local geography.

An organization usually reaches out to an offshore software development company with an extensive talent pool to hire offshore developers to scale their projects.

Recommended Read: How To Hire Offshore Developers [Complete Guide & Checklist]

Importance of Offshore Software Development in Today's global market

Offshore software development has emerged as a boon in today's rapidly changing global market. It has opened avenues for businesses to hire offshore software developers from any part of the world, creating a balance in demand and supply of resources. It has empowered companies, big or small, to get access to experts and build quality products with ease.

Simply put, offshore software development has become a crucial tool to thrive in the highly competitive market, and here is why:

Advantages Of Offshore Software Development

There are multiple advantages of offshore software development to a company seeking to build a successful product. Here are some of the top benefits:

1. Cost savings

A study has shown that businesses can save as much as 60% of their development costs when they offshore their software development.

How, you ask?

When you think about software development, two prominent costs come to mind: software developer costs & Infrastructure/overhead expenses. Offshore software development helps you with both.

Offshore development enables you to hire software engineers from third-world countries with low labor costs due to the low cost of living. Countries like India offer a large talent pool of experienced software developers at 1/3 price of the same resources in the USA or Western Europe.

A mid to senior software developer with 5-8 years of experience charges approx. $80 to $100 per hour. In contrast, a resource of a similar caliber in India would charge $30 to $50 per hour.

Hiring offshore developers eliminates the overhead expenses like infrastructure and system costs and employee benefits like gratuity, insurance, bonus, etc.; when you offshore your project, the team you hire from an offshore development company is technically their employee, so they are accountable for overhead expenses and infrastructure.

2. Access to global talent

Though the IT industry is growing globally, technology growth is inconsistent across geographies, creating a disparity in the demand and supply of resources.

Offshore software development empowers companies to hire skilled professionals across the latest technologies from different countries. It balances the talent market, allowing businesses to build agile and scalable teams of top-quality developers worldwide.

3. Increased operational flexibility

One of the most underrated advantages of working with offshore software development companies is the ability to scale your team as and when you like. An offshore software development company is home to a large and readily available repository of software developers across technology stacks that be quickly hired and deployed on your project.

Besides this, when you hire a team for software development operating in a geographical location with a big time-zone difference, you stand to gain around-the-clock project development.

When your offshore team has delivered the work for the day, your in-house team starts their day, giving them time to review the work and share the feedback before the offshore developers start the next day.

This ensures your project is being developed around the clock, reducing your time-to-market manifold.

4. Focus on core business 

Today software is at the heart of all operations, whether in finance, consumer goods, automobile, or any other industry. Every business relies on software solutions to run its daily operations, but only some have the expertise to build or maintain software.

This is where an offshore software development team can do wonders for you. From building a custom mobile app & web development for your business, integrating new tools, to upgrading the legacy systems, they can take over the IT projects so you can focus on growing your business.

There is no doubt that offshore development is the future of the IT industry. But to say it is without risk and challenges would be far from the truth.

Let us explore the challenges one may face with offshore software development services and learn how to mitigate them.

Challenges Of Offshore Software Development

Below are some of the most common challenges faced while working with offshore development teams.

1. Communication barriers

Seamless communication is critical to ensure a smooth development process, but communication barrier is one of the most common challenges faced while working with offshore development companies.

Communication challenge arises due to two factors.

• Language barrier: It occurs when your offshore team needs help communicating in the same language as your in-house team. It is a common phenomenon when you hire offshore software development services from countries where English is not a primary language.
• Analytical Capability: Just because someone understands a language does not necessitate that they understand your project brief and requirements. Your offshore software developers' analytical skills are directly proportional to their experience and knowledge base and define their ability to comprehend and execute a complex brief.

Working with an offshore partner needing to catch up on the above aspects would create communication barriers and delays. A rigorous selection process for offshore development services providers, before you finalize the team, can help avoid this challenge. 

2. Cultural differences

Cultural differences, like communication, are a common challenge when working with an offshore programming team. It can create difficulties in coordination, develop friction within teams and affect overall project management. 

Conducting training to educate both in-house and offshore teams on the cultural nuances and creating well-defined processes and tools for communication can go a long way in eliminating these challenges.

3. Intellectual property and security concerns

The increasing number of cyber-attacks has made businesses wary of the growing threat to their data. The concern multiplies when working with an offshore development company. If your partner offshore software companies don't have enterprise-grade security or don't follow proper security protocols, your company data can be exposed to considerable threats.

A company invests time, effort, and money in building unique software products; they want to safeguard their unique codes. Working with an external software development company can create IP protection concerns if all parties do not sign extensive NDAs.

Learn the best security practices of offshore software development

4. Quality assurance and control

Often when one works with offshore software development companies, they face the challenge of inconsistency in work commitment and delivery. This can arise due to a lack of knowledge in an offshore developer, a missing customer-centric attitude, or an absence of systems, processes, framework, and escalation matrix.

A thorough evaluation and assessment of the offshore software development companies before you initiate the project, can help avoid this challenge.

Recommended Read: Solutions to the Top 8 challenges of offshore software development.

Offshoring software development projects do not guarantee success. Multiple factors affect its performance.

Let us find out what to consider before you offshore software development.

Key Considerations for Successful Offshore Software Development

Successful offshore software development is no rocket science. All you need is a little planning and management, and you can soar.

1. Defining Project Scope

The first step to IT projects, whether web or mobile app development, is defining the project's scope. Defining project scope entails defining the vision and purpose of the project. Find answers to questions like

• What function would the solution perform?
• What are its attributes and features?
• What will be the timelines of project delivery? 

Once you have created the project scope, the next step is identifying the technologies required to build the solution and the size of the software engineering team needed for the project.

2. Finding the right partner for offshore software development projects.

When offshoring software development, you must remember that there are no best offshore software developers but the best fit for your development project. While finding a software development company, consider which partner offers talented software engineers who fit your business requirements.

How do you determine if the software development partner fits your project?

Most software development companies claim to be experts in custom software development, though their expertise may be in different technologies and industries. Thus before offshoring a software development project, ask the following questions:

• How long has the company been operating in the market?
• Does it have experience working in your industry?
• What is the size of their talent pool and their technology expertise?
• Do they have experience in handling complex projects?
• Do they have industry accreditation?
• What do their clients say about them?
• What is their software development process?

Answering these questions will help you find the right offshore development company.

3. Establishing communication channels

Seamless communication is the lifeline of offshore software outsourcing. So, proper communication and project management tools are essential to ensure smooth operations.

Tips for building strong communication with offshore teams

• Set standard channels for the team to communicate and collaborate.
• Set clear expectations
• Create documentation of the project.
• Setup regular scrums to stay on top of the ongoing work

4. Creating an inclusive environment

Unlike an outsourcing software development company, where you hand over the project to a third-party vendor, you get a dedicated team aligned directly with you when you work with an offshore company.

Since these offshore developers work as your team, you must treat them as such. Creating a workspace that respects their cultural differences can go a long way in building solid relationships.

Build an environment of trust and mutual respect. Remember you chose offshore software development to work with experts. So, it would be best to acknowledge their input and suggestions on the ongoing project. Be mindful of the time zone differences before setting up scrum meetings and feedback calls.

5. Creating an exit plan

Undoubtedly, offshore software development outsourcing is profitable when you find the right partner. But what if your offshore development partner fails to meet the quality and timelines set for the project?

Hence, an exit plan is necessary when working with an offshore software development company. To make the handover seamless, one must develop a detailed knowledge transfer (KT) process and documentation of the ongoing work.

Establishing a comprehensive KT process also ensures a smooth transfer of ownership once the offshore development contract is over.

You can ensure a positive offshore development experience by caring for these aspects. But the key to successful offshoring is finding the right team that fits your project requirements.

This brings us to our next section.

How To Offshore Software Development Team: 6 Steps

Offshore teams are core to the success of your project development and, thus, should be chosen with significant consideration. Here are six steps to help you find the right team.

1. Find offshore development companies

Create a list of top offshore development companies based on their market experience, technology expertise, service quality, and security standards.

2. Check Social Proofs

Check for references, client testimonials, and success stories of the offshore companies on the list. Visit B2B platforms like Clutch & Linkedin to evaluate the reviews and ratings of these companies.

3. Company Size Matter

Company size is a critical aspect to consider as it is directly proportional to how quickly you can scale your team with various technology experts.

Choose companies with a big talent pool across technologies and extensive experience delivering complex projects for various industries.

4. Shortlist the Partners

Basis the first three steps, shortlist the companies that meet your project requirements best in terms of technology, experience, and talent pool.

5. Conduct Interviews

Conduct interviews with the company's top management and technology experts to assess their communication skills in terms of language and analytical ability to gauge their knowledge and expertise in your industry.

6. Sign the Contract

Select the offshore development company that matches your project requirement and draw a comprehensive contract defining project scope and delivery timeline, Security Protocols, NDAs, AMC, etc., to be signed between you and the selected offshore team.

Offshore Development Team Structure:

An offshore team usually has the following members:

• A project manager who acts as a bridge between you and your remote team
• A front-end development team responsible for designing and developing the UI & UX of the solution
• A backend development team responsible for creating server-side functionality and integration to ensure smooth functioning
• A QA team that ensures the product is bug-free through extensive testing.

Though this is the usual team size for offshore software development outsourcing, one can hire an individual programmer to scale the existing development team. In such engagement, the client has an in-house project manager who coordinates work with the hired offshore developer.

Popular Destinations for Offshore Software Development

There are multiple aspects to consider, from technology advancement, outsourcing market maturity, time zone differences, and offshore software development rates, before choosing an offshore destination for software projects.

Considering these aspects, we have identified three geographical regions that offer the right mix of reasonable development costs, tech advancement, time zone difference, and geo-political stability. Starting with:

Central and South America

Also known as Latin America, this region has recently become an offshore outsourcing destination. Brazil, Argentina, and Mexico are the top three countries leading software outsourcing in Latin America.

Compared to the total number of software developers in South America, Brazil leads the way with a population of 500,000 developers, followed by Mexico with a population of 225000 and Argentina with a population of 115000 developers.

Since Latin America operates in the same time zone as the USA, coordination with the offshore development team becomes relatively easy.

Projects you can offshore to a Latin American Software Company-

1. Web and mobile app development: Latin America is a popular outsourcing option for companies seeking mobile application or web development services.
2. Quality Assurance and Testing: Latin America provides great software testing teams & QA services, helping companies build scalable and bug-free products.
3. Data analytics: Latin America has a growing population of data scientists who can help businesses with artificial intelligence (AI), machine learning (ML), and big data projects.
4. Cloud computing: Outsourcing companies in South & Central America can provide cloud infrastructure services, including cloud computing, migration, monitoring, and management.
5. Software Maintenance and Support: You can outsource software maintenance and support projects cost-effectively to Latin America.

Offshore software development rates in Central and South America

Let us review what offshore software development companies charge in different parts of Latin America.

1. Brazil- Mid-to -Senior- $15 to $30
2. Argentina- Mid-to-Senior -$20-$40
3. Mexico- Mid to Senior -$20-$40

Eastern Europe

Eastern European countries such as Poland, Ukraine, Romania, Hungary, and Bulgaria have emerged as popular destinations for software outsourcing. With a population of 600K+ software engineers, Eastern Europe offers highly-skilled resources with English proficiency at cost-effective rates.

In the IT population, Poland leads the way with 250K+ developers, followed by Ukraine at 200K+, Romania at 100K, Bulgaria at 50K, and Hungary at 40K developers.

Projects you can offshore to an East European Software Company

1. Software development: The large pool of software engineers across different technologies makes Eastern Europe an ideal destination for a software development project.
2. Quality Assurance and Testing: Eastern European software testing teams provide high-quality QA services.
3. Cybersecurity: Eastern European IT professionals provide high-quality cybersecurity services, including penetration testing, security consulting, and security assessment services.
4. Big data and analytics: Eastern Europe provides highly skilled data scientists with big data, AI, and ML solutions expertise.
5. Cloud computing: You can hire offshore developers in Eastern European countries to start your cloud journey.

Offshore software development rates in Eastern Europe

1. Poland- Mid-to -Senior- $25 to $45 per hour
2. Ukraine- Mid-to-Senior - $20 to $40 per hour
3. Romania- Mid to Senior -$20 to $40 per hour
4. Bulgaria-Mid to Senior -$20 to $40 per hour
5. Hungry-Mid to Senior -$25 to $45 per hour

South East Asia

India and China rank amongst the top destinations with the best software development companies worldwide for their ability to provide top-tier talent at economical pricing. Besides these, Singapore, Malaysia, the Philippines, and Vietnam have also emerged as popular locations for outsourcing software development.

Offshore software development rates in South East Asia

1. Custom Software development: South East Asian countries like Singapore, India, and China are at the forefront of creating innovative solutions in most emerging technologies, thus making it one of the best locations to outsource software development.
2. Website and app development: South East Asia is a great outsourcing destination for website and app development projects due to its large developer population across technology stacks.
3. IT consulting: South East Asian countries like Singapore and Malaysia, with highly developed IT infrastructures, makes for IT consulting and advisory services.
4. Enterprise Software Solutions: Businesses can outsource enterprise software solutions development to South East Asia. This can include projects related to customer relationship management (CRM Software), enterprise resource planning (ERP), supply chain management (SCM), human resource management (HRM), and other business-critical software applications.
5. E-commerce Solutions: The deep penetration of the e-commerce industry makes developers in Southeast Asia well-versed in the nuances of the e-commerce development processes.

Offshore software development rates in Southeast Asia

1. China- Mid-to -Senior- $15 to $35 per hour
2. India-Mid-to -Senior- $15 to $30 per hour
3. Singapore- Mid-to -Senior-$30 to $60 per hour
4. Philippines- Mid-to -Senior- $15 to $30 per hour
5. Vietnam-Mid-to -Senior- $10 to $25 per hour

Success Stories of Offshore Software Development Services

1. CISCO- This networking giant has invested $150 million to expand its tech-development team and built its 2nd largest R&D facility with 1500+ Indian technical professionals in Bengaluru, India.
2. Ford Motors- A leading name in automobile manufacturing, Ford Motors offshores back-office operations, IT services, software development, and many other processes in India and other countries.
3. Google- America's tech giant relies heavily on offshore development services for its R&D and product development & maintenance.
4. Dorey Finance, a Guernsey-based FinTech SMB, used offshore development services to enhance their product by upgrading it to better technology.
5. GoHire, an Applicant Tracking System (ATS) startup, use offshore development services to upgrade and maintain its product.

Why Choose Your Team in India As Your Trusted Offshore Software Development Partner

Ranked in the top three companies to hire software developers and teams by TrustFirm, YTII is a reputed offshore software development service provider in India.

What makes YTII the right choice for you?

• It comes with 13+ years of industry experience and has delivered 1000+ successful projects
• A large, pre-vetted & English speaking talent pool of 200+ software developers across technologies
• Operates from India, so development cost is almost 1/3 of what you would pay in the US or UK
• Has extensive IP protection policies
• It has enterprise-grade security integrated into the infrastructure to ensure end-point security
• It follows well-defined processes, frameworks, and security protocols to ensure a seamless and secure development process
• It practices an agile development methodology
• It offers a flexible hiring model for offshore software developers

Conclusion

Today businesses are partnering with offshore software development companies to build more agile, flexible, and diverse teams to combat the dynamically evolving IT industry. Offshore teams have become a favorite to expand the business because they deliver quality output while mitigating risks and costs associated with having an in-house team.

Though offshoring software requires careful evaluation of multiple aspects, having a trusted offshore development company can go a long way in navigating the challenges of outsourcing software development.

Frequently Asked Questions About Offshore Software Development