Offshore Custom Software Development for Growing Businesses

The offshore software development and IT outsourcing market is popular now and is expected to accumulate $425.19 billion from 2021 to 2026. Why are entrepreneurs so crazy about offshore IT services, you wonder? Well, it’s because this smart strategy helps startup founders and entrepreneurs get better partners for their businesses. Hence, they gain access to essential materials that would have been unattainable otherwise. Companies like Google and Amazon owe much of their success to IT offshoring.

So how does it work? Do regular companies really succeed in doing this? In this article I will cover the key facts about offshore custom software development including:

• Offshore outsourcing pros and cons
• Risks and how to overcome them
• Successful offshoring examples
• Offshoring stats you should know

In the end, you’ll get to know if offshoring is the strategy that takes your business to the next level. 

What Is Offshore Software Development?

Also known as offshore outsourcing, it is simply moving one or multiple parts of an organization’s business activities or processes (outsourcing) to another country (offshoring). Offshore is mainly used to describe this collaboration because it signifies the location and time zone difference between the company and its partner or developer involved.

When outsourcing the company's workflow, it is essential to know that working with a software development company is way better than working with a freelancer, as freelancers are usually experts in only one field. By partnering with another company, you get different experts in multiple fields working together in one place.

Differences Between Offshoring, Onshoring, and Nearshoring

When deciding what method of offshore development services to use, cut and dry rules don’t exist as they can be influenced by other factors such as location, type of products, etc. There are 3 types of outsourcing commonly used by organizations: onshoring, offshoring, and nearshoring.

• Onshoring: Onshoring involves the company or organization hiring software developers in their region or country. Onshoring is more inclined towards big-name founders, tech giants, and companies that are well established.
• Offshoring: It involves hiring companies in different countries, continents, or time zones. This is best used by tech giants with less proficiency, early-stage startups, and established companies with a couple of new projects.
• Nearshoring: This involves the company hiring or working with another company in a different country but in the same time zone and is mainly used by tech giants and established companies.

Types of Offshore Software Development Services

You can get multiple benefits from offshoring software development services, depending on what type of services you offshore. Choose several or a specific one you lack expertise in and find a company or client that provides it through outsourcing.  

• Product Discovery: Outsourcing helps speed up the first stage of any development process – discovery. Having this outsourced enables you to increase the amount of workforce involved and will allow you to move further at a much faster time.  
• Mobile App Development: Hiring offshore software developers makes it easy to get the best and fastest method for developing a mobile app without spending a lot of money on working space, equipment, and native workers that generally cost more than workers through outsourcing.
• Web App Development: Outsourcing parts of your business allows you to provide better operating web products, taking you a step ahead of your competition. Offshore product development helps promote your company's online presence by offering modern websites in the best possible time.
• UX/UI Design: Outsourcing your UI/UX design gives you access to a range of skilled professionals and designers with different wonderful ideas you could choose from. Getting the professionals to work together will enable you to get one of the best interfaces that could be made. 
• QA: Every app developed needs to be tested to ensure there are no bugs or mistake. It is much cost-effective and faster to outsource this so as not to overwhelm your developers.

Successful Offshoring Examples

There are multiple companies whose offshore development processes have been successful, and three of the well-known ones include:

1. Google: If you’re still wondering  “what is offshore outsourcing” and can’t picture it, this example should help. Google serves as the ideal case study because although based in California,  the company has outsourced multiple tasks related to software development to employees working worldwide. For example, Google is one of 100+ big companies that have their R&D centers in Ukraine.
2. Amazon: In 2018, Amazon needed to expand. So, they bought a Kyiv-based company – Ring for their R&D office. This gave them the boost they needed in the global market.
3. WhatsApp: WhatsApp, in the early days, hired an offshore software development company to reduce costs.

Where & When to Hire Offshore Developers

Offshoring can be done when trying to take your business or company to the next level or phase. Adequate planning is vital here as it helps to ensure that you meet your goals in time. That’s why it’s essential to know when to hire offshore software developers.

There are a couple of signs that let you know it may be time to offshore your business. You can look out for:

• Not enough skilled individuals in the company
• Expensive cost of operations
• The need for better service
• Need for reduction of workload for your staff
• Need for more tech expertise
• Need to scale quickly

Top Offshore Destinations

Five of the most popular destinations for offshore software/IT project outsourcing are: 

1. Ukraine is the most popular and best place to outsource if looking for a place in Eastern Europe. Ukraine has over 285,000 top IT professionals, and its economy is highly favorable for outsourcing. Developers in Ukraine have incredible work ethics because the majority of them choose their careers out of passion. The citizens tend to be united, which translates to impeccable team-work on projects, including offshore development. They also speak great English.
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3. Poland has over 295,000 IT professionals ready to work and very good at what they do. Your data is safe in Poland due to the General Data Protection Regulation (GDPR), which highly favors businesses ensuring you get your money’s worth.

1. India is one of the most popular places for offshore software project outsourcing due to the high number of skilled developers and English proficiency. Developers from India are not only skilled but also affordable.

1. Argentina is the top choice for Latin American outsourcing because the government highly promotes outsourcing in their country, and the children are exposed to top-tier education, especially regarding tech. The employees are also much cheaper because of the low salary rate in the country.

1. The Philippines is an excellent offshore destination as they speak generally-accepted English, are very hard-working people, and have outstanding customer service. You will get value for your money. You can't go wrong in choosing them as your offshore destination.

5 Signs that You Should Opt for Offshore Outsourcing

Offshoring doesn’t match every business. Here’re the signs that help you understand if offshoring is your choice.  

1. When you lack in-house IT talent:

It’s often difficult and expensive to have every talent you need in-house. When you notice that you need more talented people, you should strongly consider outsourcing.

1. When you need specific expert support/consulting:

When working on certain projects, there will be times when you will need the expertise in different fields or people with new skills. Hiring offshore software developers at this point helps you move forward on your project instead of stagnation.

1. When you’re on a budget:

Building products in-house can be expensive. If you notice that your company regularly struggles to  cover the cost of production, look into outsourcing to reduce the costs. Doing this will make your budget sufficient.

1. When your capabilities are limited:

One company can't do it all. You may find that your skills and knowledge are limited. Outsourcing tasks and processes help increase the coverage of things your company can do.

1. When you have tight deadlines:

Outsourcing helps speed up the development of products a lot. Once you discover that you and your in-house team don’t have enough time to meet a deadline, outsource parts of the process. This strategy will speed up your business process.

Offshore Outsourcing Benefits

Offshore application development provides a ton of perks to your company. Some of the offshore software development benefits are:

Access to top IT talents

Offshoring gives you access to an extensive pool of top IT professionals. If you only stick to hiring people in your locality, you may miss out on other top talents.

Industry expertise

Custom offshore software development services open the door to niche expertise and professionals with unique skills. You can outsource vendors from other countries with a specific expertise, unique skills, and experience. Their industry expertise will help you reach goals faster and easier.

Optimized workloads​

Lack of employees with the needed expertise can cause pauses and breaks while handling projects. Outsourcing helps operations run smoother, and your company can focus on its niche.

The best quality-to-money ratio

Offshore application development is usually cheaper than having things carried out in your company. Remote employees are much more affordable than people who commute to work every day. Also you don’t have to buy new laptops or rent office space.

Faster product launch time​

As a result of people focusing on what they specialize in, the business finishes projects much faster. Better efficiency boosts customer satisfaction and generates revenue faster.

Greater scalability

There is a limit to how much performance can be gotten in-house in every company. Outsourcing different tasks to companies that have experience in performing them better and faster helps you save time and produce products of higher quality.

4 Major Things to Mind Before Offshoring 

There are a couple of things to prepare for to ensure your offshore custom software development process goes smoothly, and they will also help you pick the offshore software company that suits your needs best. Although outsourcing comes with some potential problems, there are 4 common ones when it comes to offshoring. They include: 

Time zone differences

The difference in time zone is significant as it can negatively impact the workflow between the teams. It is vital to ensure the outsourced company can attend meetings when necessary. Discuss with any prospects about their availability, and create a system that suits all parties.

Communication issue

Cultural and language barriers are usually significant problems that arise when it comes to offshore software outsourcing. Make sure the company involved in your offshore outsourcing project speaks the same language as your staff. Often, speaking with the sales team isn’t enough and you can set up a call with the core dev team to solve the communication issue.

Knowledge transfer 

Knowledge transfer is a crucial part of outsourcing to the point where the product's success can depend on it. You should do knowledge transfer properly to ensure it doesn't backfire, causing problems for the company. Invest in training videos and course materials. Also, create a stable line of communication that flows through all levels of your organization.

Data security issue

Data security is an integral part of business operation. Sharing details of your work process or outsourcing means giving them backdoor access to your product. This can cause some security issues but can be solved by writing contracts that ensure none of the companies can leak trade secrets to the other.

Offshore Development Statistics: Business Results

• $66.5 billion was made globally from the outsourcing IT industry in 2019

• The accumulated contract value of the IT outsourcing industry market was $526.6 billion in 2021 and it is expected to reach over $683 billion in 2022 

• According to Statista, the second most outstanding offshore destination is China, with India at number one.

• Ukraine has the potential to become one of the best software development outsourcing providers within the next ten years.

• The annual growth rate of the IT outsourcing market from 2022-2027 is 8.26% 

• The United States gets the highest revenue from IT outsourcing totaling $144.8 billion in 2022 alone.

• The top 5 countries gaining from IT outsourcing the most as of May 2022 from first to fifth are India, Ukraine, China, Poland and The Philippines.

Summary

Offshoring, while it isn't for every company, can be an essential step that will enable you to take your company to the next level. It gives access to talents with different expertise worldwide, cuts development costs, boosts profits, and speeds the in-house processes. 

This has been instrumental in helping some of the more popular companies we know today, such as Google, and Amazon, reach where they are now. Now that I’ve explained everything you need to know about offshore outsourcing, it will be easier for you to make a decision and take your business to the next level.