Today’s software development market is over-saturated. Most of IT and software providers are located in Western Europe and the USA. The development costs are continually increasing, industry competition is becoming more challenging, and the talent is getting scarcer. While offshore software development has become a magic wand for many businesses in western countries, many entrepreneurs are still unfamiliar with what “offshore outsourcing” really means.
Backing at my experience of consulting and serving both onshore and offshore software development companies, I’m sharing several insights that may help business owners understand the overseas outsourcing process better and make a high-informed decision on the next technology partner for their companies.
What Is Offshore Software Development?
Offshore software outsourcing means delegating the digital product development process to the professionals located in another country. Commonly, these countries offer cheaper services due to the overall lower living cost there.
For example, IT giants like Apple, Google, and Microsoft have created their R&D centers in Bangalore, the Silicon Valley of Asia, because this country offers significantly cheaper labor costs compared to the US and Western Europe. In other words, offshore software outsourcing means expanding your team or hiring an entirely new team that is geographically distant from your headquarter.
Two Big Reasons to Consider Offshore Software Outsourcing
Your operational costs are getting out of hand
IT professionals are the most expensive workforce today. According to The Engineer, the software engineer’s average salary in the UK is around 48,000€. These figures vary in different countries, but they mostly remain the highest wage compared to other professions. This situation is nearly the same worldwide.
Thus, hiring an in-house full-time software engineer may cost you a lot, not to mention travel allowance, insurance, yearly bonuses, etc. The amount you’ll be obliged to pay is through the roof. At this point, hiring an outsourced offshore talent may seem not a bad idea.
You’re not scaling fast enough
Suppose your business has been consistently growing, and you have faced the challenge of expanding its internal team’s capacity to address new tasks, manage more clients, and accept new growth opportunities. Likely, your existent team lacks hands, talents, and skills to accommodate all this successfully. Thus, it’s the right moment to consider offshore software outsourcing as an optimal option for your business.
The Benefits of Offshore Software Development
Obviously, the decision to try offshore software outsourcing isn’t a small move, but a strategic action. So, the benefits for your business must be tangible too. Let’s consider a few of them in our brief offshore software development guide.
Access to global engineering talent
You might be surprised to hear it, but one of the most reasons Western companies hire offshore software engineers isn’t the price but the availability. IT talent scarcity has become a significant problem for many businesses. Around 250,000 software engineering job positions are remaining unfilled in the USA alone. The industry lacks experts who can tackle projects of higher complexity.
Although US colleges and universities have started paying more attention to bringing up a new generation of software engineering talents, there is still a gap in human resources. It takes time while graduates will grow into highly specialized experts. Meanwhile, companies start hiring professionals from other countries, like India, China, Vietnam, Philippines, etc., because they are available to start working on the project immediately.
Lower operational costs
Of course, the second biggest reason to consider offshore outsourcing is the lower development cost. Let’s be more specific. Imagine that you have an in-house software team in Chicago, but you have also decided to hire software developers located in Vietnam. A Chicago-based engineer’s average salary will be 3-4 times higher than the salary of a developer located in Vietnam. The only reason for this – a lower living cost in Vietnam. It also means that doing business in Vietnam, including premises, administrative staff, legal work, payroll, and engineer salaries, is half cheaper. Does it sound attractive?
The opportunity to speed scaling up
Hiring new in-house employees is a challenging process requiring a lot of time, effort, and significant financial risks. Plus, there is no grantee that another company will not hunt a newly accepted employee in a while. What you get in this situation is work overload, the drop off of the software quality, and the clients going to your competitors. However, offshore outsourcing can help you prevent the crisis.
First of all, recruitment costs and payrolls are much lower. It allows the company to shoulder down periods more easily with an offshore team. Another huge advantage is that it enables scaling up the team and the project much faster. It opens new opportunities for your business, as it comes in readiness to tackle even more projects. And scaling happens naturally.
The ability to focus on core business goals
Offshore software outsourcing allows you to focus on the key business and activities and even start working on new projects. While you’re caring about your primary business goals, a high-professional offshore team is managing all the development process instead of you. You will only need to schedule calls with a project manager to stay updated about the process from time to time.
The administration, payroll, recruitment, accommodation, insurance, and other similar stuff are now the responsibility of your offshore partner. The outsourcing service provider should care about scaling your team with minimum stress and inconvenience for you as the client.
Offshore Outsourcing Destinations: Where Should You Go?
So, you are now probably ready to consider hiring an offshore team as a talent-extension for your project. The next question that arises is what countries are the most popular destinations for offshore software development.
The world is your oyster, and you can pick any location. The most famous offshore software outsourcing countries are India, Vietnam, Eastern Europe, and Latin America.
India has already become a traditional offshore outsourcing destination. It was one of the first countries to offer this kind of service to western companies. On average, Indian developers speak English well and are high-qualified as the IT culture has been blossoming in this country for many years. Although India offers much lower operational costs than western countries, they have slightly arisen over the past few years.
According to Gartner’s recent research, Vietnam is an Asia Tier 1 emerging-market location and top 5 location for outsourcing. The same source says that Ho Chi Minh City, one of the largest cities in Vietnam, is among the Top Outsourcing Cities in 8 consecutive years. These several factors prove that this country is an excellent choice for offshore software outsourcing. Vietnam has a well-developed IT infrastructure and a lot of talented software experts.
Eastern European countries like Belarus, Ukraine, Romania, etc. can be a good option for western European companies looking to hire a nearshore software service provider. It allows them to collaborate with an offshore team almost in real-time since the client and the vendor are both in nearly the same timezone.
Like the collaboration with Eastern Europe is an optimal choice for businesses located in Western Europe, Latin America is a great offshore outsourcing destination for companies based in Nothern America. Countries of Latin America live in nearly the same timezones as their neighbors in Nothern America. It allows conducting real-time project management and setting more effective communication between the client and an offshore team.
How to Manage Your Offshore Software Outsourcing Team
Here are a few tips that will help you, as a stakeholder in a business, manage your offshore outsourcing team.
Share your vision. It’s the primary task. Ensure all the project participants are aware of your vision, business goals, requirements, and values. Share with these people where you expect to see this project in a few years. It can inspire them and make them feel like part of something bigger. Tell teammates what’s your plan for the future, and they will help your business get there faster.
Bridge the culture gap. It’s crucial to remind your in-house and offshore teams that both of them are working toward one goal. Let them feel that regardless of the cultural differences, they are parts of a big and amazing process.
Communicate effectively. Effective communication is the key to project success. So, it’s crucial to set it appropriately. It’s advisable to use popular collaboration and communication tools like Skype, GoToMeeting, Zoom, Google Drive, Slack, Gmail Suite, Jira, etc.
Here are all tips and recommendations on offshore software development I’d like to share with you today. Hopefully, these few ideas and insights will help you find a reliable software service provider in the nearest time and skyrocket your business success together.