Featured image for Pros & Cons of an Offshore Development Company

// Development

Pros & Cons of an Offshore Development Company

Are there any questions?
Alexander Safonov
Write to the expert
Featured image for Pros & Cons of an Offshore Development Company

Nowadays almost all companies, no matter their size and field of activity, turn to offshore development to create and improve their own software. Below we will look at the most important advantages of offshore development, including cost reduction, a wider range of qualified developers, resource optimization, flexibility and others, as well as describing the main risks a customer may face when hiring an offshore development company.

What is offshoring?

The term "offshoring" usually refers to the process of moving some company operations to an outside organization in another country. This can be done for a number of reasons, such as the desire to reduce costs or the need to gain access to more talent. Offshoring is also a motivating force for multinational corporations looking for a fast growth and development.

From a software development perspective, offshoring is when you outsource the development of your mobile, web or custom software to a company located in another country. For example, if you are in the United States and you have hired a developer from Ukraine, that is offshoring.

Onshoring means hiring a developer in the same country as your business; offshoring means hiring a development company in another country

Onshoring means hiring a developer in the same country as your business; offshoring means hiring a development company in another country

The advantages of offshore development

The major benefits to be gained by outsourcing your software development process to an offshore developing company are the following.

Global talent pool

The world is much bigger than the country in which your company is located, which means that the talent pool is theoretically much bigger, too. As the talent pool is larger, outsourcing software development to offshore vendors means that you will have access to a much larger pool of talent that boasts a broader range of skills and more impressive cases in your portfolio.

Nine out of 10 executives say their companies are facing skills shortages or expect these deficits to arise within the next five years

Nine out of 10 executives say their companies are facing skills shortages or expect these deficits to arise within the next five years

At the same time, given the growing shortage of talent in IT, which has already reached 40 million and will increase to 85 million professionals by 2039, offshore development is often the only way to hire experienced developers to launch your product. Moreover, the more qualified a specialist is, more likely it is not possible to hire him in your country in a reasonable timeframe.

Most importantly, since offshore development companies have to compete on the global market, their specialists are often more skilled and experienced than even specialists from North America and Western Europe. Thus, according to the Skill Value report, Slovakia, Mexico, Hungary, Poland and Ukraine are the best countries to hire an offshore development company because the skills of local developers are at the level of specialists from Silicon Valley.

Reducing development costs

The second important advantage of choosing an offshore software development company is a significant cost reduction. If the customer is located in the U.S., EU, UK or Australia, then hiring a specialist from Ukraine or any other offshore development center can reduce the costs associated with programmers' salaries several times and completely save you from expenses related to equipment purchases and utility bills.

Moreover, you will be able to save a lot even when working with the most experienced, highly skilled professionals. For example, in the USA, the salary of a good developer (Middle) ranges from $137 to $173 000 per year. If you want to hire a top-class specialist (Senior) from the U.S., then it will cost you 200-400 thousand dollars a year (plus all sorts of bonuses such as stocks, apartments and cars). In Ukraine, however, the salary midle - 15-20 thousand dollars a year, Senor - up to 50 thousand dollars a year.

The average cost of hiring programmers in different countries

The average cost of hiring programmers in different countries

Easy and Fast Hiring (and Firing)

Recruitment and staffing is becoming more difficult as health and safety laws become stricter, the role of unions and all sorts of venues where employees rate their employers increases. In this environment, it can be quite a hassle to hire a team and then quickly fire them when the product is in place. Offshore outsourcing pretty much eliminates this problem by providing you with the best talent from around the world, whom you can hire very quickly and just as quickly fire when their work is done.

You don't have to worry about insurance, social security packages and all sorts of social and tax payments. You just hire a contractor (an offshore development company), give him the job, control the development process and accept the finished result - as quickly and simply as possible. So, if you have an established process of outsourcing development offshore, then hiring a development company and processing the job will take you a day or two.

The most serious encumbrance (in addition to payment), which theoretically you can be asked for is to leave a review.

Inspiring innovation and quality

As offshore companies operate in a global marketplace, they are forced to constantly improve themselves, adopting new technologies and tools to keep up with competitors and stay in the marketplace. That is why such companies more often and quickly develop new areas in IT (RPA, artificial intelligence, neural networks, blockchain, Internet of things, virtual reality, big data, etc.). Of course, your country may also have specialists knowledgeable in certain innovation but they will be significantly less than on the global market and probably the cost of hiring them will be considerably higher than in the offshore.

Thus, if you want to get a competitive advantage by implementing innovations in your business, you will either have to hire very expensive developers (which may not exist at all) or invest in training your staff (which may take years), otherwise you can just hire an offshore development company with the specialists you need.

Ukrainian developers are 5th in the world in terms of hard skills

Ukrainian developers are 5th in the world in terms of hard skills

Ukrainian developers are 4th in Europe in terms of hard skills
Ukrainian developers are 4th in Europe in terms of hard skills

Ukrainian developers

Consistency and Outreach

A good offshore strategy helps companies to expand their business functions around the world. Take customer support. You can have a head office in the U.S. and several support offices in regions that are important to your company. With your IT teams in different time zones and languages, you can be sure that international customers can reach you 24/7. And they won't have any problems with communication due to language or cultural barriers.

Besides, you can use a mixed development model, when internal and remote teams overlap each other (this is how most big IT companies work nowadays: Apple, Microsoft, Google, IBM and others). If two teams work eight hours a day, you will do twice as much work in a day and end up bringing the product to market much faster.

Management without headaches

Another advantage of hiring an offshore development company is the ability to avoid all the difficulties and "personal drama" of hiring and managing an internal development team. If these problems lie on your shoulders, then in most cases they will suck the energy out of you and create unnecessary disagreements and conflicts within your company, which often take so much effort and time to solve it, that it would be better not to start development.

Well, you can't say that it won't happen if you hire an offshore development company but the probability of that happening is much lower. Especially if you're dealing with an experienced development company, having set up all the processes a long time ago (that is, having got all the "bumps" on past clients).

Enterprise Flexibility

If you invest a lot of time and money in a software development project and therefore divert important resources from your core business, operational breakdowns such as budget shortfalls and/or frequent missed meetings can have devastating consequences for your business. While these kinds of problems may not lead to critical errors, they can still severely limit the development of your business and narrow the horizon of available management solutions - making your business more fragile.

Working with an offshore development company can save you from these problems and increase the flexibility of your business.

  • Firstly, your partner will have the experience and skills needed to deliver the project on time and on budget, which will reduce time to market and help you recoup your investment more quickly.
  • Secondly, the outsourcing model allows you quickly add developers to your team as needed or hire people with very specific (rare) skills. This makes it easy and fast for you to scale development in the direction you want.
  • Finally, when hiring an offshore developer, you can choose whatever IT outsourcing model suits your business best.

Optimizing Resources

For a company owner, management is an amalgamation of passion and skill-you love what you do for a living and you're great at it. It's the same with your team: you've hired them because they're interested in the company's success and they do a good job. However, when you start adding supporting roles, responsibilities and projects, this well-tuned machine may no longer work so well - malfunctioning and accumulating mistakes.

Hiring an offshore development company to develop the software you need allows you and your team to focus on your core competencies and not spread your human resources over multiple tasks, which often results in a noticeable drop in quality and speed. Your partner will take care of all development-related tasks, while you focus your internal resources on more pressing or valuable tasks, such as training your team or sales.

Disadvantages of offshore development

Offshore development has quite a few pros but there are also cons to consider when choosing the right offshore outsourcing strategy for your business. Here is a description of these disadvantages and recommendations on how to avoid or minimize them.

Time Zone Differences

Your first concern that comes to mind when you think about hiring an offshore company in another country is the time zone difference. Working with a partner on the opposite side of the globe means that your team will be working when you are sleeping and vice versa. It can cause a lot of problems in communication. For example, if you need any clarifications or just want to get in touch with your team, you can't reach them before their work day starts, which can cause significant delays in the project.

To avoid this problem, you need to look for an offshore developer who is willing to communicate with you within a time that is convenient for the client. Usually, there is no problem with this - the project managers of offshore companies are ready to get in touch within an hour, even if they are asleep. For major clients, many developers are even willing to work night shifts (many programmers work better at night).

Language and Cultural Barriers

Besides delays in communication, you may encounter a language barrier. Of course, most developers today speak English at least a little but if their level of language proficiency is too low, you may again have serious problems communicating. This can cause developers to do anything other than exactly what you asked them to do, just because they didn't understand you from the beginning. Throw in a time zone gap and you'll spend days figuring out and solving problems.

Even if you don't have a problem with the communication language, there is still the problem of cultural mismatch. People in different countries have different attitudes about their work, authority, certain words and actions. These characteristics may be interesting to the tourist but when it comes to business, these cultural differences can cause serious discomfort and even conflict.

Solving these challenges is not as easy as with time zones but it is still possible if the development company hires the right people for the positions that will communicate with customers. Someone who knows a lot about the country of the employer and appreciates cultural differences.

Shifting Responsibility

Employees in your company who oversee the development and the developers themselves may shift the blame to each other if serious problems arise during development. It is not always clear who is actually right and who is trying to avoid responsibility:
  • The employer usually knows his colleagues and employees better and therefore tends to trust them more, so if something goes wrong in development, it's likely that the remote team will become the scapegoat.
  • It can also work the other way around: offshore developers may try to push authority (they understand development better than some office clerks) and blame your employees for project failures.
In this situation, it will be quite difficult to find the culprit if you don't understand the programming process on your own. Unfortunately, it is very difficult to reduce the risk of such a thing happening.

Quality Control Issues

As offshore developers are isolated from you by many factors (geography, language, time zone, etc.), it takes quite a bit of effort and dedication to control their performance at every stage of software communication development. This problem can be further exacerbated by poor working conditions, which you cannot control, and the lack of modern tools to control the quality of development.

It is practically impossible to eliminate this problem once development has started - it is easier to hire a new developer and start from scratch.

How to reduce the risks of quality problems when hiring an offshore developer:

  • Pay attention to the number of experience years.
  • Examine feedback from the developer's past customers.
  • Test the developer's past work.
  • Connect a technology expert.

Data Security

Working with an offshore developer often involves the transfer of sensitive data. It can create risks of leaking this data to hackers or fraudsters. You can mitigate the risks of this problem by:
  • Signing a Non-Disclosure Agreement (NDA).
  • Signing a Service Level Agreement (SLA).
Using reliable security protocols.

Employee turnover

The fact that offshore companies can quickly hire a lot of additional specialists is not always a plus because such developers can just as quickly switch to another project if they are offered more money. This breaks the smoothness and continuity of the development process, which can lead to lower quality and delays. To avoid these problems, look for developers with a lot of experience and a stable "backbone" in your programming team.

Final thoughts

While the main advantage of hiring an offshore development company is certainly the cost savings, digging deeper into the benefits of such a collaboration, you'll realize that it's not just a matter of budget. Experience, communication skills, and specialization play an equally important role, as it is the quality of the final software product that most depends on it.

Pros & Cons of an Offshore Development Company key takeaways:
  1. What is offshoring?
  2. The advantages of offshore development
  3. Global talent pool
  4. Reducing development costs
  5. Easy and Fast Hiring (and Firing)
  6. Inspiring innovation and quality
  7. Consistency and Outreach
  8. Management without headaches
  9. Enterprise Flexibility
  10. Optimizing Resources
  11. Disadvantages of offshore development
  12. Time Zone Differences
  13. Language and Cultural Barriers
  14. Shifting Responsibility
  15. Quality Control Issues
  16. Data Security
  17. Employee turnover
  18. Final thoughts
Merehead does professional development of offshore development company. If you have questions, contact us for a free consultation.

How can we help you?

Full name *
Email *
Your budget
Tell us about your project
Merehead review. Vleppo is a startup, digital asset exchange platform based on the Komodo blockchain protocol.