What Is Offshore Development? Why Is It Important?

Offshore development is a popular and effective way of outsourcing software projects to a remote team in a different country or region. 

It can offer many benefits for businesses that need specialized skills, high-quality deliverables, and cost savings. However, it also comes with challenges and risks that must be carefully considered and managed. 

In this article, you will gain a clear view on:

• What offshore development is, 
• Its advantages and disadvantages, 
• How to choose the best offshore software development team for your needs.

What is Offshore Development?

Offshore development is an outsourcing model that involves hiring a software development team from a foreign region that operates at a different timezone than the company’s headquarters. 

For example: a Western European company might work with Golden Owl, a software development team in Southeast Asia.

The reason why this model became so popular in recent years is because businesses can access to a vast talent pool at a relatively lower cost than hiring an in-house team (Thanks to the exchange rate).

Offshore development can be helpful in several tasks, from basic coding to product design, developing custom software, software support, and maintenance. The offshore team can work on a project from beginning to end or collaborate with an in-house team. 

The size and complexity of the project determine the number of developers you will work with. For smaller projects, a solo or 2-3 developers is quite sufficient. In comparison, a team of professionals will be better for larger and complex projects. 

Overall, offshore development can help businesses save costs, improve efficiency, and deliver quality products.

Comparing Offshore, Nearshore, and Onshore Development

Outsourcing software development typically consists of three main models: offshore, nearshore, and onshore. 

You've already go through offshore development above, so here’s a breakdown of the latter two to help you determine which model is best for your business:

Nearshore Development

Nearshore development is to outsourcing to a nearby country or region, usually within the same or a similar time zone. 

For instance, a U.S.-based company might partner with a team in Mexico or Canada, which basically in the similar time zone. Hence, it's called nearshore development service.

This model allows for easier communication and coordination, reducing the risks of misunderstandings and delays. While nearshore development might not offer the same level of cost savings as offshore, it has a balance between cost efficiency and effective collaboration.

💡Popular countries for nearshore development:

• Mexico
• Canada
• Brazil
• Poland

Onshore Development

Onshore development keeps the development team within the same country as the business. 

Pretty straightforward, this model offers the highest level of control and ease of communication, as there are no time zone or cultural differences to navigate. 

However, onshore development is typically the most expensive option due to higher labor costs. It's often selected for projects that need high-quality labor, close collaboration, high security, or when the budget allows for higher spending.

💡Popular countries for onshore development:

• United States
• United Kingdom
• Australia

Below is an overview of the three models, compared based on multiple aspects:

Top 4 Benefits of Offshore Development

This outsourcing model can offer many benefits for businesses that need to outsource their software projects. Some of the main advantages are:

1. Access to a Large Talent Pool

Offshore development opens up access to a global market of experienced software developers who can bring specialized expertise and high-quality deliverables that might be hard to find locally. 

You can also benefit from a fresh perspective and innovative ideas by tapping into offshore developers. After all, they come from different backgrounds and cultures.

Research by McKinsey shows that diverse teams are 35% more likely to outperform their peers, highlighting the value of innovative ideas from developers with different backgrounds and cultures.

2. Cost Saving

Outsourcing your software development to offshore teams can significantly reduce operational costs.

Data from Deloitte indicates that 59% of businesses use outsourcing to cut costs. By hiring developers from countries with lower rates, you can achieve quite the substantial savings.

Additionally, since the base of this model is outsourcing and project-based, without any in-house restriction, it eliminates expenses for infrastructure, equipment, and benefits for each developer.

Finally, offshore development can streamline your project timelines and reduce delivery times by avoiding local issues and regulations that might cause delays.

3. Flexibility and Scalability

Flexibility and scalability are key benefits of offshore development, crucial for adapting to changing business needs, since offshore development lets you adjust team size and scope easily to meet your project requirements.

You can select from various models, such as:

• Fixed-price, 
• Time-and-materials, 
• Dedicated teams, tailored to your budget and needs.

Additionally, offshore teams can work around the clock due to time zone differences, ensuring continuous progress and faster delivery, helping you meet tight deadlines efficiently.

4. Competitive Edge

Outsourcing your development work to offshore teams can give you a real advantage in their market. You will be able to launch your products more quickly, improve quality standards, and provide more value to your customers. 

Also, working with local partners who understand the local market can help you expand your reach and presence in new locations.

What Are The Risks of Offshore Development?

1. Communication Barriers

Effective communication is essential for the success of any project. However, maintaining clear and concise contact with an offshore team can be challenging, especially when there are language and cultural barriers and time zone differences to consider. 

Misunderstandings, errors, delays, and conflicts can arise due to communication breakdowns, harming the project’s quality and ultimate success.

2. Lack of Control

When you collaborate with an offshore team, you may face some challenges related to project management, quality assurance, security, and intellectual property rights. 

Since you cannot oversee every aspect of the work, you have to trust your offshore partner’s professionalism, competence, and reliability. Unfortunately, these qualities are difficult to assess from a distance. 

Additionally, you may encounter legal and regulatory disparities between your country and your offshore partner’s, which could pose some risks or obstacles.

3. Hidden Costs

Although offshore development offers significant cost savings upfront, there may be several hidden expenses that you should consider and plan for. 

These can include costs associated with communication tools, travel expenses, fluctuating currency rates, taxes, fees, and penalties. Also, hidden expenses can arise from poor-quality work, missed deadlines, rework, or disputes requiring arbitration or litigation. 

In conclusion, accounting for these potential costs is essential to ensure that offshore development remains an efficient and cost-effective option for your business.

How to Choose an Offshore Software Development Team?

Choosing the right offshore software development team is crucial for the success of any project. Therefore, it would be best if you considered several factors when selecting your offshore partner, such as:

1. Reputation and Experience

When choosing an offshore partner, 10 out of 10 times, businesses definitely go for the one with a good reputation and a proven track record of delivering successful projects for industries similar to theirs. 

Check the portfolio, testimonials, reviews, and ratings to ensure you pick the right partner. Also, look for certifications, awards, and recognition. 

Some of the trusted sources to check the reliability and quality of any agencies are Clutch.co, AppFuture, GoodFirms, 99firms, etc. And as an alternative, you can search for suggestions and reviews on some forums like Reddit or Quora.

For reference, you can check out Golden Owl's portfolio right here! We are a development service provider in Southeast Asia’s tech industry, and had partnered with branches in six countries: UK, Singapore, Vietnam, Australia, USA, and Norway. 

Reach out to our team for more info later on, we'd love to know more about your business vision.

2. Skills and Expertise

Along with a record of experience, check for the skills and expertise to see if the team can match the desired project requirements and expectations. 

Go for the team that can offer a wide range of services and solutions. The partner should also have a strong culture of learning and innovation to keep up with the latest trends and best practices in the software industry. 

For instance, our team consists of over 500 expert developers proficient in various programming languages and technologies, including Ruby on Rails, Python, JavaScript, React, and Swift.

3. Communication and Collaboration

Communication might just be the most difficult part throughout the process. One misunderstanding can cause the entire workflow to be disruptive.

So, be mindful of how the partner communicate with you in the first or second demos. Was it clear? Did both party understood each other well? What kind of communication style and channels did they suggest?

Ideally, you will want a partner with a transparent, agile approach to project management, making it easy to provide feedback, adjust plans, and stay on track. 

Typically, at Golden Owl, we tend to keep our partners up-to-date on the projects with communication tools like Slack, Skype, and Zoom, along with the Scrum methodology, to deliver top-quality software products on time and avoid mismatched info.

4. Cost and Value

It would be best to look for an offshore partner that offers a fair and competitive price while delivering a good return on investment. 

A clear and detailed contract outlining the project scope, timeline, payment terms, and expectations is also essential. The offshore partner should also provide quality, security, and satisfaction guarantees. 

Golden Owl offers different engagement models, including fixed-price, time-and-materials, or dedicated teams, depending on the client’s preferences. We also provide a free consultation and trial period to ensure the client’s satisfaction.

Conclusion

Offshore development can be a cost-effective solution for businesses needing a larger talent pool and save on labor costs. However, it comes with its own set of challenges and risks. Therefore, you need to carefully weigh the pros and cons of offshore development and choose the best partner for your needs. 

Looking for a reliable and professional offshore software development team to bring your vision to reality? Golden Owl is here at your service. We offer comprehensive IT services to guide you through digital transformation quickly and efficiently. 

Let Golden Owl be your trusted partner in turning your ideas into reality. Contact us for a one-on-one consultation today!