Offshore Software Development: The Complete Guide for 2024

Developing any viable digital product is a multi-stage and complex process that requires certain resources. It’s necessary to take care of many details, such as creating technical requirements, managing a team, finding the right specialists, etc. Taking into account the speed of technology evolution, and constantly changing industry trends, you have to stay agile and open to new advancements to assure your solutions remain relevant and competitive. In this regard, outsourcing, and especially offshore software development, is the optimal solution.

Currently, the IT Outsourcing market is valued at $617.69 billion and is expected to reach $806.53 billion by 2029. Moreover, 93% of small businesses shared their experience of working with an outsourced team as positive, emphasizing on the flexibility of such approach that allow to adapt business to constant changes.

In this article, we’ll discuss how this approach helps delegate part of the heavy duties and get a high-quality product as a result. We’ll also talk about the main types of outsourcing, their advantages, pitfalls, and challenges clients face during cooperation.

Simply put, offshore software development is a project’s partial or full transfer to a third-party vendor which is located far away from the client’s headquarters, has a different timezone and labor costs. This approach is useful for providing businesses with top software engineering talent pool, access to advanced technologies, flexibility in scaling teams, and the ability to focus on core activities while the offshore team handles development tasks.

An example of offshore software development can be when a U.S.-based e-commerce company hires a software development team in Ukraine to build and maintain its web platform. The Ukrainian team handles all technical processes such as coding, testing, and implementation tasks remotely, collaborating closely with the U.S. company’s project managers and stakeholders.

This approach can significantly reduce development costs while providing access to a skilled team with needed expertise in a comfortable time zone that allows the U.S. company to focus more on core business functions like strategy and customer engagement.

When exploring software development outsourcing, companies often choose between onshore, nearshore, and offshore options, each has distinct advantages and drawbacks, so let’s discuss this in more detail.

Onshore outsourcing

Onshore outsourcing is transferring a project to a vendor from your geographic region. This approach has many advantages, and the main ones are:

• absence of language and cultural barriers, therefore more accessible communication;
• live meetings and communication;
• one time zone;
• the ability to control the development process without additional efforts and intermediaries.

Pitfalls:
Onshore outsourcing can be quite expensive, considering prices in the USA, Great Britain, and the countries of Western Europe. It happens because of different reasons: the high cost of specific engineering services or even the lack of unemployed talents in the region.

Offshore outsourcing

Offshoring software development involves transferring the project to a team or company located outside of your region. Typically, organizations from the US or Western Europe outsource their projects to companies from Central or Eastern Europe. The advantages of such an approach are:

• relatively low cost of professional services;
• high quality of services due to significant competition;
• flexible approach to cooperation;
• a large talent pool.

Pitfalls:
The distance can be different. Accordingly, sometimes companies face a large time zone difference and miscommunication. Such teams can be challenging to control on your own, so it’s necessary to choose a vendor very carefully.

Nearshore outsourcing

It means transferring the project to a vendor from neighboring countries. The advantages are:

• a slight time difference;
• more accessible communication;
• easier cooperation control.

Pitfalls:
Price. The services of a vendor from a neighboring country may be as expensive as yours.

Offshore outsourcing gives you an opportunity to access different expertise and services. Let’s consider some of most common offshore software development services.

Custom software development services involve creating a product adjusting to the specific business needs and requirements of the client, including such types of applications as web, mobile, cross-platform, and desktop. Offshore software development teams create systems that meet unique operational needs, providing flexibility and integration with existing infrastructure. The custom software development market is evaluated to reach $126 billion by 2026, which shows the increasing business demand for customized solutions and their potential in the future.

Web development services are also suitable for outsourcing. Offshore teams often deal not only with the development of web products but also with their further maintenance, security control, scaling, updates, etc.

AI development services allows you revolutionize your business and automate operational workload. Actually, 36% of Americans looking to hire AI development services on Clutch are looking to hire partners outside of the United States. This can help to get cost-effective AI development team ready to transformate your project.

Cloud development services enables businesses to use global expertise in designing, deploying, and managing scalable cloud solutions with cloud technologies like AWS, Azure, or Google Cloud. According to Statista, the global market of cloud services is constantly growing. Additionally, data indicates strong growth in cloud-based software outsourcing, with projections estimating the market will reach $141.2 billion dollars by 2027.

Mobile app development is one of the main services that can be outsourced. It requires teams with specific technical skills and experience, which are not always available in a particular region due to the cost of services or insufficient tech level.

According to Computer Economics research, clients often hire offshore teams to develop finance software or retail/wholesale distribution and manufacturing applications.

Among other services that can be outsourced, it’s worth mentioning:

• designs services (UX/UI, UX research, web design, etc.);
• automation;
• QA services;
• cybersecurity services.

In other words, practically any IT service can be outsourced if necessary; you just need to find a suitable vendor.

Offshore software development has many advantages. Let’s talk about the main ones.

Vast Talent Pool and Opportunity to Choose

Offshore software development allows you to access a vast talent pool and choose the best option. You get an opportunity to hire worldwide and choose teams according to your budget and requirements. In this way, you can hire a team of engineers who not only have specific knowledge in the chosen field but also share your business values ​​and vision.

Extra Time for Your Core Business Activities

In offshore software development, you transfer a large part of the responsibility to the vendor, so you don’t have to spend energy digging into the development process. This way, you get more time for your main business activities and can focus on your own professional goals.

Lower Development Cost

To form a solid in-house development team, you should spend money on recruiting, licensed software, and equipment, not to mention salaries, insurance, and rent. In this regard, offshore outsourcing is much more profitable because these costs fall on the vendor’s shoulders. In addition, the services of IT specialists from other countries can be cheaper with the same level of professionalism.

Lower Risk through Partnership

Having partnered with a reliable offshore outsourcing company gives you the guarantee that your product will be released on time and meet the highest standards of quality and security. Usually, offshore development partners have well-established processes for managing projects, including best practices on development processes, quality assurance, and risk management strategies. Their experience in handling various project challenges helps mitigate common issues, such as budget overruns, project delays, and technical problems.

More Opportunities for Business Growth

Offshore software development is unlimited access to another company’s resources and qualified specialists, which allows you to open up new opportunities for the growth of your business, capturing new markets and expanding influence.

Besides, in many cases, cooperation with a qualified offshore software development team allows you to reduce the product’s time to market and ensure its quality.

Despite the numerous benefits, offshore software development is associated with some challenges that are important to be aware of.

Significant Time-Zone Differences

An offshore outsourcing team can work in a radically different time zone. The significant time difference can be challenging, but a professional PM can solve this issue using agile development techniques and proper time management.

Communication Difficulty

Communication is critical in the development of any product. In offshore software development, this is a particularly sensitive issue. It is not always possible to maintain transparency with a team in another country, not to mention misunderstandings due to cultural and language differences.
Only proper management (timely reporting, meetings, control) from both sides can help to solve this challenge.

Security

When you choose a vendor, you choose a full-fledged partner. Otherwise, you may face security challenges such as data leakage or loss. Therefore, it is crucial not only to find the best company but also to protect your intellectual property. This can be done with a Non-Disclosure Agreement (NDA).

Quality assurance

The quality of the code and the final development result depends on the experience of the team, its skills, control and structure of the work process, etc. Quality control can be problematic when offshoring, so choosing a vendor requires special attention.

So, determine the quality indicators and requirements with the vendor, clarify under what conditions you are ready to accept the work, etc. This will help guarantee the quality of the final result.

Having identified all the pros and cons of offshore software development outsourcing, now it is no less important to choose the right location. Each of them has its own characteristics, so when choosing, you need to consider what is important for your project.

Eastern Europe

Countries such as Ukraine, Poland, and Romania would be the optimal choices if quality is a high priority for you. Nonetheless, the price for software development in these countries is quite competitive. Eastern European countries are characterized by their strong technical expertise, responsibility, and eagerness to perform their best. They usually have strong regulations and certifications, which keep your business safe from security threats.

From a cost perspective, Eastern Europe strikes a practical balance by offering competitive rates without compromising on quality. Notably, the outsourcing industry in Europe is valued at $138.20 billion, highlighting the region’s importance as a global hub for offshoring software development services.

Southeast Asia

Southeast Asia is a growing hub for offshore software development, known for its affordable costs and a large number of IT specialists. The indication that the region’s talent pool and competence are likely to develop in the future is the statistics that predict software development in Asia will grow annually by 9.16% over the next five years.
While cost savings are a significant advantage, some challenges can appear, such as maintaining consistent quality and addressing cultural differences, which might require careful management and clear communication.

Latin America

According to Statista, LATAM revenue is expected to reach an annual growth rate of 9.03%, resulting in a market volume of US $27.57 billion by 2029. Thus, offshore software development in Latin America is becoming increasingly popular, particularly among North American companies looking for reliable partners with convenient time zone matching. The region combines a skilled talent pool, cultural compatibility, and competitive pricing, making it a promising option for software outsourcing.

When you already know about the pros and cons of offshore software development, choose the appropriate area for offshoring, and decide to give it a try, the most significant part of this process is now coming – choosing the right software development outsourcing company. Let’s go through the main steps to offshore software development outsourcing.

Step 1. Research Your Target Audience

The success of any software depends on end-user satisfaction and experience. And the sooner you research the target audience, the better.
The TA determines the product’s value, features, interface, etc. Defining the target audience helps give specific instructions to your vendor and expect a particular result from the outsource development team.

Step 2. Pay Attention to Regulations

Most likely, you plan to bring your product to your country’s market, which means you must take care of all the requirements and regulations. It is worth defining their list and sharing it with developers in the first stages of cooperation.

Step 3. Identify Business Needs and Goals

Business analytics transform business needs into specific requirements during the development process; it helps determine the course and scope of work. These are the principal identifiers of progress and quality metrics. So, determining precise needs and goals is integral to developing any product.

Step 4. Create a shortlist of companies

Look for potential vendors in reputable directories such as Clutch, Manifest, Goodfirms, and others. These platforms provide detailed reviews, ratings, and case studies that can help you evaluate the credibility and company’s expertise. Additionally, you can explore recommendations from industry peers, LinkedIn, or specific forums related to your industry.
Pay particular attention to customer reviews and ratings, as they often reveal insights into a company’s strengths, weaknesses, and approach to problem-solving. Look for companies that consistently deliver quality work and keep up strong client relationships.

Step 5. Choose the Best Offshore Development Vendor

After defining business goals, needs and regulations, and searching the potential companies for your shortlist, you can choose a suitable vendor. Be sure to pay attention not only to the cost of services but also to the following criteria:

• the technical level of the team;
• necessary skills to develop your product;
• communication transparency and flexibility;
• models and terms of cooperation;
• cultural compatibility;
• time zone.

Before hiring an offshore software development vendor, you should determine whether it can meet your requirements and ensure the safety and quality of the product. You can also start with the discovery phase service of your project to assess their proficiency and compatibility with your goals. The discovery phase allows you to collaborate with the vendor on initial planning, requirements gathering, and feasibility analysis.

We have vast experience in offshore software development cooperation with clients from the USA and Europe. Over these 9 years, we’ve built an optimal strategy for outsourcing software development and a system of working on projects of various complexity.

Being the winner of Silver Stevie Award in the category of Customer Service Department of the Year, Leobit demonstrates diligence in providing software development services for our clients and high customer satisfaction rate. Additionally, we are certified Microsoft Solutions Partner in Digital and App Innovation and ISTQB Gold Partner.

Our clients can use the services of engineers, QA specialists, software architects, designers, etc., as well as get a strong and well-functioning team at their disposal. We work with various technologies – C#, .NET, Ruby, Flutter, Angular, iOS etc. We also provide a wide range of services, so each client receives an individual approach. Our projects and customer reviews can tell you more about us and our experience.

Offshore software development outsourcing can be a profitable and effective solution. There are three different types of outsourcing, offshore, onshore and nearshore; they all have their own advantages and pitfalls.

In general, offshore software development allows you to access a large pool of talent, open up new facets of user experience, and free up time for other needs. And although it has its challenges, they can be solved easily with the right approach.

We have extensive experience in this field, so we will be happy to answer any questions and advise you about offshore development. Feel free to contact us in any convenient way.