Offshore Software Development in 2023: Types, Benefits, Importance

Offshore software development. You’ve heard the term for sure. Perhaps you’ve heard about the advantages it brings to businesses, allowing them to scale fast and save significant amounts of resources. All of this is true, that’s why many companies are shifting their focus to nearshore and offshore software development models for web development. 

You may think “Wait, we started with an offshore model, what are onshore and nearshore?” 

Those are different types of development teams, each with their own benefits and pitfalls. Wondering what they are? We’ve got you covered. Keep reading this blog post to find out all the important aspects to consider while looking for offshore software developers. 

What is offshore software development?

Offshore software development describes the process of software development taking place outside of the client’s country of residence. Plus, the offshore team is not internally staffed. Thanks to globalization and the widespread use of the Internet, it’s now possible to hire offshore teams from different countries or even different continents. 

The classic example of this phenomenon is IBM. While being a technology corporation itself, “Big Blue” often partners with offshore software development companies around the globe. 

When you search for information about offshore software development, you probably see some other terms appear, like onshore or nearshore. Let’s see what they mean. 

Onshore software development refers to a situation when a company and the development team are located in the same country.

Nearshore software development applies when they are located on the same continent.

Offshore describes the situation when a company and the the offshore team are located on different continents. This type of software development is often synonymous with outsourcing. However, there are some differences between them, which we’ll describe in a moment. 

Types of offshore software development models

The software development process consists of many steps besides the coding itself. Usually, it includes business analysis, roadmap creation, prototyping, testing, third-party integration, and can include much more, depending on your project. All of these factors are important and influence the cost of offshore software development services. There are three types of offshore software development models, with their pros and cons. 

Fixed-price model

The title speaks for itself: The price of software development is determined and is based on the evaluation of time, needed resources, and release date. 

This form of engagement is perfect for small-scale and short-term projects with detailed project requirements and limited functionality. It offers precise delivery time, predictability, and easy and transparent management. 

Dedicated team pricing model

This model suggests that team management becomes the software development company's responsibility. You’re free to examine employees’ CVs and even conduct interviews with them to make the perfect match. Then, you pay for the amount of time that team spends on your project. 

Basically, a dedicated team pricing model gives you all the perks of having an in-house team but without being responsible for onboarding, paying social security wages, sick leaves, and so on. 

This model is more expensive than fixed-price and time and material ones, but offers significant advantages, like total control over the development process paired with freedom from administrative duties.

Time and materials model

The T & M model is often used when it’s difficult to estimate the scope of work and amount of resources required to develop the project. In this case, the agreement is more flexible than in the fixed-price model which guarantees a quicker start. 

The approach for software development can be described as agile, and the client only pays for the time and resources spent on the project. It seems to be a great engagement model, however, there are some pitfalls, too. Undefined deadlines and undetermined budgets may become a nasty surprise in the end. 

Offshore software development vs. outsourcing: The differences

The offshore custom software development market is developing by leaps and bounds, and more companies are looking for ways to get the most of it. That’s why you may hear different terms describing engagement models between clients and software development providers. You already know about onshoring, nearshoring, and offshoring, and you may also hear the term outsourcing. Offshoring and outsourcing are often used as synonymous but this is slightly wrong. Looks like it’s time to dot all the “i”s. Let’s do that. 

Outsourcing refers to a situation when a company hires specialists from outside to provide services that would otherwise be done internally. The reason for this? Two words: Cost reduction. According to a Deloitte report, about 70% of companies choose to outsource their software development projects to save costs. You can find more about the cost of website development in our article. 

The offshore software development model also describes the process of hiring developers in a distant country. Cost reduction can be among the reasons, but nowadays it’s more about accessing tech specialists with a specific skill set that you can’t find locally.

The core difference between offshoring and outsourcing software development is that your offshore software development team is a value-adding extension of your existing workforce and is in it for the long haul. 

Offshore software development: Benefits for your project

Offshore software development comes with a plethora of benefits that make it a go-to option for big corporations, small and medium-sized companies, and startups around the globe. It not only helps businesses reduce their operational costs but gives them the possibility to grow and scale fast when needed. Below we present five key advantages of offshore software development. 

Access to top engineering talents

With so many emerging technologies and industries that constantly evolve, companies are looking for ways to adapt them to their projects and services. While hiring and assembling an in-house team requires a significant amount of time and money, offshore software developers are ready to work from the day you submit requirements and sign an NDA. 

Moreover, offshoring gives you access to the large pool of tech specialists with a specific skill set that you need. Usually, offshore software developers work on different projects, which gives them a broader view of trending technologies and frameworks. 

Flexibility

It usually takes at least four people to develop a piece of software. Let’s count: A software engineer, QA engineer, UX/UI designer, and project manager. That’s the bare minimum when it comes to software development. Usually, the team includes a solution architect, project manager, product manager, API engineer, frontend engineer, backend engineer, UX/UI designer, DevOps, and a business analyst… The list may go on and on, depending on the size, budget, and your project requirements. 

But what if you can’t have all these people on payroll? Or if you simply don’t need such a big team because you don’t have that many tasks for them? This is where you can see one of the huge advantages of offshore software development: It gives you freedom and flexibility to have your needs fulfilled at your convenience. 

Plus, while offshoring software development, you may focus on product strategy and pay full attention to company growth. 

Lower operational costs

Do you know that it costs between $13,000 to $41,000 or even more to hire an in-house developer in the USA? Moreover, it becomes more expensive the longer it takes. It can take a lot of time, money, and other resources to hire tech specialists in the USA and Canada. 

Below is the comparison of tech specialists’ average hourly wages by region. 

As we can see, offshore software development costs may differ by two 2 or even three 3 times. However, you can get high-quality software development at a much lower price by hiring an offshore software development company. 

Let’s consider Poland as an example. Polish developers are best known for their Python, Shell, Ruby, Java, and .NET Frameworks skills. The level of English proficiency is scored as 63,76, which refers to upper-intermediate and advanced. Polish tech universities graduate over 13,000 specialists per year which gives you access to a large pool of tech talents. 

Saved time

Have you ever thought that all great ideas are already taken? Well, you’re right, and the Startup Playbook may confirm your assumption. It’s unlikely to come up with a unique idea that no one from the startup world has already tried. That’s why today's business world is such a competitive and fast-moving area.

In this competitive and saturated environment, businesses don’t have that much time to hire and assemble an in-house team, onboard developers and introduce them to processes. As your business constantly evolves, so do your requirements: You may find yourself in need to implement additional features, adjust UX/UI, or even make a pivot.

Hiring offshore software developers allows you to do so relatively fast.  

Quick scalability

One of the biggest benefits of offshore software development is that it allows businesses to grow and scale fast. While an in-house team might not be skilled enough to develop the software needed, outsource specialists already have the right skill set and experience and are ready to start developing the product. Working at an offshore development company requires being in touch with the latest technologies, so you may be sure that the offshore software development team already has the right skill set needed for your company or project. 

Flaws of offshore software development model

With all the benefits of it, there are some development challenges that can (possibly!) influence your choice. 

Hint: All of the possible risks that we’ll mention can be fixed with communication. So, let’s get started. 

Cultural gaps

People are different because of the cultures they belong to. Something that is obvious to us can be a surprise for other people. Speaking about the business side, cultural norms influence the way people treat subordination and reporting, task assignment, how they approach decision-making, and what their definition is of a completed task. 

Happily, there is a classification of cultures. It should be noted that this classification doesn’t reflect your development team skills or professionalism, but it could reflect their attitude to work.

Time zone differences

It’s natural that when you and your software development provider are located in different countries or even different continents, communication takes a bit longer. However, with proper management and in advance scheduling, challenges can be easily surpassed. 

In this article, we share three simple rules for how to manage time differences that are as easy as one-two-three. Take a look!

Security concerns

Cybercriminals are becoming more and more sophisticated. Data is the new gold and the target of theft. Yet, this problem can be addressed by signing an NDA and discussing the security infrastructure with your offshore software development team. 

When should companies consider offshore development?

Is there a right time to start thinking about offshoring your software development? Yes, there are situations when it’s better to turn your attention to it. Below we list three of them. 

1. You’re short on time

It may occur that you need this piece of software ASAP. Happily, you can always find offshore teams that are ready to get started right away. Moreover, they are familiar with the specific aspects of software development, have the experience of building projects that you require and their own tips and tricks to get things done faster without losing the quality. 

2. You don’t have niche specialists within your team

Thanks to globalization, you have access to top tech talents of whatever specialty and level of seniority. If your project requires the involvement of a specialist with a specific skill set, the odds that a software development provider has them within its team are very high. These teams usually work on projects from different industries and are always in touch with the latest technologies and frameworks. 

3. You’re on a tight budget

Hiring developers outside of the USA and Canada may reduce the cost of development by two or even three times. These resources can be tapped to building marketing strategy or doing additional user research. 

Offshore software development gives you the freedom to pay only when you need to get your task completed. 

Where and how you may find the perfect offshore team: Tips & tricks

Now you know the pros and cons of hiring offshore software companies. The next step would be finding those companies that will match your business needs and your personal expectations. Happily, there are plenty of ways to do so. 

We’ll arm you with tips & tricks below. 

1. Ask your colleagues and friends for references 

They will share honest feedback with you about their experience of working with a specific software development company. In this case, you save tons of time because you don’t need to evaluate hundreds of profiles. 

2. Freelance websites

Here are the most popular websites to find offshore software specialists:

• Upwork

• Fiverr

• Toptal

• Youteam

These websites ​​connect businesses with independent professionals and agencies around the globe and are the perfect places to find developers for small projects or tasks. 

3. Tech companies directories

Websites like Clutch, Techreviewer, ITFirms, and GoodFirms work as aggregators of offshore software development companies. You can filter by industry, location, or search for a company by name to find out more about them. 

4. LinkedIn and GitHub

We recommend these platforms as additional resources. It may be a great idea to check company employees’ activities on these professional platforms after you’ve already chosen a company on directories or got a referral from someone you trust.

How can you control your offshore software development team? 

Perhaps you’ve already chosen an offshore software development services provider and now wonder how to build successful relationships with them. We’ve got you covered and will arm you with strategies that will help you achieve fruitful cooperation. 

1. Do your research

Cooperation starts long before both parties sign the agreement and NDA. Taking a look at a company's profile on directories, employees’ profiles on LinkedIn, and customer testimonials will give you a picture of the company's projects and cultural code. 

2. Define your goals

The offshore team serves as an extension to your existing workforce. That said, they become your business partner and it’s a good idea to treat them accordingly. Why? Well, these people become as interested in the success of your project as you are. 

How to achieve this? It’s great to start with sharing your vision so they know the perspective. 

3. Remember that communication can fix everything

While most offshore development companies work under western business standards, still some misunderstandings may occur. Because both of you belong to different cultures, it’s essential to agree upon important aspects on the shore (an interesting wordplay, isn’t it?) to prevent possible conflicts. 

Important points to pay attention to include the form of reporting, the communication tools, and working schedules.

Wrapping up

Offshore software development offers your business a range of benefits and opportunities. While software development becomes the responsibility of a reliable partner, you can pay more attention to your core business and focus on growth strategy. 

We at Yellow have been developing high-quality and bug-free code for businesses big and small since 2015. We have talented and experienced tech specialists within our team that would be happy to help you turn your idea into reality and (who knows?) build the next unicorn together. Feel free to take a look at our portfolio or reach out to us to discuss your project.