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What Is Offshore Software Outsourcing?

Offshore software development is a type of outsourcing whereby you deploy your software development project to an organization outside your home region, i.e. “off your shores”, usually in pursuit of lower-cost or to find resources that are deficient in your home market.

Offshore vs. Onshore Software Development: What's The Difference

If offshoring means deploying your software development project overseas, then onshoring means the opposite: deploying your project locally, i.e. partnering with a United States software development company (assuming your organization is US-based, of course).

One more term to add to this vocabulary is “nearshoring” which refers to outsourcing your software project to a company neighboring your home region. In the context of the US, this would mean deploying your development to Canada or Mexico.

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Onshore and Offshore Software Development: Advantages and Disadvantages

Companies usually opt for onshoring for the following reasons:

  • To ensure their software solution is of high quality: USA-based software companies are renowned for their expertise, creativity and meticulous execution.
  • To have more control over the development: The ease of communication - the ability to easily navigate time zones, meet in person, hop on impromptu conference calls, as well as speak the same language and understand the cultural context - facilitates the collaboration between the software development partner and your organization.
  • To ensure the security of their intellectual property (IP) and business: Having your software solution developed on US grounds makes your partner subject to the local laws and authorities. This means that your organization would enjoy the protection of a familiar and trustworthy system.

More and more companies are willing to forgo these advantages of onshoring to be able to achieve these benefits of offshore software development:

  • Reduce cost: Research shows that 70% of businesses outsource projects to cut costs. Cost-effectiveness is one of the main reasons why offshoring has gained in popularity in the past decade or so. By offshoring their software projects, companies are able to half or achieve even a third of the cost they would pay in their home market. (scroll down for Offshore Software Development Costs and rate comparisons ↓)
  • Alternative to recruitment: Software professionals are in great demand worldwide. Sometimes -and this is particularly true for non-tech organizations- attracting talent locally is extremely difficult. This is why many organizations are partnering with offshore software companies that offer staff augmentation services, i.e. build dedicated teams that act as an extension of the organization’s in-house software arm.
  • Increase talent pool: With the world hungering for software professionals, most market are left deficient in particular specializations. Offshoring helps bridge this talent gap by opening the doors to other talent pools.
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70% of businesses outsource projects to cut costs

Offshore Software Development Costs: Rate Comparison

Offshore software development services rates differ from region to country to city to company. However, there are some general estimates you can keep in mind that will give you an idea of what development will cost around the world.

For the purpose of this comparison, we also include the average rates by region as a reference.

This is how much software development companies charge in:

  • North America: $95-$170 per person, per hour
  • Central & South America: $30-$50 per person, per hour
  • Eastern Europe: $25-$50 per person, per hour
  • Asia & Africa: $18-$40 per person, per hour

How To Choose The Best Offshore Software Development Company For Your Business

Finding a top-rated offshore software development company can be difficult - after all, you are stepping into the unknown (presumably).

But, it doesn’t have to be as difficult as it seems. Here are a few steps you can take to ensure you’ve conducted thorough research and found the best candidates for your business:

Define The Services You Need

Different regions will tend to specialize in different technologies and types of solutions, as well as offer different types of services.

The easiest way to identify the best offshore software development companies for your organization, or at least the most eligible candidates, is to assess the tasks you’ll want to outsource, technologies and other skills you are looking for, and let these guide your search.

  • Are you looking for staff augmentation / dedicated teams or project-based services?
  • Do you need a partner for end-to-end software development or just particular tasks like quality assurance?
  • Do you need a website coded in a specific language?
  • Are you hoping to integrate emerging tech?
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Set A Budget

As discussed above, geography is a factor in the cost of software development.

This mostly comes as a result of the difference in cost of living.

When compared to the USA, Eastern European countries have a lower cost of living. 

The regions we’ve covered -South America, Eastern Europe, Asia and Africa- have different price averages which can be useful in narrowing down your search. This is why setting a budget for your software development project is important; It will serve as a filter for offshoring candidates.

However, do keep the following in mind:

  • Price tends to be indicative not only of quality but other standards as well: To achieve low rates in the context of their home market, companies have to make sacrifices. These usually mean sacrificing the quality of their workforce and their environment, training, management, technology and other aspects that play into the quality of the company’s output.
  • Regional averages are not necessarily indicative of what you’d end up paying for the best offshore development company: Sure, the average rates in Asia are $35 per person, per hour, but the best software development companies can go as high as $60 per non-senior software developer, per hour. This is still advantageous as you would pay the same caliber of the developer twice as much, or more, in your home market.
  • Don’t overlook implicit costs: When screening your top candidates, be sure to flush out all the costs associated with your development project. These will include subscriptions, technology and equipment, as well as travel costs (if applicable).

Decide On The Location

A few key factors to consider when deciding on the right location are:

  • Cost of living
  • Local government support and ease of doing business
  • Availability of infrastructure
  • Labour resources 
  • Data security and privacy

An Aventure's report on software development places Ukraine, Belarus, Poland and Romania among the best Eastern European software development centers.

The region:

  • Employs 700,000 IT specialists
  • Produces 60,000 graduates from tech institutions

Offshore Software Development Companies: 5 Questions To Ask Prospective Partners

Once you’ve narrowed your search down to a few candidates, you will be conducting interviews with each, including their references, to find the best match for your organization.

Here are the key questions to answer:

  1. How do you ensure your software professionals remain the best in class? Your ideal offshore software development partner will understand that staff retention and building a team of overachievers both boil down to how they treat, train and compensate their people. They will typically have an active office life, continuous access to training, incentives and recognition schemes to keep their teams happy and professionally accomplished.
  2. How proficient is their staff in English? Almost all offshore software development companies will claim that their staff is highly proficient in English, but it won’t always be the case in reality. Seek some proof of their proficiency or dedication to developing linguistic skills like in-office or external company-sponsored training, daily learning tasks and logs, etc.
  3. What are the unique aspects of the local culture I should be aware of? You will want to understand (and be mindful of) your development partner’s cultural norms including, but not limited to the social protocol, holidays and other cultural aspects that would directly or indirectly impact your project.
  4. Which development methods they use? Why? And how? Most software development companies prefer Agile but are open to other development methods as well. The key thing to look for in the answer to this question is structure; How do they apply these methods, and how organized and efficient they seem to be in their approach.
  5. How do they ensure efficient and effective communication with your home-team? Here, you will want to learn how they propose to navigate the difference in time zones, as well as how seriously they take communication as a factor in the development process. Look for the tools, processes and practices they have in place to improve the flow of communication, as well as transparency and documentation throughout your project.
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How To Manage Offshore Software Development Companies

We’ve written about the best practices in outsourcing software development projects; Here are a few highlights:

The key to obtaining successful offshore software development services is to manage those projects efficiently. With the right preparation and organization, an offshore development project can drive just as great of results as an onshore project.

By following these simple steps below, you'll be sure to keep your project on track, despite different locations, time zones, and sometimes languages.

  1. Set expectations: Share your brand goals, ideal features, and ensure that the firm you choose understands them and can truly help you reach them.
  2. Communicate constantly: Ensure that there are a few people on your offshore team that can speak the same language as you fluently, then stay in touch with them daily to update tasks and talk shop.
  3. Create deliverables: Work with your project manager to set an achievable timeline, then ensure the team works well to reach those deliverables on time.
  4. Utilize video conferencing: Because you're unable to meet in person, take advantage of high-quality screenshare video conferencing systems such as GoTo Meeting, Zoom, and Skype Business to speak in real-time.
  5. Let them do their job: At the end of the day, you should hire an offshore software company because they do good work -- not just because they'll save you money. And because you trust in their expertise, give them time to do what they do best -- deliver custom software solutions.

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