Offshore Software Development – Costs, Benefits and Complete Guide 

Offshore software development is a BLESSING for small and medium-sized businesses, and companies with bigger sizes have also explored its potential. 

WhatsApp, the world’s leading free messaging application, started its journey with offshore outsourcing. The company outsourced the entire software development work to experienced Russian coders for designing solutions and developing a core app. 

Thus, the company could focus on customer support and other administrative tasks. 

But there are countless examples of companies that hired offshore software development teams to keep costs down or gain access to high-quality talent. 

Research studies state that at least 60% of IT organizations prefer to outsource software development to save their money.  

According to Statista, global revenue in IT outsourcing is expected to increase by 81.2 billion dollars between 2023-2028. The data itself tells us that offshoring software development is booming all around.  

So, why not take advantage of this? 

This comprehensive blog talks about offshore software development, the benefits of hiring an offshore development team, and how offshoring differs from onshoring and nearshoring and cost of offshore development rates by country. 

An Overview of Offshore Software Development 

Offshore software development primarily means outsourcing software development tasks to developers outside your country’s borders. The software provider is situated in any country of the world. 

These developers are contracted to complete short-term projects such as developing an online web app or mobile app. 

Such services are not only confined to mobile and web development domains. The organization outsources offshore software development services and can communicate through e-mail, video conferencing, slack, or any digital channel. 

An offshore software development firm has a dedicated development team that adds value to your business. Hiring offshore developers saves time and effort as you get access to qualified professionals and scale your business without training them. 

According to a study conducted by Deloitte, around 70% of companies outsource projects related to software development to save their funds—28% of companies offshore to find talented software developers. 

Businesses are looking to hire software developers either on a freelancing basis or find a dedicated offshore software development company that aligns with their business needs. 

Various software development services, such as web app development, custom software development, enterprise software development, QA testing, etc., can be outsourced. The primary goal is to double the work speed at a reduced cost without compromising quality. 

Moreover, India is the most preferred destination for offshore software development. At the same time, developed nations such as USA, Australia, and New Zealand prefer to hire software development teams from India. Choosing such a development model saves 50% on labor costs.  

How is Offshore Software Development Different From Onshore and Nearshore Software Development?

Here’s how Offshore software development differs from nearshore and onshore.

1. Offshore Software Development

The most popular model of software development is offshore software development. In this model, you hire a software developer worldwide to build software or apps. 

With this model, there will be uninterrupted workflows as offshore programmers work when you sleep. Because of time zone differences, your project will be delivered within the specified timeframe and sometimes at the earliest.  

An example of offshore outsourcing is when a US company hires an app development company from Eastern Europe. In such a case, US companies get access to qualified personnel, and you must pay hourly rates to those hired professionals. 

Wild Fork Foods, a food distribution company based in Canada, took help from our app development experts in developing an Android, iOS application and keeping Shopify as the backend.  

The client wanted an offline transition to online to increase storefront sales. It is an example of an offshore software development model. 

2. Onshore Software Development  

Onshore outsourcing is related to hiring a software development team from the same country in which you are operating your business. You don’t need to struggle with time zone differences, language, or cultural barriers here. 

You can use such an outsourcing model to exercise complete control over development projects. 

However, you must bear high costs, which is 2x or 3x higher than an offshore software development partner.  

3. Nearshore Software Development  

Nearshoring refers to hiring a technical vendor from a neighboring country where you have access to talent in the local region that functions in a similar time zone or has a 1-3 hrs. difference.   

Unlike offshore development centers, you can have a flying visit to the vendor anytime you want and can monitor the development process.  

Here, you get the benefits of both onshoring and offshoring because you have access to the best talent at affordable rates, plus you don’t need to worry about time zone differences. 

For Instance – When a company based out of Los Angeles collaborates with a Mexican company, it is an example of nearshore outsourcing.  

What are the Benefits of Hiring an Offshore Development Team?  

Hiring an offshore software development team can provide various benefits-  

1. Reduced Costs  

By hiring an offshore development team, startups can find skilled professionals at affordable rates. Research studies state that offshore outsourcing businesses save 60% on development expenses. 

Finding a dedicated software development team takes most of your time and money on training employees, investing in licensed software, paying salaries to your staff, etc.  

So, companies prefer doing offshore outsourcing from countries such as Latin America, Eastern Europe, or India because of the low labor costs in such countries. 

Companies with lower budgets find offshore outsourcing a cost-effective option as they can hire offshore talent at lower costs.  

Hiring developers from countries such as the US and Western Europe costs around $60 -$200 per hour. At the same time, offshore talent from central Europe charges as low as $50 per hour.   

2. Find the Right Talent for Your Business  

With the offshore outsourcing model, you can access a diverse range of professionals with expertise in various backgrounds. 

Often, it is challenging to hire skilled developers from developed nations such as the US and Western Europe because they demand expensive salaries and attractive perks. After all, the cost of living in such countries is high.  

As per GitHub findings, the Asia Pacific region is flooded with 6.5 million software developers, and organizations in Western countries are looking to find a high level of talent from such regions because they get access to everything at lower development costs.  

So, collaborating with an offshore development firm gives you access to a large pool of skilled developers.  

3. Work at Your Own Pace 

Because of ever-changing customer needs, startups having tight budgets find it difficult to upgrade their business model, change the tech stack, or scale up or down human resources from their team as per project requirements.  

Choosing an offshore development team provides you complete flexibility to choose from a repository of software developers who can be quickly deployed on the project.  

Because of the time zone difference, you get an assurance that your project will be delivered on time. 

4. Focus on Core Business Operations 

Today, software remains at the core of every industry, be it finance, operations, automobile, consumer goods, etc. Many startups find handling the business and technical side of things challenging.  

Most startup founders are good at making strategic decisions or lack technical expertise and vice versa. 

Finding a reliable software partner is time-consuming, so working with an offshore development team can do the job for you, from building a custom mobile and web app and handling your IT systems to integrating new tools.  

Thus, you can focus on other revenue-generating areas of business that keep your business profitable. 

Delegating software development projects to offshore teams allows businesses to work on core competencies and other business areas such as business development, product innovation, customer acquisition, etc.  

Challenges in Hiring Offshore Software Development Firm

Here are a few challenges involved in selecting an offshore software development firm-  

1. Differences in Time Zone

Because of time zone differences, it might be difficult for you to collaborate with offshore developers when they sleep, and your in-house team works tightly to deliver projects.  

Lack of real-time collaboration hampers the quality of your project. You can find an offshore app development team to overcome such a challenge by choosing the correct time zone. 

For Instance – If you are based out of New York, hiring a dedicated development team ahead of your time zone can provide you with an advantage because when you wake up, the software developers have already completed their work. 

At BigOhTech, our team members schedule a discovery call in advance to ensure your projects run smoothly and there is no delay in product development process.  

2. Language Barriers

While choosing an offshore development partner, you must ensure they have a good command of English. Otherwise, you would face communication-related issues while working on projects.   

To successfully complete the software development project, you need to ensure that everyone is on the same page. 

Make sure that you and your outsourcing partner speak the same language. In most nations, English is not their first language, so a lack of language proficiency results in miscommunication and delayed results. 

3. Security Challenges

Another challenge is that if your offshore software developers do not abide by the norms, it could lead to reputational damage and security vulnerabilities in the final product.  

Inform your offshore developers to sign an NDA to protect sensitive information about your business. 

Relying on external teams to develop secure software opens the doors for vulnerabilities.   

For Instance – If you have outsourced the development of a patient management system to an offshore partner. While your offshore development center lacks work ethics, it could result in data breaches and information leakages. 

To avoid such consequences, research the security practices of offshore vendors and get a non-disclosure agreement (NDA) signed before entering a partnership.  

4. Cultural Incompatibility

As developers are from different countries, different cultural backgrounds affect the quality of project management. Moreover, in this business world, every country’s culture differs from another, which impacts the project’s design, development, and outcome. 

Today, businesses are searching for offshore partners to smoothen their product development processes at reduced costs.  

Cultural differences such as changes in communication style, time zone challenges, language barriers, differences in decision-making processes, etc., lead to delays in processes and reduced productivity.  

To reduce this gap, the teams should have clear communication protocols and utilize project management and collaboration tools such as Asana, Trello, Jira, Monday.com, Slack, etc., to facilitate smooth communication. 

Additionally, before choosing offshore developers, have clarity in mind about high and low context culture.  

People in countries like US, Germany, Britain, the UK, Australia, etc., have low context culture. Such individuals are logical and deadline oriented. 

Countries with high-context cultures are team-oriented and follow the waterfall methodology for developing software. They are not very adaptable. India, China, Russia, etc., fall under such categorization. 

How to Manage an Offshore Development Team?   

Here are some best practices for managing offshore resources so you can scale your projects faster and improve the efficiency in developing secure software-  

1. Make Sure to Have Clear Communication  

When working with offshore development teams, you will rely on various communication methods, such as video conferencing and other project management tools, to bridge the communication gap.  

Having the right communication tools is indispensable for keeping in touch with the offshore development team and facilitating real-time communication. 

Research studies have proven that a 10% lack of communication leads to a downfall in productivity by 50%. 

2. Use Agile Methodologies

Using agile methodologies is a way by which developers can adapt to changes in project requirements. Most businesses prefer adopting Agile as it is an iterative process, and developers can provide rapid and easier alterations. 

This methodology allows for feedback, so the final product developed will be per customer preferences. 

3. Have Clear Goals and Expectations 

Before working with an offshore development center, you should have clear expectations regarding what you want to achieve, such as timelines, deliverables, etc., and measure the progress of a project by setting key performance indicators (KPIs).  

Having clear project requirements helps your offshore team achieve desired project goals.  

Also, developers should understand your company’s vision and mission, what product you want to create, and what problems your final product will solve. 

4. Don’t Micromanage Your Offshore Team

Whether it’s your in-house staff or hired specialists, micromanaging your team is bad practice. Motivate them when they have achieved top-notch results and delivered optimal performance.  

• Nobody wants to work with a company that micromanages their staff. 
• Most companies made the mistake of hiring professionals at cheaper prices to get the work done. 
• Ensure your offshore development team has a mix of senior developers and project leads.   

5. Make Use of Product Documentation

Managing your offshore team can be highly effective when you create detailed product documentation.  

Multiple people work on different project parts, so you must keep SOP and documentation handy. Otherwise, it will result in increasing technical debt of the project.  

Such documentation must ensure that the software developers align with your business requirements.  

6. Employ a Build Operate Transfer (BOT) Model

By employing a BOT model, you can outsource software development to someone in a distant location responsible for product development and setting up IT processes.   

The outsourcing company manages projects for certain periods, and when your product reaches a certain stage of maturity and brings you substantial revenue, ownership is transferred to you.  

How to Choose the Best Offshore Software Development Team?  

Finding a reliable partner for your development project takes most of your time, but when done successfully, you can reap rewards in the long run. 

Therefore, we have curated a 5-step checklist for you to find the perfect partner that provides unbeatable results for your business. 

1. Define Your Goals  

Have a clear goal in your mind before hiring an offshore development partner.  

Decide about what services you are offering – do you want to outsource software development and get the app developed from scratch? 

Or do you want assistance from a partner to improve the current UI/UX of your app or website, or do you need developers’ help to modify projects that previous developers developed?  

Explaining all those problems to the overseas partner will help you get a product that matches your project requirements. 

2. Check Out the Experience and Portfolio of Technical Vendors 

Now comes the part where you need to hire the right personnel who possess the necessary skillset and can work on projects. 

• Check out the company profile on LinkedIn and Clutch and read reviews line by line.  
• After that, head over to the portfolio section on their website and see what clients they have worked with and what results they delivered for them.  
• Such things will help you decide whether they are the right fit for you. Evaluate their expertise, the technology stack they use, and what skills they have. 
• We’d recommend you collaborate with a firm that specializes in specific technology. As they have expertise in that, you will get dedicated support from the team.  

Moreover, an experienced software development firm adds value to your business by developing a high-quality product.  

3. Development Cost of the Project  

Don’t choose the offshore partner by falling for the cheapest quotes because it will cost extra bucks when someone else has to rewrite the poorly written code.  

When searching for a dedicated development team, choose the ones that rightly fit your project requirements and quote you an appropriate budget.  

We suggest you find a offshore mobile app development team based out of Asia, Latin America, Eastern Europe, and Africa. Here, you would get access to experienced professionals at affordable rates.  

4. Choose the Right Development Model

Here comes the part of choosing an appropriate Offshore development model (fixed cost, time and material, dedicated development team). 

With the fixed-cost development model, you need to pay the offshore development center a fixed sum, and they will deliver the entire project. This model is beneficial when project scope and requirements are well defined.  

The time and material model are considered flexible, as the client pays for the time and resources spent on the project.  

At the same time, the offshore development team is responsible for delivering project deliverables. Such a model works best for projects when there are unclear project requirements. 

In the case of the dedicated development team model, the client can exercise more control over the project, and the project must be completed within a specific timeframe at a specified cost.  

Moreover, such an offshoring development model is highly suited for long-term projects and requires frequent communication.  

5. Decide Your Communication Tools

You must use various communication tools to facilitate seamless collaboration between clients and Offshore IT vendors. You can contact your clients using communication tools such as Slack, Jira, Zoom, Figma, etc. 

Ask your offshore partner which tool they use so that both of you are on the same page because these tools are goldmines for tracking performance and assigning tasks to team members.  

Offshore Software Development Rates By Country 

Offshore software development countries	Offshore software development rates
Eastern Europe	$25 to $55
Latin America	$30 to $50
Africa	$20 to $40
Asian market	$18 to $45

As per the Mordor Intelligence report, the IT outsourcing market generates $527 billion.  

Cost of hiring an offshore development center changes because it depends on various factors such as time differences, expertise, location, etc. 

Generally, outsourcing rates are higher in countries with high-quality standards, such as Europe, Australia, Western Europe, and Israel, and hiring an offshoring partner cost around $50-$300. 

On the contrary, less developed regions such as Africa, Latin America, Asia, and Eastern Europe have lower offshore development rates.  

1. Cost of Offshore Software Development in Eastern Europe  

It is a popular offshoring destination, especially for web development, as you can partner with qualified professionals at an affordable cost.  

The Eastern Europe offshore development rates range between $25 to $55. 

You can pick up the best talent from outsourcing hubs such as Ukraine, Poland, and Romania. More importantly, such professionals are well-versed in English.  

2. Offshore Software Development Rates in Latin America  

If you are looking to hire offshore software developers remotely, Latin America would be the best option. You can get access to competitive talent at reasonable prices.  

For Instance – hiring a junior specialist costs you around $30 hourly while hiring a senior developer costs about $55.  

3. Cost of Offshore Software Development in Africa  

After Microsoft invested $100 million in the African market, there has been an increasing popularity in outsourcing software developers, especially in countries such as Egypt, Morrocco, Nigeria, and Kenya.  

Generally, offshoring software developers in Africa costs around $20-$40 per hour. 

But, expecting a flawless product from such a region can be questionable as some African regions do not have good internet connectivity, and most developers lack expertise in developing high-quality digital products. 

4. Offshore Software Development Rates in Asia 

The Asian market is considered a popular destination for outsourcing because it offers affordable rates, and you can find a vast pool of qualified IT candidates. 

The offshore software development rates for the Asian market range between $18-$45. 

Although the final product quality can be an issue, in terms of communication, you will never face any problems as English is the widely spoken language in Asian markets such as India, Philippines, China, Vietnam, etc. 

Offshore OR in-House Development Model: Which One Should You Choose?  

There is no straightforward answer to this as it depends on various factors such as project scope, timeline for the project, how much control you want over the development process, and access to the talent pool. 

Here are a few instances that can help you make a choice between the two.   

• If you are an early-stage startup and cost is a significant concern for your business, you don’t need to spend time and money recruiting in-house professionals.  
• In that case, you can go with offshoring software developers because the development cost is 2x or 3x cheaper than the rates charged in countries such as New York, San Franciso, California, etc.  
• If you don’t have a dedicated technical team or CTO who can guide you throughout the entire software development process, start your research to find reliable development partners through Offshoring.  
• Outsourcing companies operating in specific niches for the last 8-10 years have proven expertise in projects with different technologies. 
• In the case of offshoring, you will have less control over the project and software developers. Setting up the right processes and systems in place, such as communication and project management tools, helps you measure the progress at every stage of a project. 

Don’t worry if you are stuck with which development model you should choose: offshore outsourcing or in-house team, as we have covered a detailed guide. 

How Can BigOhTech Help You With Offshore Software Development?

BigOhTech is an offshore software development company that provides you access to qualified, dedicated software developers who work round the clock to keep your business ahead. 

We have assisted various clients, including financial service providers and Airtel XSTREAM, worked for them across different time zones, and delivered high-quality products for them.   

Our tech professionals have expertise in various business domains and show remarkable communication skills when working on development projects. 

Besides that, we provide you with round-the-clock support and develop high-quality digital products that reduce your overall business cost by 70%.  

With the best-in-class professionals and their dedicated expertise, you can get everything done under one roof, from app and software development to unlocking your business potential by leveraging our emerging technology services. 

Wrapping up 

Now, you understand a lot about offshore software development, and finding reliable developers through this approach is not a tough task if done strategically.  

Managing an offshore team is quite cumbersome, but the above practices help you create a digital empire and scale your projects faster.  

If you are still looking for a dedicated software development team that aligns with your business goals and helps you improve your workflow efficiency, we are the right fit for you.