What is Offshore Software Development

offshore soft development - What is Offshore Software Development

Explore the ins and outs of offshore software development. Learn how it can help businesses save costs, access global talent, and accelerate project completion.


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    So, you’ve decided to reinforce your project with a remote developer or even a whole external team. You’ll be in good company – tech whales such as Google, Microsoft, WhatsApp, and Alibaba all rely on offshore developers. By now, the global IT outsourcing market is worth more than $440 billion, and this continues to grow.

    From this post, you will learn all the ins and outs of offshore product development. We also have some tips on hiring a top-notch remote software development team.

    What is offshore software development?

    Offshore development is a business practice that involves delegating some software engineering tasks to a remote third-party contractor rather than assigning it to an in-house team. Often, the offshore development services provider operates in a foreign country.

    Cost reduction remains the primary reason why businesses opt to outsource part of their processes to the remote destination. 31% of the US companies that cooperate with offshore services providers name better expenses as the major reason.

    Other reasons include:

    • Access to a skilled talent pool at lower wages.
    • Lack of developers with specialized expertise within a company.
    • Need to lighten the load of the in-house workforce.
    • Lowering the need for transition service agreements.

    How does an offshore team work?

    Today’s most common offshore software development business models are variations on three main approaches. These are fixed cost, T&M, and the dedicated team models.

    In case of fixed cost offshore IT outsourcing, an offshore software company operates within a budget that was agreed upon beforehand. This approach is the most widely used type of outsourcing contract. The fixed price model contributes almost half of the total deal value in the US tech outsourcing industry, according to the KPMG report.

    With fixed-price offshore software outsourcing, the main concern is that the client gets the illusion that everything is going according to plan. Meanwhile, the project may already be halfway to failure.

    By its nature, software development is a volatile process where nothing is set in stone. Requirements change, uncaught bugs pop up, end-users complain, and the client comes up with the bright idea of a new killer feature two days before deployment. Pressed by budget restrictions, offshore programmers will inevitably start implementing the fastest and cheapest solutions just to get something working and deliverable.

    Time and resource outsourcing is basically freelance contracting on a B2B level. You’re hiring remote software engineers to work alongside your developers on specific short-term tasks. For instance, you can request two offshore Java development specialists with particular framework experience as an addition to your team for completing tasks in the next sprint.

    The benefit of such a model is that you literally purchase the developer’s time and the expertise needed to get the particular scope of work done. You pay an hourly rate instead of supporting an extra salaried position. Once the tasks are finished and tested, you don’t have to pay the specialist on the bench until next time.

    With the dedicated team model, an offshore development company provides you with the services of their own team members. Alternatively, they put together a bespoke team of internal specialists to work on your project.

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    This option will usually cost more compared to time and material offshore software development. You are renting the full-time employees of another software development company and so have to pay their full-time wage.

    The dedicated team offshore IT development model comes with the benefit of smooth teamwork and expertise backed up by your offshore software services contractor.

    Pros and cons of offshore outsourcing

    Annually, over 300K tech positions are outsourced in the US. The main benefits of offshore outsourcing software development and staff augmentation include:


    • It would be a mistake to believe that offshore development is cheap. However, it usually costs a lot less than hiring a full-time in-house developer.
    • Offers the ability to improve company performance by taking non-critical tasks off the in-house developers’ shoulders.
    • An easier and faster recruitment process.

    Of course, offshore software product development comes with its own risks as well:


    • For 50% of US businesses, the quality of the services is the main concern in offshoring.
    • Security threats are another consideration that deters IT companies from offshore software solutions.
    • There can be issues with communication caused either by time differences or cultural gaps.

    Best practices in offshoring

    1. Make the most of technology for connection and communication with your remote crew. There are plenty of collaboration tools available today. You can keep your in-house and offshore developers as in-sync as if they are in the same office.
    2. Distribute control over the development processes. As the project owner, you want to oversee the decisions made by your offshore vendor regarding product development and resource management.
    3. Monitor progress and test quality. While the project owner shouldn’t set unrealistic deadlines, a clear timeframe should exist. Progress should be measured throughout the development, too.
    4. sensitive data and intellectual property. Common protection practices include legal consulting, signing NDAs, and a security infrastructure audit undertaken by the vendor.
    5. Encourage and facilitate cultural exchange and integration between your internal and remote teams.

    Offshore SoftDev Firms: Who they are and what services they provide

    The variety of service development approaches is one more factor to consider when choosing the right offshore software development outsourcing company. The choice will define the distribution of work shared between internal and offshore software developers.

    • The project-based offshore development model provides you with extra hands for when you need to complete a one-time, specific amount of work. This approach is often used by businesses with one-off or pilot projects with well-documented specs and requirements.Project-based partners can, but usually don’t, aim for further long-time cooperation. In the short run, you gain an advantage cost- and quality-wise. However, if the requirements frequently change or the project is quite large, it’s worth to consider cooperation models that are more strategically beneficial, such as working with an offshore software development center.
    • When using the staff augmentation model, an offshore software development company allocates its own employees to your project for a set period of time. The clients draw on the services of staff augmentation vendors to obtain domain specialists for a particular task on favorable terms. Unlike classic outsourcing, this model allows full control over project development. It also provides more scope for tracking progress and performance.
    • While out staffing companies offer a skilled workforce to get the job done, the dedicated offshore center model is focused on providing services. In this case, the remote team takes charge of the assigned scope of work. This includes development, management, maintenance, and technical support, as needed.
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    How to find the perfect offshore development team

    Three-quarters of clients are satisfied with their offshore partners, says Deloitte’s survey. However, among a plethora of companies offering offshore application development services, only a few are really high-qualified experts. Here’s a checklist of things to do when looking for a reliable, trustworthy, and committed outsourcing partner:

    • Determine which cooperation format suits your business goals – whether it’s a long-term partnership or a one-time project.
    • Research the position and authority of a potential outsourcing partner within the industry.
    • Review their portfolio to understand their domain expertise. This will also help you evaluate their level of experience with the technologies required for your project.
    • Take time to learn about their business values and culture. This allows you to see if your team could find common ground with them easily.
    • Verify their references and get feedback from previous clients.

    Want to delve even deeper into the details of hiring a remote workforce for your next product? Contact us.

    Tips on how to conduct offshoring

    Of course, the product owner cannot just sit back and relax once the contract is signed. There are still a few crucial things you should do to ensure productive cooperation which translates into top-quality software:

    • Establish the expected standards of quality and stick to them. Make sure that these quality standards cover both code and architecture, and that they are well-documented. Perform code reviews on a regular basis.
    • Set up uniform workflow processes for the in-house and remote teams.
    • Acknowledge the achievements of your external team and provide positive feedback.
    • Hold regular check-ins and maintain constant communication.
    • Be ready to pay more than you expected. Many business owners opt to hire remote developers to cut costs. However, more often than not, there are unforeseen complications, and the project ends up costing more.


    There is no doubt that joining forces with an offshore software development team provides immense opportunities for boosting software engineering processes. Hopefully, you now know where to start on your way to fruitful and mutually beneficial cooperation with an offshore partner.

    If you’re looking for an offshore development team and are considering Ukraine as your offshore project development destination, get in touch! Our experts are ready to help you choose the solution that works best for you.

    Tags: collaboration, communication, cost-effective, development, globalization.

    Lou photo
    Back in 2013, I founded Echo with the simple business idea: "Connect great tech companies around the globe with the brightest software engineers in Eastern Europe." We've employed hundreds of talents so far and keep going.
    Lou photo
    li profile Lou Reverchuk

    IT Entrepreneur

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    3 years ago

    If you are looking for ODC set up in Bangalore reach out to Pattem Digital.

    Hanna Norris
    3 years ago

    Hey Lou, That’s a great post. But as per our research, outsourcing in India can be beneficial for your business. What do you think is the right location or country to outsource software development?

    Ready to discuss your challenges?