Outsourcing custom software development lets companies focus on growth and digital advancement. 

Now is a good time for outsourcing. According to Deloitte’s 2024 Technology Industry Outlook, 55% of business executives characterize the current situation in the tech industry as healthy or very healthy; 62% believe it is a good time for their company to take greater risks.

offshore software development

Offshore software development helps companies globalize and scale operations while accessing competitive prices for top tech talents and innovative, cost-efficient technologies. However, sustainability and resilience must remain in constant focus.

Both are achievable when partnering with a reliable and flexible service provider. 

Below, we discuss how your organization can increase its bottom line and retain supply chain resilience with the help of experts in offshore software development.

1 What Is Offshore Software Development?

Offshore software development means outsourcing some or all project-related activities to engineers who reside in a distant location.

Offshore development has long been an important alternative to in-house hiring. It lets companies overcome such challenges as limited project budgets and the inability to find missing experts due to their scarcity in the local market. 

Based on the scope and nature of their projects, companies can consider:

  • Hiring an IT consultant who can assess project performance, advise on improvement steps, or help with a specific implementation strategy. 
  • Opting for IT staff augmentation to quickly add a software developer (or developers) on a short- or long-term basis. These developers report directly to the in-house team and can bring missing expertise. 
  • Finding a dedicated team — a tight-knit group of engineers headed by a project manager that works autonomously on the entire software project (or a significant part of it) in tight coordination with the product owner.

There are both geographic and cultural distinctions between onshore, nearshore, and offshore software development.

nearshore locations map

Onshore development. In this model, the outsourcing service provider is located in the same country as the client and in the same or a nearby time zone. There are no cultural barriers between the client’s team and the service provider’s.

Nearshore development. The provider is located in a neighboring country but is in the same or a closeby time zone. Cultural barriers are minimal or insignificant, and hourly rates are lower than for onshore teams.

Offshore development. Offshore outsourcing companies have significant time differences relative to their clients. Plus, cultural barriers can be high, especially with inexperienced teams in the cheapest offshore locations.  

3 Main Types of Offshore Software Development Services

Offshore software development outsourcing companies provide a wide range of services, striving to find resources to meet each client’s specific needs and challenges.

Signs you should hire offshore developers

Hiring offshore developers is beneficial in many situations:

  • Budget constraints

Your hiring budget can be insufficient for the local market, yet your team may be overwhelmed with the growing workload. Adding an offshore software developer can help you stay within planned budget limits while retaining the in-house team’s productivity and morale.

  • Tight deadlines

Hiring and onboarding in-house developers typically takes at least two months, with the time required increasing alongside the level of seniority. Finding offshore engineers or an entire team with an established workflow is possible within around two weeks, letting you sustain your desired pace of development.

  • Niche roles

You may need a highly specialized role (such as an Elixir developer) for a short period, which makes an in-house hire complex and expensive. Offshore specialists can cater to your needs quickly, flexibly, and as long as needed. 

  • Loss of focus

Developing software requires managing both the development team and the software product. If you have limited resources and software development is not your core business, consider offshore software development so you can focus on activities that increase your bottom line.

  • Process consulting

Productive software development is only possible when you work to constantly improve processes. A reliable service provider can help you adjust your working culture and establish processes that ensure frequent software deliveries and a stable codebase. 

The most common offshore software development services include:

DevOps and Cloud Transformation

Cloud technology is an important growth enabler that lets businesses scale seamlessly and cost-effectively. However, proven expertise is important for a sustainable DevOps transformation. The cost of a cloud solution can easily skyrocket when the team leaves infrastructure unoptimized.

Expert-level DevOps services are critical for successfully migrating legacy infrastructure to the cloud, reducing resource waste, and securing software maintenance.

Project Discovery

Project discovery increases a product’s chances of success, helping organizations spot opportunities and underserved needs. It also lets businesses encounter challenges and possible technology pitfalls so the product team can adjust to them early. According to a McKinsey study, large IT projects run 45% over budget on average. A discovery phase can help to avoid this. 

During project discovery, the software development team prepares a roadmap, identifies roadblocks, and evaluates the project’s technology stack for possible risks.

UI/UX Design

According to a customer service report by Salesforce, 80% of customers say that the customer experience is just as important as the products or services a company offers.  

An elaborated UI/UX design lets businesses meet user needs in the minimum required steps. It enables companies to build coherent, straightforward interfaces across target platforms, avoiding expensive global changes in the middle of product development.

Full-cycle Development Services

To be successful, every product that’s more complex than a starter-level business website requires a wide range of skills and competencies. As a result, assembling the right team can take a long time.

However, an organization can quickly hire a team with a dependable offshore software development company that has a wide talent pool. A software development company can assign engineers to your team who know how to handle specific technologies, can add missing expertise, and can respond to changing needs.

AI Development

According to Deloitte, AI is one of the biggest growth enablers. It lets organizations overcome limitations in the available labor force and process inefficiencies, improving customers’ satisfaction from provided services.

Businesses can enhance many operations with the help of AI development services, including customer support, marketing and sales, analytics, security, and process automation.

Software Reengineering

Software reengineering prepares software to meet growing user expectations and prolongs its lifecycle and integrity. Still, success depends heavily on the development team’s expertise: when the team does reengineering correctly, system scalability, security, and stability improve. Maintenance costs decrease. 

Reengineering requires a complex approach. The outsourcing team needs to find solutions that best meet the project’s technical and business goals, then introduce them in step by step transformations. 

At the same time, they must support the existing codebase to ensure the software remains available to end users and the reengineering work remains invisible.

Enterprise Software Development

Enterprise organizations must constantly improve their systems to quickly adapt to the disruptive business environment. However, they must be careful to keep the company’s processes up and running as these improvements are made.

A hybrid approach that combines an onsite team and an offshore software development center lets organizations complete required upgrades, modernization work, and automation activities within reasonable budget limits and immediately respond to emerging challenges.

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4 Benefits of Offshore Software Development

Offshore software development helps companies overcome limitations to seizing emerging business opportunities, such as: 

  • insufficient hiring budget
  • scarcity of available skilled talents
  • inefficient software development processes
  • lack of flexibility in resource management

and more

These limitations can make it nearly impossible to successfully complete a project and can negatively affect a company’s competitive edge.

offshore software development

The main advantages of offshore software development include:

  • Cost Savings

With offshore development, companies benefit from the lower costs of qualified labor, which lets them manage surging expenses and offer their products to consumers at a competitive price. 

offshore outsourcing software development
  • Access to Experts

Companies can find engineering talents with the required skill sets on the global market when those talents are unavailable locally. The hiring time is also shortened when turning to a respectable offshore development vendor.

  • Efficient Processes

By hiring a dedicated team, companies enjoy fine-tuned processes inside a team where everyone understands each other’s roles and capabilities. A project manager helps with team coordination, communication, and task distribution.

Efficient IT staff augmentation can be tricky, but it also can be implemented quickly with a vendor’s help.

  • Icon
    Staff augmentation lets you add a missing engineer within two weeks while saving up to 50% of the vacancy budget. Read more about successful IT staff augmentation in our post on how to hire the best software developers.
  • Productivity Boost

A reliable offshore development vendor helps complete long-awaited software improvements and boost productivity of related departments. They can also overview processes from an outsider’s perspective and suggest required workflow improvements.

  • Improved Scalability

Offshore software development vendors usually have available talents that they can deploy quickly on a growing project. Or, they can find, hire, and manage talents in their own local market.

  • Focus on Business Challenges

Companies spend time and resources efficiently when outsourcing activities outside their specialization. As a result, companies can focus on important strategic decisions and reach their goals.

  • Enhanced Capabilities

One of the key benefits of offshore software development is that companies can reinvest saved resources into further enhancements, such as market intelligence, business analysis, or competitor research.

4 Key Processes in Offshore Software Development

You must understand how offshore software development works for the project to succeed. Keep the basics of software development processes in mind during cooperation with a vendor.

offshore software development process

1. Discovery and Audit

Every established outsourcing vendor starts cooperation with a software audit, a discovery phase, or at least a small pilot task. This is needed to ensure the outsourcing team can meet its promises and understands how to handle project requirements within specified limitations. 

2. Planning

The outsourcing team determines all required project steps and activities, then discusses them with the product owner until both parties come up with a shared vision. 

When a detailed estimate is impossible (for example, due to too many unknown or hidden challenges), the team divides the strategic goal into high-level milestones and focuses on specific actions that maximize business value and minimize effort. 

3. Software development

Software developers use Agile methodologies to ensure flexibility. As a result, the client gets tangible deliveries every two weeks, which helps them evaluate project progress and make adjustments. Also, an Agile methodology lets developers calibrate the direction of development to meet the client’s changing business goals.

4. Deployment

After functionality is ready, the team deploys it on live servers. CI/CD and test automation enable the team to make several daily deployments, which allows them to deliver improvements quickly (for example, to close security vulnerabilities). 

A swift workflow is crucial. The engineering team looks after the deployment process and makes necessary adjustments if required.

5. Maintenance

Software maintenance is an essential stage. A specialized engineer or team must look after the system’s uptime and security. 

Hiring a DevOps team offers great benefits for software development projects. DevOps engineers unite development and operations processes into a seamless workflow, optimize infrastructure, and increase scalability. 

 

5 Challenges in Offshore Software Development

One of the biggest risks of offshore software development is not hiring the best available team. 

Possible consequences can be short-term, such as an initial slowdown, or long-term, such as a complete loss of control over business processes. You can eliminate these risks by working with a reputable offshore provider.

offshore software development team

Let’s look closer at these challenges:

  • Cultural Barriers

Programmers in a distant location can over-promise or have a relaxed attitude to deadlines. Communication can be difficult if the team’s English knowledge is insufficient, or on account of the team misunderstanding your vision and business ethics.

  • Time Difference

The ability to communicate with an offshore team in real time is limited, and constant synchronization is required. You need an experienced project manager who knows how to organize the workflow. Otherwise, the project pace can slow down.

  • Lack of Expertise

Offshore developers may lack business knowledge in your industry. As a result, features can take longer than expected to implement, and you will need to spend extra time on explaining your vision of how they should work. 

  • Hidden Costs

There is always a risk of choosing a dishonest provider that will give you a vague, general estimate and then try to charge you extra for things that would otherwise be part of the initial scope of work. For instance, developers in certain regions may include QA at an additional cost – something IT Craft never does. 

  • Security Concerns

A vendor’s security standards can differ from yours, raising concerns about data safety. Ensure the offshore development team can adjust to your security practices. 

  • Loss of Internal Skills and Competencies

In-house employees can become uninterested in learning specific technologies when they see that such work is frequently outsourced, leading to a growing long-term knowledge gap. In an extreme case, there may be no one remaining who knows how software corresponds to business processes. 

  • Vendor Dependence

With offshore custom software development, you are highly dependent on your vendor’s stability. You need access to source code, project knowledge, and documentation to ensure a smooth vendor change if required.

6 Choosing the Right Offshore Software Development Company

Finding a suitable outsourcing vendor is the key to successful cooperation. A potential vendor needs to know how to meet your business goals and stay within the agreed budget and time frame.

There are six steps you should take to evaluate a potential offshore development vendor’s reliability and performance: 

1. Identify your needs.

Having well-defined expectations for offshoring software development and a defined development budget increases your chances of success. 

Consider a range of factors that will affect your search criteria:

  • Current state of your project
  • Scope of work
  • Budget considerations
  • Seniority requirements across your team and for individual developers
  • Desired start date and timeline
  • Long-term plans

2. Make a list of potential vendors.

The next step is to use search engines and review platforms to find the best options based on your priorities (cost, experience, level of expertise, availability, range of required services).

Make sure to check: 

Important note: When browsing on Clutch or similar platforms, switch sorting from “relevant” to “low to high.” This enables you to find negative reviews of offshore custom software development companies that otherwise can be deeply hidden for sponsored profiles.

3. Discuss your project. 

Send your requirements to selected vendors and schedule introduction calls with managers. During intro calls, ask questions about completed projects and acquired expertise, and make notes on each vendor’s answers. You also might ask for references from previous clients.

Additionally, be prepared for managers to ask clarification questions. If they don’t, it can be a sign that a vendor does not possess the required expertise. 

4. Select the best vendor.

Consider which vendor best fits your criteria for offshore custom software development. To do this, rank vendors based on: 

  • response time
  • previous experience
  • project initiation time
  • flexibility
  • transparency of communication
  • cultural fit
  • proactive attitude to your project

A great vendor will satisfy your individual offshore software development needs throughout the software life cycle while keeping both short- and long-term needs in mind.

5. Negotiate on terms and conditions.

Leave no room for ambiguity: clarify all terms and conditions before the project starts. 

  • Vendor’s contact points
  • Security policies
  • Cooperation model and payment terms
  • Reports and communication
  • Time and budget limitations
  • Transfer of IP rights
  • Contract length and renewal

6. Start with a discovery phase or pilot task.

Start small with a trial. Initiate the discovery phase or a small pilot task before the main project starts to ensure you get what is expected from the team. This will let you see if the team meets your criteria and can deliver on its promises. It is also possible that after a discovery phase or pilot task, you will need to restart your search. 

Decrease your development time

IT Craft can help you at any project stage. Let’s discuss your needs.

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7 How to Manage an Offshore Software Development Team

The best advice comes from one of our long-term partners: 

 

Treat them [outsourcing software developers] as part of the team.

 

You need to establish a positive relationship with your team, maintain trust in communication, and have a swift workflow. To do that, you need to: 

Be in touch

The team may come back regularly with project-related questions. If you have no time to respond, ensure that you remove this blocker by assigning a product owner who can make timely decisions. 

Establish KPIs

Discuss with your project manager what you can achieve within the designated timeline and what KPIs can help you and your team measure the project’s progress without interrupting the team’s autonomy.

Get to know the project manager

A dedicated project manager is a key figure on the project, being responsible for effective team coordination and task distribution. Take your time to communicate with them and ensure they are the best fit. 

Participate in regular meetings

You or your product owner can understand your team’s velocity, project progress, and challenges by participating in team meetings. Your participation lets the team discuss particular challenges with you and focus on your business priorities. 

Provide feedback

Send timely feedback on completed tasks. This will help the team remain on the right track or introduce improvements quickly if required.

8 Offshore Software Development Costs

Cost reduction is one of the major drivers for 57% of business executives who opt to offshore software development.

A company’s hourly rate depends on where it is located, with EU, US, and Australian companies being the most expensive. Asian companies offer the lowest rates, and Latin American and Eastern/Central European companies fall in the middle.

Hourly Rates in Different Countries and Regions

Here is a comparison of software development costs in different countries and regions:

offshore software development

Source: How to Find the Best Programmers for Your Startup

As a rule of thumb, prices grow from east to west (with the exception of Australia and Japan). Also, the costs of offshoring software development depend on a project’s complexity, timeline, and required level of expertise.

Expert developers charge higher rates for their services, though they will cost you less in the long term than inexperienced teams.

Experienced developers should have higher productivity, requiring fewer working hours to complete a project than inexperienced developers. They should also give you higher-quality source code and help you avoid common maintenance problems.  

 

Remember: The cheapest prices do not guarantee the lowest project costs.

9 Why Choose IT Craft’s Offshore Development Services?

IT Craft has been operating in the offshore software development market for 20+ years, launching and maintaining projects of varying complexity, from simple websites for small businesses to large SaaS systems. We successfully deliver solutions that match each client’s unique needs and vision. This is demonstrated by our clients’ high satisfaction ratings.

our recognition

A full-cycle development company with strong technical expertise acquired across 20+ industries, IT Craft offers various services to increase a software product’s bottom line at any stage of its lifecycle. Our main areas of expertise include: 

  • AI consulting and development
  • custom software development
  • enterprise development services
  • Dev(Sec)Ops and software maintenance
  • IT staff augmentation
  • IT consulting and discovery phase
  • app modernization
  • digital transformation

Here are the main advantages that have made IT Craft the long-term offshore development partner for businesses all across the world:

All-in-one services

We add the experts needed to ensure productive planning, execution, upgrades, and maintenance of a software development project. If additional expertise is missing or a specialist leaves the company, we look for a suitable internal replacement — no action from the client is required. 

Communication and shared mindset

IT Craft teams share your work ethics and abide by their promises. We maintain transparent communication while updating you on task statuses, discussing plans, and providing timely reports on completed work. 

Proactive approach

Our software engineers work on a solution for a business problem, producing high-quality, well-commented source code. IT Craft teams are proactive: if something brings great results for little investment, we will suggest it. 

Immediate project start

Short project timelines are crucial for businesses looking to stay ahead of the competition. Long negotiation times can destroy momentum. This is why we take on a client’s project as fast as possible, right after clarifying all terms and signing an agreement.

MyCarrier

Web portal for flexible shipment management

The IT Craft team built a solution from scratch that realized the client’s vision. It focused on project expansion and scaling to help the client best meet end-users’ changing shipment needs.

MyCarrier

Flexwise

AI-powered medical staff management system

The IT Craft team helped our client improve and finalize an on-demand platform for hiring certified nursing professionals. We then continued working on project expansion to let clinic administrators forecast and balance labor needs.

Flexwise

! Conclusion

Offshore software development makes it possible to implement a business vision at a reasonable price. Businesses can benefit from offshore development to launch long-awaited improvements rather than postpone them or bloat their budget.

The best approach to successful offshore software development is partnering with a reputable vendor that will provide you with a balanced team, maintain open communication, and cover specific tech needs with the relevant expertise.

FAQs

What is the difference between offshore and onshore software development?

The difference between offshore and onshore software development is in the distance between the client’s company and the outsourcing team. Offshore software development means working with a team that is located overseas, while an onshore team is located in the client’s own country. 

What is offshore software development?

Offshore software development means hiring a third-party vendor in a different location to work on all or part of a software project.

Why should I offshore my software project?

By opting for offshore development, you can achieve the following benefits: 

  • Reduced costs
  • Access to missing talents
  • Improved performance
  • Great scalability and flexibility
  • An outsider’s perspective on your software system
What is an offshore software development company?

An offshore software development company is a company that works on a client’s development and maintenance tasks remotely from a different location.