Looking for tech business veterans and consultants? They are just a few clicks away.

Offshore Software Development: Guide For Startups

Jan 26, 20228 min read

Robert Krajewski

Co-founder and CEO of Ideamotive. Entrepreneur, mentor and startup advisor.

As the market is growing rapidly, both startups and established businesses try to deliver software products faster while making production cheaper. It is quite a challenge if you think about it but offshore software development made it a breather. 

 

Until recently, Eastern Europe, India, and South America have not been on anyone’s mind as possible development centers. However, they are as popular as Central Europe or Silicon Valley now but they still have much cheaper rates. In 2019, numerous companies took advantage of this and the IT outsourcing market has grown to $66.5 billion and is expected to grow to over $409 bn by 2022, given the pandemic situation and ever-growing quality of outsourced services.

 

Do you want to save your startup’s budget by IT offshoring? We have got you: keep reading and find out about the benefits of offshoring, who it will work for, how to offshore software development and best management techniques for outsourced teams. As you see, we have got a full guide!

What Is Offshore Development?

Offshore development is a practice where IT companies hire individual professionals or entire development teams from other countries where hourly rates are lower. You can offshore certain tasks like design or maintenance or give over the entire project.

 

The most popular offshore destinations are India, South America, and Eastern European countries like Poland. In these parts of the world, IT has become an honorable and popular profession because it allows citizens to earn more money. So developers from these areas spend a lot of time and effort to level up their skills with those of colleagues from more developed regions. Yet, since the average hourly rates in these areas are low, half the rate of Americans seems to be great money for them. Consequently, the skill level is as high but the cost of development is much lower. 

Who Should Consider Offshore Development?

Pretty much everyone can benefit from offshore development. However, CEOs and Product Owners admit that the following companies benefit the most from such an approach:  

 

Who Should Consider Offshore Development_ 1

Startups With a Limited Budget

Startups usually have the brightest ideas but they struggle a lot with funding. There can be two outcomes: they do the product poorly or they refuse the idea altogether because they do not have enough money. Offshore development will help them significantly there: the cost of development can go down to as much as 90%, without hurting the quality. 

Businesses That Lack Tech Talent in Their Area

We live in the greatest of times: you are no longer limited to honestly bad professionals in your area - there is a whole world to choose from. It works for the IT industry as well and you can find whatever professional you need if you look outside of your borders. You can find professionals with rare skills or just find someone with more expertise.  

Businesses That Need the Product ASAP

Time is money and if your competitors push out the project before you, there is a high chance that you will not survive. Offshoring means a faster time to market for sure: you do not need to go through recruitment and screening (agencies already have the best candidates) so you can start faster. 

When Is The Best Time For Offshore Software Development?

You can offshore teams at any stage of development, even after it is finished. Let’s take a closer look:

Hire Offshore Business Consultants at Project Discovery Phase

If you have the slightest idea of what kind of software you want but you have no idea about the market, feature set, or design, this is the right moment to hire software consultants. They will research users’ needs and competitors, make a list of features and design guidelines and help you plan out the development process: the task and tech set, deadlines, and budget. 

Hire Offshore Development Team When You Defined Your Idea 

If you have already completed the steps described above, you can start looking for an offshore development team. They will take the project on paper and make it into functional software with a beautiful design. You can also hire a project manager to let them make sure that everything goes according to plan time-, task-, and budget-wise. In such a way, you will be able to focus on the business side rather than technicalities. 

Hire Offshore Tech Partner to Refine Your Product and Scale

In case your software is done and released, you can still benefit from offshore software engineering. There are bugs to fix and performance to boost. Sometimes you also need to add new features to keep up with the competition. If you do not perform regular fixes and updates, you will not stay relevant for long. Offshore teams can do it with less money and better quality. Since they usually have a lot of different projects, they are also likely to suggest new useful features that they have implemented somewhere already. 

How to Find The Right Partner For Offshore Software Development?

Offshore software outsourcing IT will work only if you have a trustworthy partner with top-performing development teams. Otherwise, you may run into endless deadline and budget extensions or, in the worst possible cases, into a scam. 

So how do you find the perfect partner?


infographic 2-2

Seek Recommendations

Asking around is the best possible way to find a trustworthy offshore outsourcing software development company: you can ask other startup founders from your network circle or go to a tech event to seek advice from people there. It is even better if you have a reliable mentor. It is almost impossible to run into a scam if you look for a partner this way. 

Look At Tech Directories

Tech directories are websites with all the offshore firms listed, including their area of expertise, case studies, reviews, etc. We recommend narrowing down the best-performing companies in your industry and contacting them and their previous clients. You can also ask on forums about them and read reviews. However, the last ones are not as reliable. 

 

Some of the most popular tech directories include Clutch, G2, Upcity, ITFirms, Goodfirms. 

Define Your Business Needs

What is your project: you have to explain your idea so that the possible partner can assess whether they have skills, knowledge, and resources for this. If your partner does not ask questions about your project, it might be a red flag. 

List Your Priorities

What matters to you the most: budget, quality, time and cultural differences, communication? It will be much easier to narrow down your choices based on that. 

Go Through Standard Checks

Any company can write whatever they want on their website and you need to check whether it is true to make sure that you are getting what you are promised. Therefore, do not forget to:

  • Look at their talent pool, their expertise, and English proficiency
  • Ask for recommendations and references
  • Check out the products that they have already developed
  • Ask for their workflow and pricing
  • Contact their previous customers and ask about their experience: how good the communication, delivery time, and budgeting was
  • Ask employees whether they stay for a long with that agency, how often people come and go and teams get reshaped

Reject The Cheapest Rates

Cheap does not mean cost-effective. In offshore development, it usually means two things: it is a scam or the quality of the project will be very low. We believe that you do not need any of those. Therefore, go for the average cost in the chosen region

Have a Call With Your Future Team

It is very important to feel comfortable with your development team. After all, you will spend at least the next two months with them and if you do not like their communication style or the way they work, you might turn your inspiring project into a bundle of stress and confusion. 

 

An interview is also a great way to check their English knowledge. 

How Can You Manage Your Offshore Software Development Team?

Managing a local team is difficult but the task is even more complex when it comes to managing remote developers. It is one of the biggest challenges of offshore development. You have to figure out time differences, cultural approaches to work, and remoteness. However, every challenge can be mitigated with just the right amount of preparation. Here are some tips on how to manage your offshore development team.

Always Make Sure That You Are On The Same Page

It is not rare to be lost in translation so you might need to double-check whether everyone understands your goals, visions, and tasks. Do not assume that people just understand things: people might have a different understanding of strict deadlines and sometimes you need to ask twice whether someone has better ideas because in some countries, for example, employees are not allowed to challenge their employer. So sometimes it is better to invest some time in explaining rather than redoing the whole project. 

Have Local Person As A Team Lead

It is better to have a local team lead: they are the ones with better English and will be able to explain things to the other team members in their native language. They will also be the ones who can physically reach out to others, raise their spirits and see whether the work is actually being done. 

Agree on Tools and Time Tracking

Using the same tools for communicating, productivity, writing code, and testing is a must. It will help you avoid confusion, unread messages, and, consequently, missed deadlines or calls, and badly written software. You have to make sure that everyone on the team knows how to reach out and where the work is happening by either coming with your suggestions or adopting their workflows. 

 

Since most offshore developers work at an hourly rate, you will have to figure out how to track their actual working time. There are special platforms that help remote teams to track the time and improve their performance. 

Avoid Micromanagement

It is hard to avoid micromanagement with regular teams but it is an even bigger challenge with remote ones. Not seeing what they do and not having the ability to properly communicate drives some people crazy and they become obsessed with getting to know more. We understand where they are coming from but it just will not work. The offshore development team will feel that you do not trust them and suffocate them with messages every two minutes. It will also hinder their productivity if they spend half the time reporting to you about their progress. 

Treat Them As Partners

If you are aiming for a long-term relationship with the team, do not treat them as temporary employees that do not need to know much about your company and are not worthy of getting to know them. Tell them about your long-term goals, take time to invest in their motivation and satisfaction, and let them see the bigger picture. It is even better if you can pay a visit to them someday. If you treat them as a valuable extension of your business, they are less likely to drop out and are more likely to go an extra mile for you. 

Offshore Outsourcing Benefits & Drawbacks

Like everything in life, offshore outsourcing is not perfect: if it was the ultimate solution for every business, everyone would be outsourcing by now. So let’s take a closer look at both advantages and disadvantages of offshore software development.

 

offshore software development Infographic Pros&Cons

Pros of Offshore Outsourcing

  • Lower costs. Hourly rates of offshore developers are significantly lower than those in developed countries. It will significantly lower the costs of development and you will be able to invest more in marketing or get rid of the stress of having to secure more investors. 
  • Faster delivery. You do not waste any time on recruitment or employee training: just find the right offshore development partner and they will do the magic for you. Offshore developers are also quicker to grasp the concept of the project since they change projects often and know how to jump on the task in no time. You will be able to enjoy fast delivery to the market and flexibility. 
  • Bigger talent pool. You are not limited to your location and are free to choose a professional with any skill level and rare knowledge. 
  • More focus on business. Business is as important part of a tech company as the software itself: you may have the best idea but if you can not deliver it right to the investors and market it to end-users, you will fail. Offshore development takes some pressure off your chest, especially if you hire a project manager as well, and allows you to focus on the business side of your company. 

Cons of Offshore Outsourcing

  • Cultural and language misunderstandings. Different cultures take workflows, hierarchies, and communication differently. When some nations will stay late to work on a tight deadline, others will walk away and blame the wrong planning. Some cultures are friendly and open, others might not enjoy the small talk as much and will cut straight to the point. It is important to know and accept these differences since they will not work otherwise.
    Language differences may lead to wrong task and vision understanding so it is better to always clarify and set very clear tasks. 
  • Time zone differences. If you are not in Central Europe working with Eastern Europe, you will have large time zone differences. For some people, it is quite frustrating to know that they work while their team is sleeping and vice versa. However, it will be okay if you just accept it and set meeting times that work for both countries. 
  • Hidden costs. It is not necessarily about offshore development but about employees on hourly rates or project work in general. They will overcharge you for additional working hours, changes, and tasks that were out of the agreed ones. It is better to discuss all the additional charges in advance. 
  • Possibility of intellectual property theft. If you stumbled upon an unreliable partner, they might steal your idea and make a great business out of it. You will have little influence on that. So it is recommended to sign an NDA in advance. 

Conclusion

Offshore development is a great way to reduce costs and delivery time, as well as access a wider talent pool. It will work really well for startups, as well as established firms if they have small projects or maintenance to do. You can come to offshore partners with a bare or developed idea or even turn to them after the software is released.

 

However, if you find it difficult to work with remote teams, different time zones, and cultures, this might not work for you. If you still want to work with offshore developers, just make sure that you are well-prepared by learning about their culture and remote team management.

Robert Krajewski

Robert is a co-founder and CEO of Ideamotive. Entrepreneur, who with passion spreads digital revolution all around the internet. Mentor and advisor at startup accelerators. Loves to learn and discover new business models.

View all author posts
Newsletter 9-1
Ideamotive Newsletter
Your bi-weekly collection of hottest tech news

CEE IT 2022

The State of Central & East Europe IT Outsourcing and Offshoring 2022 Report

Belarus • Poland • Romania • Ukraine

Read now

Looking for exceptional tech talent to join your team?

Our broad network of battle-tested software developers, designers, managers and business consultants is here for you.