Offshore Software Development: The Definitive Guide For CEOs

There’s no doubt that the software industry has become incredibly saturated. With tech start-ups mushrooming like never before, industry experts suggest that there will be over a million software companies in the world within the next 10 years. Almost 50% of these businesses are tightly-packed into Western Europe and American cities. Competition is at an all-time high, operational costs are always climbing, and talent is getting scarcer by the day.

Offshore software development services have now risen as a solution for Western businesses who are looking to get ahead in the crowded and expensive marketplace. However, a lot of businesses still don’t know what offshore development really is. With the internet full of confusing and conflicting information, even understanding the basics of offshoring can be quite a task.

In this blog post, we break it down for you. As experts in the offshoring industry, we explain what offshoring is, what benefits it could bring to your business, and how you can offshore your software development.

TABLE OF CONTENTS

  • When is the best time for offshore software development?
  • Who should use offshore software development?
  • What are the benefits of offshore software development?
  • Offshore outsourcing locations: Where can you go?
  • Does offshore outsourcing create an ethical dilemma?
  • How can you manage your offshore software development team?

What is offshore software development?

For instance, IT giants like Google, Microsoft, and Apple have all established their R&D centres in Bangalore, the Silicon Valley of Asia. The lower operating costs, massive talent pool, and the opportunity to scale quickly allows them to increase their output and improve their technical expertise, without undue stress, hassle, or cost.

Simply put, offshoring means expanding your business with a new team of skilled employees who are geographically distant from your in-house team.

Read More Difference between Onshoring, Outsourcing, Offshoring & Nearshoring

When is the best time for offshore software development?

Your operational costs are getting out of hand

Add employee-centric benefits such as travel allowance, insurance, and yearly bonuses to the equation, and your operational costs are through the roof. Instead, by starting offshore development, you can save a significant amount of money, and increase your margins, without compromising on your output.

You’re not scaling fast enough

If you’re looking for a long-term solution, then outsourcing your software development to an external vendor isn’t going to work. You want to scale your team, and it needs to be done fast. This is where an offshore development model can prove to be invaluable.

By starting offshore development, you gain access to a massive pool of qualified engineers who aren’t outsourced help, but a value-adding extension of your business. They will be a part of your business for years going forward, enabling you to take on more projects and generate higher profits. And because the talent pool in countries like India is huge, you don’t ever have to worry about talent scarcity either.

Read more about when is the best time to start offshore development

Who should use offshore software development?

However, because of their lack of expertise in all things software, their technology is not cutting edge and requires a lot of developers to maintain and build. With local engineers costing well over €50 an hour, offshoring is a neat solution where they can hire developers full time and at a fraction of the cost. The development teams they build can also help implement new ideas further down the line.

In other cases, companies may already have an in-house development team but are unable to scale up and take on bigger contracts. They want to increase the value of their business and grow with the times but are struggling to. Since new developers are expensive and hard to find, a dedicated offshore team might be an ideal solution.

Does offshoring work for one-off projects?

What are the benefits of offshore software development?

Access to engineering talent

Even though colleges in the West are pushing IT courses, there’s still going to be an inevitable delay before those graduates are experts in the industry. And that’s why, today, the main reason companies are looking to build offshore teams and engage developers in countries like India isn’t cost — it’s availability.

India produces 1.5 million engineering graduates every year. Thanks to the high training pedigree and extensive English language training, these engineers roll out of university ready to work. Indian engineers can not only communicate with general fluency in the English language but can also be extremely clear and concise in a highly technical environment.

Lower costs of operation

Say you establish a development team in Bangalore, along with your in-house team at home in London. When you compare the salaries only, the salary of the average developer in Bangalore is comfortably 3–4 times cheaper than in London. That means that the total cost of doing business in Bangalore, including premises, administrative staff, legal work, payroll, developer salaries, etc., typically comes in at 50% the cost of your at-home developers’ salaries.

The reason — a lower cost of living. The cost of living in India is at least 3 or 4 times lower than in the West. A higher disposable income means that you’re paying significantly lesser to cash in the same, if not better expertise as back home.

The opportunity to scale quickly

However, with an offshore team, this crisis can be averted. First, the cost of recruiting and paying staff is lower. Thanks to the reduced payroll, a business could shoulder down periods more easily with an offshore team. At the same time, expanding your offshore team can be done much faster than in-house. For instance, The Scalers have brought multiple groups of engineers to our clients’ teams in as little as 4 weeks. Vetted, tested, and ready for work.

The ability to focus on your core business

This gives you ample time to focus on your core business, interact with potential clients, and grow your business without having to worry about not being able to accommodate them.

Read more about the business benefits of offshore software development

Offshore outsourcing locations: Where can you go?

India

Eastern Europe

Latin America

Another option is onshoring, where you transfer your software development to non-metropolitan areas within your own country. Consider a city like London where the rent, bills, and wages are all much higher than the rest of the country. By building a development team in a nearby town instead, you can keep expenses a bit lower. However, it’s still significantly more expensive than offshoring.

Read more about the offshore software development rates in different countries

Does offshore outsourcing create an ethical dilemma?

However, the reality is quite contrary. The primary reason why companies are drawn towards offshoring is so they can scale quickly, without compromising on quality. We’ve already discussed how setting up a development centre in the West is very expensive, and the fact that there aren’t enough engineers. This, in turn, implies that offshoring definitely doesn’t lead to a loss of jobs, as one would think.

Source

Rather than companies having to choose between globalisation or patriotism, they can choose both. Globalization has always proven to benefit the economy of a country. Wealth is not a zero-sum game where one country’s loss is another country’s gain. If going offshore means becoming more economically productive, in turn, producing better services and products, aren’t companies doing more good than harm?

Another ethical argument about offshoring is the wages of engineers in countries like India. Because you can hire developers at a fraction of the cost as compared to the West, businesses sometimes worry that maybe the engineers aren’t being paid enough, they’re not as good, and that the quality of work delivered is substandard. But again, this is a direct result of the lower cost of living, and not cheap labour = poor quality.

Read more about the ethical dilemmas of offshoring

How can you manage your offshore software development team?

Share the vision and mission of your company

A lot of the times, companies see their offshore team only as an execution partner for their development processes and nothing more. However, establishing a connection with your remote team is extremely important. The more they know about your brand, what you want to build, and why, the more invested they’re going to become in the vision and mission of your company.

Right from the moment you start building your offshore team, you should always have a clear vision and mission for your project, and that vision must be consistently and continuously communicated to your offshore team.

Bridge the culture gap

Remind your teams that they are both working towards a common goal and that if the project is a success, then everyone wins — together. It doesn’t matter where the person sits or what his role in the organization is.

As the lead on a project, it is your responsibility to make your offshore team feel appreciated and recognized. Make it your mission to ensure that every single person who is contributing to your project feels included, and as a part of your greater vision.

Visit your offshore team from time to time; conduct ice-breaker conference calls where both your teams get a chance to get to know each other and always be vocal about how you feel about their collaboration.

Communicate effectively

It is crucial to foster an environment in which effective communication becomes the first, and most important goal, without which your development project can derail. Some communication channels that you can use between your in-house and virtual teams include:

  • E-mails: official communication, schedules, and project meeting notes can be shared via emails.
  • Instant messaging: Instant messaging tools like Slack and Skype work best for quick clarifications, status updates, and queries.
  • Productivity tools: Project management is crucial when working with offshore teams because without it, you wouldn’t know what your remote team is working on. Tools like JIRA, Asana, and Basecamp are worth exploring.

These are just a few of the many strategies that you can implement when working with remote teams. We’ve written an entire blog post dedicated to the topic — a resource that can prove to be extremely helpful for your business.

Source: https://thescalers.com/offshore-software-development-definite-guide-for-ceo/