5 reasons CTOs are embracing offshore teams for enterprises

5 reasons CTOs embrace offshore teams

Between 2020 and 2023, the number of companies offshoring doubled. 

While it was once a strategy for cutting costs or startups unable to retain a permanent team, it’s now becoming an essential tool for businesses of all sizes. 

Enterprise businesses are no exceptions. While some reasons apply to every business, there are unique reasons why offshore teams for enterprises are taking off.

In this article, we’ll explore those reasons as well as the often neglected key to ensuring an offshore centre’s success.

AI is continuing to drive digital transformation

Worldwide IT spending is forecasted to top €4.7 Trillion in 2024. That’s an over 9% increase from 2023. While 2023 might have seen a smaller 4% increase from 2022, it was hard to keep up with the 19.7% leap achieved that year

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The global digital transformation projects, kicked off by lockdowns, weren’t a one-off. While 2023 did see some slowdown, the boom in AI is driving a whole new field of transformation that will revolutionise the way we work

And drive value for enterprises which leverage these tools.

global digital transformation

Machine learning (ML) and robotic process automation (RPA) have been present in digital transformation projects for years and now generative AI has joined their ranks. Enterprises already employing AI tools now see further optimisation opportunities, while those who have yet to incorporate AI enhancements are keen to launch their own projects.

40% of the IT spend of Global 2000 companies is predicted to go towards AI initiatives as soon as 2025.

IT decision-makers know that to keep up with the accelerating technological advances they require top talent. But why build an offshore team for enterprises when talented engineers are graduating all the time in Western Europe and North America? 

Local talent shortages are rampant

While demand for IT skills continues to skyrocket, there’s no way for supply to keep up.

Especially in Western countries.

Due to a reduction in the movement of highly skilled engineers due to lockdowns and changes in government policies, the skills shortfall is widening. In 2023, 77% of firms reported difficulties in finding candidates with the skills they need. That’s up on 2022 despite mass layoffs in tech giants.

Local talent shortage

And when there’s an increase in demand and a drop in supply, it can only mean one thing.

Engineers are demanding more

It’s not just money, though that’s certainly part of it.

Even junior engineers expect high salaries, people-focused work environments, and meaningful work. While the balance of priorities will differ between employees, companies have to deliver far more to attract and retain top talent.

With tech giants scoping up IT talent across the board, enterprise firms are establishing new offshore development centres to ensure delivery. While offshore staff’s demands are also growing, the difference in economies means it isn’t as prohibitive to compete.

Offshoring is no longer a low-quality option

There was a time when the low-quality approach with frequent communication barriers was universally true. That time is over.

A string of factors has led to offshoring providers who function the same if not better than in-house teams including

  • English becoming the new Lingua Franca
  • The rise in engineering standards in developing countries
  • Offshore software development partners now providing high-quality models with fully integrated teams
  • The boom in communication tools (such as video conferencing tools) and project management tools post-pandemic

While fewer companies — especially global corporations — are prioritising the dirt-cheap, low-quality offshoring options, there are still cost savings. These stem from the lower cost of living and overheads in offshoring and nearshoring countries. And at an enterprise scale, they are significant.

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One option is to move into new markets, and building an offshore team is often a key part of that strategy. It’s far more effective than trying to build a localisation team in your head office. Plus, you gain additional knowledge and insights from native tech talent to help regionalise your product.

These development hubs can then expand to provide support or even localised marketing and sales if needed.

While achieving similar results via traditional outsourcing is possible, it’s more suited to tackling temporary pipeline bulges and one-off product development. Although the up-front costs may appear smaller and less of a commitment, the ongoing charges are often painful.

Follow the sun operations

Managing departments split between multiple time zones was traditionally seen as a hindrance. But after the world was forced to go remote during the pandemic, companies now have the infrastructure, workflows, and experience to manage distributed teams.

And that means companies can now leverage the productivity boost of 24/7 operations.

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Although this has been a standard in support, there are benefits for development and data analytics too. Colmore, one of our partners in the financial service sector, found their analysts in Bangalore could continue working on data from the previous day so it was ready for Western clients before they woke up.

While this does require some time to be spent on knowledge transfer between team members — and a little bit of planning for video conferencing calls — the additional hours more than compensate for it.

Risk mitigation

The world is a turbulent place. Wars, revolutions, pandemics, and economic upheaval have all come along in recent years.

While Western countries have avoided most side effects, disruption in the development process is something enterprises can’t afford. Whether they’re long-term talent shortages due to changes in government policies or short-term issues such as power outages, downtime is unacceptable.

Establishing multiple offshore development teams is an effective strategy to mitigate these risks. Even if one office suffers issues, the rest can pick up the slack.

This is especially true of offshore teams for enterprises.

Their need for consistent delivery and localised teams in less secure countries means it’s safer to establish multiple offshore centres.

How do you find the right partner to build an offshore team for enterprises?

Building an offshore team for enterprises has more to it than understanding the reasons for or against it.

You need to find a partner who can provide the required candidates with the technical and soft skills and also navigate the legalities and local regulations — no easy feat.

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Even when partners can meet those conditions, there’s still a vast difference between them. Some will allocate employees from their common pool with no guarantee they’ll remain your employee in the long term (even if you have a dedicated team).

Others may provide a dedicated team complete with a team lead, but only partially incorporate them into the larger company. This causes communication barriers, friction between cultural differences, and ultimately lower value creation.

Software growth forecast

Choosing a partner with a proven track record of building successful teams, alongside a people and talent-centric approach is the better choice.

They will ensure you get the right team, have the tools and processes to ensure effective communication, and work as an extension of your existing team, not a separate entity.

The net results? The highly skilled employees stay as part of your company, providing ongoing, long-term value.

Offshore teams for enterprises: a conclusion

Offshoring is no longer a niche strategy. It’s increasingly the only option for companies to keep their products competitive in a tight talent market.

Enterprise companies are no exception and due to their scale and global presence — or ambitions — they need to leverage offshore talent pools. For such companies, finding the right offshore partner to navigate is vital to ensure they can get an offshore software hub that can deliver on time.

Key Takeaways
Digital transformation is still driving demand for larger development teams, especially in enterprise organisations.
Local talent shortages continue to grow leading to the few available engineers demanding more.
While low-quality offshoring options still exist, there are now high-value offerings that still offer cost savings.
Entering new marketing and achieving round-the-clock delivery are common reasons to build offshore teams.
The right offshoring partner is essential for enterprise companies seeking to ensure the long-term success of their offshore strategies.

If you want to leverage Bangalore’s IT ecosystem, feel free to reach out to us by filling out the contact form. As experts in building the best engineering teams in India, we can help you build your A-team.