Offshore software development: the definitive guide for CTOs
The software industry is overcrowded. Despite the crisis hitting the big tech world, the number of software companies is expected to reach over a million in the next decade.
Almost half of these organisations cluster in Western Europe and American cities. The result? Fierce competition, high operational costs, and a talent shortage in engineering roles.
If you’re a seasoned tech leader in a US or European-based firm, you’re well aware of these challenges. Hiring local engineers is pricey and limits your access to top tech professionals.
In a competitive marketplace, offshore software development is a game-changer. Building engineering teams in countries like India is cost-effective and can provide access to a highly skilled talent pool.
But how can you leverage offshore dedicated teams to benefit your business?
Read on to discover what offshore software development (really) is, the benefits of the offshore model, and how to implement it.
Let’s get started!
What is offshore software development?
Offshore software development means hiring an engineering team overseas to build software for your company.
To maximise efficiency, organisations that go offshore often establish a new office in the country of their choice with dedicated development teams. These teams work in fully equipped facilities known as offshore development centers.
For instance, tech giants like Google, Microsoft, and Apple have established Research and Development Centres (R&D Centres) in Bangalore, India.
The large pool of world-class developers and the opportunity to scale quickly allow them to increase their output and improve their technical expertise without significant stress, inconvenience, or expense.
Who should use offshore development?
If you’re wondering whether to invest in offshore development, ask yourself: can I find and hire the right tech talent at home?
If the answer is ‘no’, you should consider investing in it.
Generally, two types of organisations leverage offshore software development:
Non-technical core businesses. E.g., retail or hospitality firms that need help transforming their existing website or developing digital products for their customers.
Companies seeking to expand their in-house development teams. E.g., financial corporations that want to increase their business’s value and grow their tech proficiency.
The first type of organisations lack software expertise and require competent developers to maintain and build their technology. The second already have in-house development teams but want to scale up to take on more significant contracts, deliver more value to users or outpace their competitors.
In both cases, a dedicated offshore team is an ideal solution since talented developers are expensive and hard to find locally.
Your crash course on everything offshoring. What is it? How does it work? Is it for you?
DOWNLOAD EBOOK3 key benefits of offshore development
Offshoring software development offers numerous advantages to companies of all sizes, from startups to major corporations.
These are the three key benefits you’ll get when going offshore:
Access top talent
When offshoring your software development, the world is your talent pool.
From Eastern European developers’ strong work ethic to savvy and English-proficient Indian engineers, top tech talent flourishes everywhere… except in the US and its Western neighbours.
The U.S. Bureau of Labor Statistics predicts demand for nearly 170,000 developer positions annually until the decade’s end. The problem is there aren’t enough talented developers to fill the roles.
Although high education institutions in the US are pushing IT and software development courses, it will take time for graduates to become experts in their specific fields. Meanwhile, the demand for developers continues to race away.
That’s why, today, top talent availability is the main reason companies are looking to build offshore teams in countries like Poland or India.
India produces 1.5 million engineering graduates yearly with solid training backgrounds and excellent English language skills. These engineers leave university ready to embark on professional careers and build software in international organisations.
Scale quickly
Scaling your offshore software development team is faster than expanding your local team.
And easier.
Offshore development companies offer several flexible cooperation models that allow you to build, manage, and scale up engineering teams on demand.
Let’s say you create a dedicated development team of five engineers. After a few months, your business grows, and you need more developers to design a new product and meet your customer expectations.
Your offshore partner has your back. Ask them how many engineers you need to scale your team, and you’ll get top-notch tech specialists in no time.
Focus on your core business
A good offshore software development company handles recruitment, administration, payroll, and other processes for you. A great one gives you peace of mind.
And there’s nothing like the security of having a partner you can trust while you prioritise other crucial aspects of your business.
If you decide to offshore software development, that’s what you get. You’ll have time to focus on your core business, interact with potential clients, and grow your company.
In the meantime, your offshore partner will hire and onboard top developers, among other tedious tasks.
3 best offshore development locations
Thus far, we’ve covered the basics and the advantages offshore software development offers to companies like yours.
In the following section, we’ll discuss the best regions for offshoring engineering teams, and the leading countries within each including India and Colombia.
Asia
India is the global leader in IT offshoring.
Tech hubs like Bangalore support this claim: 90,000 engineers graduate from Bangalore’s universities yearly, and the city is home to over one million software developers.
Given the lower cost of living compared to Western countries, setting up offshore software development in India can be a cost-effective option for your business.
Another Asian country you should consider when offshoring developers is The Philippines. This tropical archipelago ranks as 2nd most English-fluent Asian region and the 22nd in the world.
However, the country is experiencing a tech talent shortage affecting the overall quality of engineers in the Asia-Pacific region. You’d typically pay less to build an engineering team in the Philippines than in India, but you’d also hire less qualified developers.
The average offshore software development rate in these locations is €28/h.
Eastern Europe
Offshoring to Eastern Europe is an attractive business opportunity for US and Western European companies.
In particular, for organisations that require constant, real-time collaboration with their offshore developers. The minimal time zone difference is a plus for better cooperation and reduced communication gaps.
Countries like Poland and Ukraine are your go-to if you’re looking for developers with solid technical proficiency for short-duration projects.
Engineers in these regions charge €32/h on average.
Latin America
Latin America is becoming an increasingly popular destination for offshoring development.
Countries like Colombia, Mexico, and Argentina are investing in infrastructure and technology to attract international companies to invest in the region.
Medellin, Mexico City and Buenos Aires are evolving into modern tech hubs with a talent pool of expert developers who share a strong cultural affinity with Western organisations.
The downside of hiring Latin American offshore developers is some regions’ low English language proficiency. This situation causes difficulties in gathering feedback and understanding project expectations.
On average, you can expect to pay €37/h for developers in Latin American countries.
Increase innovation and deliver at speed in the Silicon Valley of Asia
LEARN MOREHow to choose an offshore partner?
So you’ve decided to invest in offshore software development. What’s next?
Now that you know the benefits and best locations to go offshoring, it’s time to choose an offshore partner.
A partner is not only a company that finds and hires top talent for you but also a crucial ally that shares your mission and provides constant support and guidance.
Follow these five steps to choose the right partner for your business:
- Identify your needs. Define what it’s you’re looking for and set your business goals. If you want to build a development team for long-term collaboration, you should filter your search for partners who specialise in these cooperation models.
- Assess communication. It may sound obvious, but finding a partner who speaks your language is crucial. Search for companies with high English proficiency and any additional languages of your choice.
- Verify developer quality. Every partner claims to offer the best developers, but most don’t. Check if partners are living up to their promises when offering world-class developers. Ask them where they are sourcing talent, what technologies engineers specialise in, and their experience.
- Evaluate security and data protection measures. Cybersecurity is essential for protecting sensitive data and mitigating potential threats. Make sure your partner follows the latest security and privacy guidelines to keep your software safe.
- Do a background check. Learn more about the partners’ experience working with international organisations. Look for testimonials, check their portfolio and analyse if they’re trustworthy.
How to manage an offshore team?
Partner in. Check.
But what about your offshore team? Your partner just built you a dream team of engineers, and now you find yourself at a crossroads, trying to figure out how to collaborate with them.
Don’t worry. We’ve got you covered.
To manage your offshore software development team, you must do the following: share your mission and vision, bridge the cultural gap, and communicate effectively.
Share your mission and vision
Most organisations view their offshore team as a mere execution partner for their development processes. That’s a mistake you can’t afford to make.
Establishing a connection with your offshore team from day one is crucial.
Introduce your organisation’s goals and requirements and share your company’s vision for the future. The more your engineering team knows about your brand, what you want to build, and why, the closer you’ll be to unlocking their full potential.
It’s all about building trust, fostering open communication, and creating a sense of shared purpose.
Bridge the culture gap
You’ll encounter cultural differences when working across your local US or European teams and offshore teams in countries like the Philippines.
Your goal as a tech leader is to nurture a unified culture of belonging across both locations.
Make your offshore team feel appreciated and recognised. Visit your offshore team occasionally, conduct ice-breaker video calls so both teams get to know each other and always be vocal about how you feel about their collaboration.
A Chief Happiness Officer (CHO) plays a pivotal role in this scenario.
Offshore partners with a people-first approach, especially in India, offer companies a dedicated CHO to foster a safe and appreciative work environment and train employees on soft skills.
Communicate effectively
Poor communication costs software teams millions in fixes and delays.
It affects in-house teams but is more common in offshore teams.
Language and cultural barriers, time zone differences, and physical distance make clear and compelling communication more important than ever when managing an offshore development team.
To avoid misunderstandings and delays, use the following communication channels between your local and offshore teams:
Emails. Share official communication, schedules, and project meeting notes via email.
Instant messaging. Instant messaging tools like Slack and Skype work best for quick clarifications, status updates, and queries.
Productivity tools. Check task status and performance with JIRA, Asana, Basecamp, and other project management tools.
Why you should consider offshoring to India?
As a Chief Technology Officer (CTO), you face complex challenges every day. The IT talent shortage is one of them.
If you offshore your software development to India, that won’t be a problem anymore:
- India has an abundant pool of top engineering talent, with almost 2 million new developers every year
- Indian engineers possess a strong command of the English language and excel in cooperating with international companies
- Moving operations to the country is cost-effective, given the lower cost of living and favourable exchange rates
- There’s an established IT Infrastructure and Special Economic Zones (SEZ) and software parks in cities like Bangalore, Hyderabad and Chennai
- India is known for being culturally compatible with Western countries, so it’s easy to align business practices with offshore teams
Plus, the country has multiple offshore partners ready to help you build scalable software development teams. That’s what we do at The Scalers.
We work with organisations worldwide, from the US to Europe and Australia, assembling teams of top-notch developers in Bangalore, the Silicon Valley of Asia.
Do you want to learn more about our unique approach to offshoring and start scaling your tech team? Drop us a line, and let’s discuss ways of transforming your business today!
Discover how 100 CTOs in ANZ are building offshore tech teams
DOWNLOAD WHITEPAPERIn summary: the only software offshoring guide for CTOs you’ll ever need
The success of offshoring development boils down to two essential factors: finding the right talent and building a solid partnership with an offshore company.
That, coupled with effective team leadership, enhances the benefits of collaborating with offshore engineers.
Kudos to you for coming this far, and we hope our offshore software development guide has provided you with valuable solutions and insights.
If you want to keep exploring offshoring, read our article on the benefits of quality assurance for digital success. See you in the next one!
