Offshore Software Development – Complete Guide & Trends 2018

Developing a software product is definitely not a cakewalk.

You need to manage a lot of aspects including technical complexities of the software, resource requirements, budgets and at the same time cater to the ever-changing demands of the marketplace.

And all this need to be done keeping your budgets under control.

Instead of burning the midnight oil or hiring new software developers, offshore software development may be a solution to all your problems.

The advancement in technology and communication systems had made it possible for work to be outsourced anywhere in the world and every business can benefit from the expertise and technological knowledge that many offshore development companies provide.

This is what we will cover in this blog – all aspects of offshore software development including differences between offshore, nearshore and onshore, advantages and disadvantages of offshore software development, offshore software development rates and latest trends.

This will help you decide the best options available around you and how you can benefit from outsourcing some of your work.

What is Offshore Software Development?

Offshore Software development is outsourcing all or part of your software development activities to a partner who typically will work remotely and provide the services requested.

“Offshore” simply means that the remote work is done by an organization which is far from your shores or abroad.

There are other related terms that you may have heard of – onshore software development and near-shore software development.

You can easily understand this when you answer a simple question – how far the outsourcing partner is from your country?

Let’s now delve into what is onshore software development or nearshore software development and which one may be the right option for you.

Offshore vs Onshore vs Nearshore Software Development

Onshore Software Development is an outsourcing partner who operates much closer to your home i.e. you have a partner which is in the same country or maybe the same town.

Nearshore is not in the same country but a country close to your home country and offshore partner is far-off from your home country.

To put in simple words, if you are in the United Kingdom, then a partner in Latvia is a near shore for you.

If you are in the USA, a partner in Latvia is off-shore for you and if you are in Latvia and have a partner in Latvia, it is an onshore software development partner for you.

Choosing the right outsourcing partner is critical to the success of the product that you are developing.

Outsourcing the software development, which is in itself a very complex activity, to a wrong partner may lead to a bad product being delivered or many late deliveries.

It is important that you understand the pros and cons of all options available around you, be it offshore, nearshore or onshore to take a wise decision.

  • A clear advantage that an offshore or a nearshore partner offers is the ‘low cost’. An offshore partner and nearshore partner may be able to offer you much lower rates than an on-shore partner.
  • On the flip-side distance and time zone difference may become a problem in managing day-to-day activities. Cultural differences and language gaps may be huge and can hamper work at times. With an offshore partner, you may feel less in control.
  • Near Shore or Home-Based vendors definitely, have an edge since these problems will not be faced with them but the cost benefits offered by an offshore vendor can be very lucrative.
  • A decision between offshore, nearshore or onshore partner should be taken based on the financial benefits achieved against the extra effort that you may need to give into monitoring, cultural sensitization and travel.

Advantages of Offshore Software Development

Offshore software development can turn out to be a very successful business association where both the partners benefit from the relationship.

Some of the key advantages of offshore software development are:

  • Cost Savings: Aim of any business is good financial results. Outsourcing some of your less critical activities can be a great way of reducing your cost and acquiring all the technical expertise that you need.
  • Reduce overhead costs: Particularly in a company where IT is not the core activity, hiring an offshore partner can be an efficient mechanism to eliminate all overhead required in hiring a dedicated IT team. The whole effort involved in hiring a set of experienced and trained employees to handle your IT operations can be eliminated by outsourcing these services to people who are experts at it.
  • Experts at lower cost: Offshore application development gives you an opportunity to hire a highly expert team of software developers at much lower rates. You not just save cost but also benefit from the highly efficient team who would deliver best-in-class and quality solutions for you. This will help you stand out from the competition.
  • Leverage Industry best practices and tools: The offshore software development companies would generally have their own set of tools, processes and use state-of-art technologies. This brings-in operational efficiency and increases productivity. You can benefit from all the best practices that they bring on the table without any extra cost involved from your side.
  • Ease to scale up or down: Resource requirement in software development is usually very unpredictable. With the evolving market needs, you may need to scale up quickly at times and scale down at other times. An outsourcing partner will help you in getting as many resources as you want at a time. You just need to ensure that arrangements for this are made in your contracts.
  • Focus on your core business: By outsourcing the day to day back-office or general tasks, the business owners have more time to look at other sources of generating income and to focus on business growth. This is especially true for the companies where IT is not the core business. This means you can put your efforts in the right place and increase your business instead of spending time on complexities of software development.

Disadvantages of Offshore Software Development

There is flip-side also to offshore custom software development and these need to be taken care of while you plan to go for an outsourcing partner.

  • Time-zone differences: Regular interactions with your outsourcing partner is required for the success of a relationship. An offshore partner may have significant time-zone difference which may become a bottleneck in having regular discussions. A nearshore or onshore partner will be a better bet if your work requires a lot of communication.
  • Lack of control: You are completely dependent on the abilities and strengths of your offshore partner and may feel at times that you have lost control on one of your critical activity. The reason could be slow communication or lack of response due to time-zone differences.
  • Stuck with a wrong partner: There would be times when you get stuck with a partner who delivers a bad product or provides poor customer service which may impact your relationships with your customer.
  • Hand-holding: Sometimes, the offshore partner may not be experienced enough and may require a lot of monitoring. You may feel that there is a lot of overhead involved in managing day-to-day operations and still you are not getting the required results. Some partners prove out to be highly inflexible and a lot of hand-holding may be required to work with them.
  • Cultural Differences: Cultural differences may result in a number of people related issues. This can slow down the progress of your project and may hamper the achievements of mutual goals that you have set for the project.

However, all these potential disadvantages can be handled by signing an outsourcing partner of good repute and setting performance limits with them upfront.

How to Approach Offshore Software Development?

Once you have decided that outsourcing is the way to go and have listed down the activities or functions that you would like an offshore software outsourcing company to work on, the next step is to choose the right partner.

This is critical to the success of the software that you are building. As pointed out earlier, one with a good reputation is always a safe bet.

Some of the key parameters on the basis of which you can evaluate a potential future outsourcing partner are given below.

Research on the Credentials of the Company

You may go through the company’s website and explore the work done by them.

Evaluate their capability against the requirement that you have. You may also get in touch with some of their customers and get their testimonials on their work.

If you can get some sample of their work to evaluate, it can give you a very good view of the type and complexity of work they can handle.

Evaluate their Work Ethics

Once you have contacted them, look at some of the behaviours of the personnel who interact with you.

You can get valuable clues through this interaction which points to the overall culture of the company and their work ethics.

A quick response and attention to details are a good indicator of the interest they have in the job and way they will respond to you in future.

Understand Tools and Technologies

It is important to understand the tools and technologies that the company offers.

This not only means software development tools but also the communication and project management tools they use.

Effective communication and project management is essential for the success of the relationship, as the time-zone differences and monitoring efforts can be considerably reduced if the tools are available and used effectively.

Financial Benefits Derived

The financial aspects play an important part when you are outsourcing any work.

Evaluate the cost of the current operations and go for a partner who gives you the maximum value in terms of benefits gained and operational efficiency derived.

Focus on Value Over Development Rates as poor service provided in lieu of lower rates is not something which will be good for your business.

Lower rates may lead to short-term gains but may hamper your reputation in the long run.

Offshore Software Development Best Practices

Once an offshore software development company is chosen, there are going to be some hiccups at the beginning of the relationship.

You need to ensure that some of the disadvantages that come with offshore software development are handled well beforehand.

Some of the best practices that can help you sail through the journey smoothly establishing a long-term mutually beneficial relationship are:

Efficient Tracking Mechanisms

For a successful association with the outsourcing partner, regular tracking of their activities is required. This can be done by having scheduled meetings to discuss project status and resolving any risks/issues that the partner may be facing.

Meetings scheduled at a mutually agreed time on a regular basis keeping in mind the time zone differences will help in controlling the project better without any surprises.

Decide Performance Metrics

A defined set of SLAs also go a long way and helps in keeping the project on track at all times.

These metrics can be an easy tool to evaluate the performance of your partner and indicate their level of competence.

Cultural Sensitization

Once you start a relationship with your client, it is important that you initiate cultural sensitization programs at both the sides.

This would ensure that you nip some of the people related issues in the bud. This should be followed as a practice with any new joiners in the teams.

Tools to Manage Work

Apart from communication tools, ensure project management tools are understood and used efficiently.

This will help you manage and monitor work with ease.

Sometimes you may want them to use your project management tools, if that is the case, make them comfortable by training the teams on the tools before they start the work.

Define the Process Approach

A company which has a defined process approach is always easy to work with.

Define the requirements that you may have on the process side; make sure that the offshore teams understand the procedures that you want them to follow.

Take Care of Regulations

In case you need to ensure that the product you want to create, complies with the existing regulations, make sure that the regulations of the country that you are outsourcing does not have any limitation with that aspect.

Also, ensure that your outsourcing partner understands these regulations and provisions for them in the applications being developed.

For example, this could be data security-related requirements if you are dealing with personal data of users.

Best Offshore Software Development Countries

Offshore software development requires highly trained, experienced, and competent software developers.

Based on the availability of highly talented resources, certain geographical regions have become a hub of software development.

Some of the best offshore software development countries which have strong IT infrastructure and a highly talented pool of software developers are:

Eastern Europe

Eastern Europe has slowly established itself as a solid base for software outsourcing companies. Baltic region (Lithuania, Latvia and Estonia), Ukraine, Czech Republic, Belarus, Poland, Romania and Hungary have developed a strong IT infrastructure.

The region now boasts of some software development companies which provide custom software development and other services.

Western Europe

Software outsourcing is emerging in several Western European countries, including the United Kingdom, the Netherlands, Norway, France, Belgium, and Switzerland, with the United Kingdom leading the way with high quality and experienced resource availability.


India, Philippines, Vietnam, and China are countries which majorly provide high-end software development services.

These countries can provide higher cost-effectiveness because of the availability of high numbers of skilled and semi-skilled labour.

Philippines offers call centre outsourcing and have been doing this for years. Recently, the Philippines have taken steps to grow the IT development sector. Vietnam also offers very low rate labour but English fluency is a problem.


Africa is probably not at the top of the list when considering software outsourcing destinations. However, Kenya, Egypt, Morocco, Nigeria and South Africa are showing the potential of having their own IT industries.

Egypt has been long into outsourcing now and is a leading provider of IT services in Africa.

Offshore Software Development Rates

The rates of software developers vary based on the technologies they work on and their experience levels. Rates of offshore development vary in various regions and there are considerable differences within regions as well.

The rates given below represent the average rates (in U.S. dollars) for software developers working on moderately complex projects.

Software engineers specializing in specific areas or with niche skills may charge significantly higher, and less-qualified freelancers may charge much lesser than the rates given below.

  • Eastern Europe: Offshore software development rates in Eastern Europe are between $25 and $70 per hour, but if you work on staffing model and are ready to work with junior software engineers, the rate you may get can be as low as $18 per hour.
  • West Europe: The rates in west Europe lie anywhere between $15 to $115 depending availability of skilled resources in the country. Outsourcing to these countries may be a costly affair.
  • Asia: Due to high labour availability, India is inexpensive, with rates between $18 to $25 for IT services but the quality offered is sometimes a concern. Rates in other countries in Asia such as Malaysia, Vietnam and Indonesia offer services at the rate of around $30 per hour. China with its wide pool of talent and high-quality projects charges hourly rates of $50.
  • Africa: Countries like Nigeria and South Africa also charge at a higher side with rates as high as $40. This is due to low labour availability in the continent.

Offshore Software Development Trends 2018

There is a growing demand for offshore software development and many organizations are outsourcing to increase their functional capabilities in IT services.

Offshore software development can give high cost-effectiveness and provide highly customized solutions which can lead to success for both the organization and the outsourcing company.

Let’s have a look at some of the key trends of 2018 in offshore software development.

Data Security

With the growing focus of many companies in data security, cybersecurity has become a hot area this year.

Data and information security is one trend which will go up substantially in the coming days. A small data violation can result in a big loss for many companies, so outsourcing partners who take care of this will definitely have an advantage over the ones who do not offer these services as part of application development.

Robotic Process Automation and Artificial Intelligence

Robotic Process Automation (RPA) and Artificial Intelligence (AI) is catching up fast.

Automation of some of the processes ensures improved productivity and enhanced performance at much lower rates. Many companies may opt for these technologies in the coming days.

Use of Cloud Technology

The cloud technology is one growing trend that allows companies to share resources over the internet and can be provided with minimal management efforts.

The cloud systems allow higher working efficiency and innovative solutions can be delivered to the clients using cloud technology quickly.

The Rise in Freelance and Independent Outsourcing Services

There is a high number of freelancers and independent outsourcing companies working in remote locations which provide services in specialized areas.

The trend shows that outsourcing services for general work done by companies are on the rise and many companies are opting for it.

Higher Efficiency and Competence

Automating the processes used by outsourcing companies using the latest software and other computer programs is enhancing the efficiency of these companies.

Benefits obtained are being passed on to the customer in form of better rates and higher quality.

This increases the operational efficiency of the organizations and they get better productivity while working with an outsourcing partner.

The upcoming outsourcing trends of 2018 indicate more companies opting for offshore software development.

Also, highly advanced technical know-how that can be leveraged from the offshore software development companies’ pool of talented resources gives organizations an edge over their competition.


The complexities that are involved in software development can be handled easily with the right offshore software development partner.

Outsourcing can give you financial and operational benefits both in the short and long term and lead the way to a successful and mutually beneficial relationship for many years to come.

Outsourcing your software development activities to an offshore software development company can turn out to be very rewarding if done in the right manner and with the right people.

We would like to hear your thoughts on this.

Comment below or contact us if you have any other questions.

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