Offshore software development services emerged for businesses looking to reduce operational costs while having access to a global talent pool. Recently, the US tech job market has been saturated, which resulted in companies looking for more options.
If you want to get ahead of the crowded offshoring market, check out this in-depth guide on offshore software development. Learn why it has been considered reliable and profitable among CEOs and stakeholders.
What is Offshore Software Development?
Offshore software development refers to the digital product development process’s delegation to the developers or a company that offers that service outside the country. Developers from outside the US usually offer relatively cheaper services compared with hiring locals. Companies in the US find it more affordable as they don’t need to cover financial incentives and tax holidays.
Apart from the low operating costs, they get to take advantage of a diverse talent pool. It offers a less taxing way to scale up quickly and improve their technical expertise.
Simply put, businesses get to expand their operations with a diverse team of skilled developers who are geographically distant from the existing employees.
Benefits of Offshore Software Development
There are many benefits to offshoring your software development team. Here are some of them:
Lower Operating Cost
Positions in tech around the world are one of the most in-demand and highly paid workforces today. However, there has been a significant disparity in the rates between US developers and abroad. The average hourly rate of an entry-level developer in the US ranges from $75 to $125. In contrast, skilled developers from Latin America, for example, charge an hourly rate worth $30 to $50. Their wages are significantly higher, not to mention the financial incentives and tax holidays in payroll. When the required wages for US developers account for a considerable portion of your company’s operational costs, it is only practical to opt for offshore services.
Hiring offshore developers let businesses increase their margins without compromising operational costs and the operation itself.
Access to Diverse Talent Pool
Working with offshore development vendors streamlines the recruitment process while giving you access to a global talent pool. As it’s the core of their business, offshore vendors have more experience with hiring seasoned talents. They usually utilize well-established processes to help you fulfill your vacancies within your preferred time frame. With their connections to a network of software developers worldwide, there is less competition for acquiring skilled professionals.
Although their skills are in-demand in the global job market, there is an influx of talent everywhere. For instance, Uruguay contains over 700 tech companies in the IT sector. Uruguay’s massive growth in tech companies stems from their exemption from income tax for any earnings for exporting or outsourced IT services and development. This also keeps costs low without sacrificing the quality of work when outsourcing to Uruguay. On top of their low costs, Uruguay ranks third in English speaking skills throughout all of Latin America. Ultimately, hiring offshore developers eliminates the issue of delay in onboarding your offshore team.
Focus on Core Business Goals
Forming an offshore software development team lets businesses focus on their primary business goals. Companies can concentrate on their critical operations and let the in-house developers concentrate on other significant tasks.
Perhaps it is the perfect opportunity to expand your product and make improvements without overworking your internal team. A team of seasoned offshore developers can manage the work’s development process or configure its add-on services. For instance, they can help you craft a version of your product that addresses a new market at a low cost. Having them perform the advancements for existing products is generally more accessible as it only requires the existing product documentation. This way, there are lesser risks involved, and you can always halt the project when it fails. Otherwise, you can entrust them with larger projects and more complicated tasks.
Timezone and distance will never be an issue if you provide constant communication. Consistently communicate to stay updated about the processes. It is also vital that you articulate the project in detail to prevent misunderstandings and conflict.
Augmenting Offshore Developers with Your In-House Software Development Team
Offshore software development services are especially helpful for businesses that don’t specialize in tech and small to medium-sized tech companies who need on-demand talent based on their project needs. Most tech-focused companies like Google augment offshore developers with their existing team to strengthen their workforce. Whether they have plans for new software or improve versions of their current products, hiring offshore expands technical expertise. It helps them broaden their horizons with specific practices that their internal team might lack.
Communication-barriers might be one of the reasons why many companies are hesitant in hiring offshore developers. It is since collaboration across teams is integral throughout the product definition and development phases. With proper management, offshore developers can contribute to either coding or quality assurance to improve its pace. Given that QA engineers are understaffed in many software development organizations, you can use the extra hand. Offshore QA team doesn’t need to divulge the source code, eliminating the security and risks of compromising your intellectual property. Additionally, outsourcing to countries like Uruguay and Argentina minimize communication barriers since their time-zones align with the United States’ time zones.
Moreover, augmenting offshore developers allows you to streamline significant developments. You can take advantage of a team that is multiple time zones ahead to accomplish round-the-clock software updates.
Finding the Best Offshore Development Company Partners
Before you hire a team of offshore software developers, here are some factors you need to consider:
Prioritize Quality Over Quantity/Costs
Most businesses opt for offshore developers to acquire cheaper services. Given that most of these developers charge less, it is imperative to look for those offering great value.
When the prices are too low, it might be too good to be true. There is always a catch for these circumstances, so it’s vital to screen your hires efficiently. Ask for their credentials, portfolio, and experiences. No one would want to waste your time and money on an underqualified software development team, so choose them wisely.
Are They Reliable?
As mentioned, they should be able to provide a verifiable track record of their previous projects. You have to ensure that the team you are hiring is worth it.
Is Their Time Zone Going to be an Issue?
Most offshore developers adjust their time zone according to the preferences of their clients. It is vital to discuss office hours with your offshore development team before the project.
This communication ensures that their office hours can overlap with your head office.
To prevent further communication-barriers, it makes more sense to hire a team that speaks your language. It promotes productivity and facilitates cooperation across your internal team at your head office.
Where Can You Find Offshore Software Developers?
Eastern European countries are rich with almost 1 million professional software developers. Countries such as Ukraine, Belarus, and Poland are leading resource hubs for skilled developers. A majority of offshore developers in Eastern Europe are well-versed in numerous programming languages.
Depending on the required skills, experiences, and project complexity, European offshore developers’ average hourly rate goes around $25 to $40. These rates are consistent, compared with the average rates of professional engineers in North America and Europe. However, you would probably find developers with the same competencies in other regions like Asia that charge cheaper.
Throughout the Asian region, India produces the most number of professional software engineers. This influx of talent is the primary reason many tech giants like Oracle, IBM, and Amazon expanded their business in Bangalore, India. There have been millions of software engineers who graduate in the country annually. With this influx of talent pool, businesses also benefit from lower service costs. The average hourly rate for an entry-level software developer ranges between $18 and $25.
The low prices can come with a significant disadvantage. More often than not, project quality tends to be lower. Businesses must screen their hire carefully to weed out the underqualified applicants. India is followed by China, although their average hourly rates are generally higher. You can acquire an offshore developer by spending around $30 to $40 per hour.
Latin American countries have also emerged within the offshore software development industry. Many businesses began taking notice of offshore developers in Argentina, Uruguay, Mexico, and Brazil. Minimal time zone differences and cultural proximity are making it easier to partner with these offshoring destinations. An entry-level offshore developer’s average hourly rate in Latin America reaches around $30 to $50 because the quality is higher.
How CEOs Manage an Offshore Software Development Team
Once you have formed an offshore software development team, it is essential to know the role they play in your business. Depending on whether the team will handle software upgrades, an extension of your products, or help you launch a new product, you must manage them accordingly. As a stakeholder of the company, you must take action to manage your offshore software development team. Here are a few things you need to consider to lead a distant group successfully.
Impart Your Vision
Before anything else, the key to a successful partnership involves a shared vision. You must take time to impart to the team your business goals and mission. Sharing your vision helps them understand your perspective, needs, and plans as a business. It is also an ideal opportunity to get to know them and explore what they can contribute to your business’s future.
More often than not, companies only view offshore teams as an extension of the business rather than a dedicated member of the team. However, this is discouraging and disrespectful due to the significant contribution to your product’s development. Simply put, they play an essential role in its success and progress. Thus, the key is to establish a connection with your team, regardless if they are geographically distant from you. The more they know about your brand, the more they can determine ways to improve their work process.
Right from the moment you start building your offshore team, communicate your vision to let them your brand’s purpose.
Managing Cultural Differences
There are many cultural differences, especially if you are working with offshore developers located in farther regions. They might have different beliefs and aspirations, but you must overcome these differences. Instead of seeing it as a hindrance, make an effort to foster a unified culture of belonging through recognition and appreciation.
Be open with these differences and remind your teams to work towards a common goal. The primary focus should be on the success of the project. It should not matter where they are from nor what they believe.
As the head of the business, it is your responsibility to keep your offshore developers recognized. Ensure polite communication across teams and no one in the group feels excluded. You can break the ice by facilitating welcome conferences. It is an opportunity for teams to get to know and learn more about each other. When teams communicate well, collaboration would not be a hassle.
The key to a successful collaboration with software development teams located offshore is through consistent communication. You must prioritize effective communication across teams above anything else. When teams can reach out to one another without a fuss, they can be more productive. There is nothing that can derail your software development project.
Here are the most common communication channels that you can use between your in-house and virtual teams:
Email serves as the primary channel of communication for most businesses. It is more formal, typically for tailoring schedules, project details, and project meeting notes.
- Instant messaging
Instant messaging facilitates consistent communication across the team regardless of their location. For quick clarifications and immediate concerns, you can use Slack, Skype, GoToMeeting, Zoom, Google Drive, Slack, Gmail Suite, and Jira.
- Productivity tools
Project management is crucial when working with offshore teams to monitor their workflow and processes. Tools like JIRA, Asana, and Basecamp allow you to track their progress easily.
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