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The beginning of offshore software development began in 1996, when the American company General Electric opened its first IT center in India, where production costs are much lower. Nearly 3 decades later, the offshore development market is expected to reach $122 billion by 2021, and 76% of executives surveyed by Deloitte say IT functions will be outsourced by 2022.
Benefits Of Offshore Software Development
Offshore development can be managed by the company itself or outsourced to a trusted IT outsourcing provider. But in many cases, companies choose outsourcing to streamline the process and reduce headaches.
So, keeping in mind the IT outsourcing trend, this article will provide you with a comprehensive guide to offshore software outsourcing to help you better understand the context and make the most of your outsourcing decision in 2023.
Let’s lay the groundwork before diving in and find out if offshore development is the right option for your company.
Software offshoring is the process of sending a company’s development project to a foreign country where production costs are lower. With offshore outsourcing, a business will hire an offshore software outsourcing provider.
What Is Offshore Software Development? Let’s Figure It Out!
For example, an American company hires offshore developers in Vietnam to develop an enterprise resource planning (ERP) system.
When a fixed cost is determined before the project starts, it is called a cost model or a project-based offshore development model. This is one of the most popular outsourcing models for clients because it shifts all responsibility and financial risk to the vendor.
A specific IT outsourcing model is ideal when project requirements and delivery expectations are met.
Usually, these projects are small and medium, short-term or promotional, with stable market conditions and changing customer needs.
What Is Offshore Software Development? A Complete Guide
With the T&M model, clients are billed based on the hourly rate and material costs used for the project. This model brings a lot of flexibility to customers and allows them to adjust the plan according to real-time changes and requirements.
This model is suitable for projects without clear terms and deadlines, aspects of which are often changing and complex.
The custom model refers to the case where the vendor provides the customer with an exclusive offshore development team. The team then works as a remote home team under the direction of the client and may be assigned multiple tasks across multiple projects.
In this model, team sizes vary for different projects, and timelines can span years. This model is often preferred for long-term projects that prioritize high standards and flexibility.
Onshore Vs. Offshore Software Development
Now you know what offshore development is, but don’t get confused by these two similar terms: Onshore and Offshore.
One of the main reasons for outsourcing offshore development is to reduce costs. This is because large maritime countries such as India, Vietnam, Romania and Poland require lower operating, infrastructure and labor costs than developed countries.
See the total annual fees for builders. US developers need about $95,000 and Vietnamese developers need about $23,000.
By outsourcing jobs, companies can tap into a wider pool of talent and skills to get the job done.
Emerging Horizons Offshore Software Development On The Global Stage By 2030
Bringing in people from different backgrounds can bring not only different technological skills, but also a fresh perspective to the table. Especially for startups and small businesses with limited human resources, offshore outsourcing is a great option to let industry experts handle complex tasks.
In special cases, the offshore development team helps companies create more localized software and conduct better user acceptance testing.
Imagine that when a European company wants to develop software for Asian users, it is better to hire Asian developers and testers. They have a deeper understanding of the cultural behavior of local consumers and can provide a better user experience.
By rotating a remote team with a home team, you can complete tasks 24/7.
The Cost Of Offshore Software Development: A Complete Guide By The Scalers
For example, let’s take the story of a client 11 hours away from the Vietnam time zone. Users are playing 24/7 and need to make sure everything is working properly at all times. Therefore, they have a QA team from the LTS group that conducts tests when their team leaves the office.
In addition to the undeniable advantages offered by offshore software, this model presents some challenges. Nothing helps avoid obstacles like knowing better. So keep scrolling to find out what problems you’re facing.
Poor coordination has always been one of the main challenges of offshore software development, often due to differences in culture and time zones.
In many cases, a company needs an offshore development team to work as a remote internal team or to coordinate with a local team for cross-tasking. However, people from different cultures may have different opinions and behaviors, which can deepen cooperation.
Offshore Software Development Market Size, Share, Trends & Forecast
Poor communication is another major challenge in offshore development outsourcing, often stemming from language and distance barriers.
Lack of direct communication and language barriers can lead to confusion about requirements. A lack of understanding will have a negative impact on the end result and the quality of the project.
Another concern with offshore web development is low security due to remoteness and lack of control.
Offshore development outsourcing means outsourcing your work from one location to another. Hence, there are various security risks, such as data breaches and code theft, which in any case will lead to intangible and non-material losses for the business.
How To Hire The Best Offshore Software Developers: Guide
For example, the waterfall development model leaves behind sufficient due diligence and approval between you and your vendor.
That’s because time zone differences and the lack of face-to-face meetings when sending your work abroad can create a lot of coordination hurdles, making a close collaboration schedule difficult.
Offshore software development can present many challenges, and in some cases it is necessary to rely on an offshore development team. Scroll down to find out when to outsource your projects.
Along with the pros and cons of offshore development mentioned above, it will be the best choice when you want:
Offshore Software Development: The Pros And Cons Of Offshore
Now, LTS Group, a reliable offshore development center service provider in Vietnam, will provide you with the foundation to effectively establish an offshore development center (ODC). Here are 6 suggested steps.
The first step in any outsourcing project is to define your project goals and vision, including why you want this offshore development center and what you expect from it. They will greatly influence your decision in the next steps.
For example, if you realize that your software project may take years and the main goal is to reduce costs, you should consider a stable and affordable ODC vendor in the Southeast Asian region.
Choosing the right offshore location will impact your offshore project in terms of long-term cost and sustainability.
Nearshore Vs. Offshore Software Outsourcing
From 2023, the main regions of marine development will be South and Southeast Asia, North America and Latin America, and Central and Eastern Europe. In particular, India remains a key destination, and Vietnam is considered a rising star in the industry.
Vendor selection is an important step in ensuring the quality and safety of an outsourcing project. You can ask for recommendations or browse platforms, get a list of vendors, and then check their eligibility, reliability, and suitability.
Now that you have a vendor, both parties need to agree on an outsourcing model that makes it easier for you and your project. There are 3 general models that you can choose based on your requirements, time and other factors. Please see the section above for more information on offshore development models.
It is important to carefully select each member of your offshore team. You should spend time interviewing outsourcing companies to assess the competence and suitability of IT developers. However, aspects of language and cultural behavior should not be underestimated to avoid misleading, ineffective or ultimately negative results.
Offshore Software Development: The Ultimate Beginner’s Guide!
It’s time to create guidelines for smooth communication and collaboration to minimize bottlenecks and maximize the benefits of offshore development. How this guidance is presented and what it includes depends on the specific situation, but at a minimum:
The pace of offshore software development directly affects IT outsourcing budgets, so this is something to consider before implementing ODC.
Amounts will vary by region and country, and even within each country, for different ages and abilities.
As mentioned earlier, the most popular IT outsourcing regions in 2023 are South and Southeast Asia, North America and Latin America, and Central and Eastern Europe. Here’s an infographic detailing the pace of offshore software development for each sector.
Top 13 Best Offshore Software Development Companies In India
Software engineering average salary by country, partially replaced
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