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When we hear the word “startup” the first word that comes to mind is a struggle. Startups always face budget-related challenges as they are paving their way through the crowd of established companies in the market. Limited funding, cash flow issues, hiring costs, and overhead expenses can add to the struggle. Also, as we are moving forward in 2023, the global recession and economic challenges are becoming overwhelming, specifically hitting the major economies. In this case, we have seen huge job cuts and layoffs, job freezes, and almost stagnant growth forecasts.
Amid the struggle, founders need to charge up their mind muscles and come up with sustainable solutions. One of these can be hiring offshore developers for their startup. It is the best way to scale up your business processes in a very cost-effective manner. Offshoring helps you find the best strategic partners by blurring the boundaries and helping you access the pool of talent that was otherwise unobtainable. It has made it possible for people living in different regions with different time zones to work in sync.
For Example Life Force, a Californian HealthTech Enterprise backed by Tony Robbins built an offshore software development team with Code Ninja to build a product. They wanted to build an integrated platform that helped people to do their routine tests (an effort to encourage routine health checks). Once the tests are done, the next step was to prescribe customized nutraceuticals based on the results. In this project, offshore dedicated development teams from 5 different time zones worked together making it a success.
The Offshore Software Development Market size was valued at USD 122,257.5 Million in 2021 and is projected to reach USD 283,457.5 Million by 2030, growing at a CAGR of 10.13% from 2022 to 2030.
The growth is attributed to increasing demand for cost-effective software development solutions, the rise in digital transformation initiatives, and the availability of a skilled workforce in developing countries.
The Asia Pacific region is expected to witness the highest growth rate due to the presence of several emerging economies and the availability of a large talent pool in countries such as India and China. North America and Europe are also expected to experience significant growth in the coming years.
These are some of the major highlights. The IT outsourcing market is developing with Bolt’s speed and there is a new development coming almost every single day.
One can easily guess from the name that it has to do something with “off the shores”. Well as per the bookish definition, offshore software development means outsourcing your work or projects to partners in other countries. This is done to save the cost of in-house software development. For this purpose, the work is outsourced to a country where the living cost of the vendor is lower as compared to the client.
For instance, On February 2,2023 Microsoft announced a strategic partnership with Infosys, an Indian multinational corporation providing IT services and consulting. This partnership aimed at accelerating Microsoft digital transformation and cloud migration initiatives. Through this collaboration, Microsoft accessed quality technical experts at low prices while Infosys got a chance to expand its global footprint and gain valuable experience in cloud computing and digital transformation.
Now there is another point that needs to be discussed. Since it’s not necessary for the vendor and client to be poles apart to avail of this kind of outsourcing. Therefore, there are three types of engagement models that can better explain the geographical standpoint of both parties:
Offshore software development is a type of outsourcing model where software developers are hired from a country with a different time zone and lower cost of living also known as offshoring.
As per this model, the software developers are hired from a neighboring country or within the same region. The advantage of this model is that you can hire developers at a low cost within the same time zone and cultural background. Also, you can maintain control over the project in the same proximity.
When the clients hire software developers from the same country, then it is called onshore software development and onshoring. It is done to maintain control over their operations and build a healthy relationship with the vendor.
Staff augmentation is an outsourcing service model which is used to supplement the existing workforce of an organization by hiring additional resources. It is a cost-effective option for companies that want to quickly scale up or down and manage resources to meet certain business needs. As per this model, professionals are hired by a company from an external service provider usually an outsourcing company.
These professionals temporarily work alongside the permanent staff and cover them in areas where they lack expertise. This way companies can tap into large talent pools and access multiple skill sets without the hassle of employing permanent staff. So, the major advantage of this service model is flexibility and cost-effectiveness.
This outsourcing service model is for companies that lack the in-house expertise to complete a specific project. Therefore, the entire project or a portion of the project is outsourced to an outsourcing company. The outsourcing company is responsible for completing the project within the specified budget and timeline and is bound to follow the client’s requirements.
This type of outsourcing model is mostly used for software development projects. The major advantage of this model is that it doesn’t let the lack of in-house expertise come in the way of project completion. Also, once the project is completed you can liberate the workforce.
Usually, there is no hard and fast rule for hiring offshore development team as every company has its own requirements. Here are 6 proven steps to hire offshore developers that has worked for many companies:
Highlight the scope, budget, and timeline of your project before hiring remote developers to better understand the skill set required.
Explore the regions that suit your budget and pinpoint a location from where you want to hire an offshore software developers team.
Now comes the most important step of the process I.e. a reputable offshore software development outsourcing company. You need to play it safe and do proper research before hiring.
To Hire the Best Offshore Software Development Company, You can:
Go through the resources the company is providing you and make sure they fit your criteria. Also, decide on the work model you want to adopt. Also, choose the communication tools and channels you are planning to use since communication is the key to successful offshoring.
Once you are sure you want to work with the chosen company, put everything on paper and review the contract. This way you will be able to expedite the process and get started in no time.
Offshoring doesn’t mean that you totally hand over your project to the other party. You constantly need to take updates from the offshore team and provide your feedback to avoid surprises at the end of the project.
Best sites like Clutch and Good firms – all these directories are amazing at putting together some good software development vendors for you.
You need to apply filters like areas of expertise, senior or junior roles, etc. And you get a list of resources.
One of the great advantages of such directories is that they take reviews and verify them on phone. Do run background checks on the projects for the company you are thinking of hiring.
On the flip side, some of the top software development companies do not get listed on directories because they get enough referral business.
Upwork and Toptal are popular freelancing sites.
Small businesses with small projects or limited budget projects can ideally look into such sites, as they found them reasonable and within budget.
The drawback of freelancing sites is that they took their middleman share like Toptal, or you have to sacrifice security and reliability.
Hiring an offshore software development company is the best bet among other options. They offer a full cycle of development from planning, designing, and development to launch.
Here, the important thing to remember is to keep tabs on the hired team, asking for the health reports frequently and seeing if the deadlines are being met.
They are the new powerhouse of offshore development. Brazil and Argentina are the top two picks from where you get vast talent access, low hourly rates, and value for money. Also, their communication skills are good enough.
A well-known and reasonable outsourcing spot for offshore software development. The region has at least 4 million professionals, even more for all sorts of projects. In fact, an average salary of an Indian developer is a fraction compared to US-based developers.
The region again has hit the sweet cost-effective spot when compared to US developers as the region has talent, lower cultural and language barriers, and manageable time zones. However, Asian countries may stay ahead as top locations to hire vetted offshore developers in terms of cost where they compensate with good quality work, consistency, and on-time delivery. Ukraine leads this region with more than 1600 development agencies.
The cost of offshore software development depends on several factors. Still, it’s the most cost-effective option for startups than hiring an in-house development team. Here are some of the factors that determine the cost of an offshore software development project:
Most of the startups engage in offshoring for the sole purpose of cost saving. Little do they what other benefits they can reap by hiring offshore talent.
Here is a list of some benefits of hiring offshore developers which prove how and why offshoring makes sense for startups. Also in this section, I have tried to unfold some of the challenges related to offshoring and present a bigger picture to help you take informed decisions.
One of the biggest advantages of hiring offshore developers is cost-saving. You get quality services for lower price. As it is easier to manage a remote workforce than hiring in-house resources.
Hiring Offshore Developers gives you the benefit of exploring the talent in the market of your choice and looking beyond the limits. Hence you get to hire top-notch software development teams which you wouldn’t have been able to find if you were hiring in-house.
It is always better to step out of your comfort zone and know what the world is up to. By interacting with different outsourcing partners, you get to know about new strategies and approaches that you can leverage to optimize your project and work methodology
Hiring offshore software developers for startups can help them distribute and manage the workload. Multitasking can sometimes badly affect the productivity of the teams, hence leading to poor performance. So, it is always a good idea to hire a dedicated offshore software development team and liberate the in-house team from the extra burden.
The IT industry is time-sensitive, as in there’s always something new coming up and you have to keep pace with it. Otherwise, you will stay behind and your product will become outdated. The time zone difference makes it possible for both teams to work around the clock and the work never stops. For instance, if a company in Canada or USA hires a software development team from Pakistan based on a staff augmentation model, one of the team is at work while the other sleep. This way you can maintain 24 hours workflow and launch your product in the market in a short time.
The offshoring team expects to work with you in the future. So, they won’t compromise on the quality of work and reputation to win other projects in the future.
The offshore vendor takes care of all the costs related to hiring and HR management. So, there is no need to drain your resources on HR.
If the in-house team is not capable of handling complex projects, it’s better to hire an offshore software development team to tackle complex projects with expertise. Training an in-house team can delay your project and affect the quality of the project as wel
The major challenge that companies face related to offshoring is cultural differences. Sometimes they are unable to communicate and interpret their values. For this purpose, they need to do thorough research about the culture of the outsourcing company and the same goes for the other party.
It is obvious when you are working across different regions, you are going to face challenges related to time zone differences. Schedules and meetings are affected sometimes but a good understanding between both sides can help overcome this barrier.
A language barrier can be an issue as it leads to misunderstanding or misinterpretation. It can only happen when none of the parties speaks or understands English. In the modern era of globalization, this problem rarely occurs as almost everyone in the world can at least understand English.
Intellectual property theft and Data breaches can happen in offshore software development.
Cultural differences, distance, and the Language barrier can make it difficult to ensure quality. However, this problem can be solved if either client or vendor travels to meet each other in person, at least once if not twice.
Developing countries still face issues like frequent power outages, internet connectivity and other infrastructure issues. This can disrupt productivity and development issues.
Every country has its own legal and regulatory requirements. If these are not followed, problem can occur.
It’s not easy to trust someone with your time and money. In offshore software development you have to take risk in order to make it work otherwise it can lead to misunderstanding and delays.
The above-mentioned challenges can be mitigated and are easy to overcome only if you choose the right outsourcing company
There are several factors that you need to consider before opting for this model. For instance:
Offshoring is the best option for startups related to technology or software development industries. If your startup is not related to this industry, you might find it hard to find the perfect offshore workforce. Since some companies require specific skill sets that are not easily available so in-house hiring is the only option that works and is cost-effective.
Startups in the early stage cannot keep up with the offshoring teams since they lack resources and experience. If you have a good project management team that knows the offshoring model inside out, then it can work for you.
If the project is small and not complex then offshoring is not for you. Hire offshore software developers for complex projects so that you can reap the real benefits.
An in-house talent is still a good option if you can afford it. Big startups having a considerable budget should go for hiring in-house teams for better control and collaboration.
In short, offshoring may not be suitable for some startups yet it is the best model to expand your business.
Vertical integration is a business strategy where a company takes back the ownership of certain processes in the production cycle that were outsourced previously. The major cause of bringing these functions back in-house could be quality control and cost-effectiveness. Here are several factors that determine why companies engage in vertical integration in outsourcing:
If the cost of an outsourced project has surpassed the in-house development cost, then it’s better to bring back it home. The primary reason for opting for outsourcing is cost efficiency.
To sustain control over the production phase and maintain quality, most of companies decided to opt for vertical integration.
Sometimes dependency on the outsourcing company leads to flexibility issues as delays can happen. Therefore, companies bring back offshore software development in-house to respond agilely to changing market trends.
At some point, clients want to maintain the privacy of intellectual property for the sake of competitive advantage. Hence go for vertical integration.
The vendor can affect the interests and capabilities of the client. As a result, companies decide to take things in hand and align them with their business goals.
The right time for vertical integration in outsourcing:
There is no specific stage that is deemed fit for vertical integration. The decision to pursue vertical integration is purely strategic one. If a company has decided to engage in vertical integration, the board must have assessed specific circumstance and objectives. Some of the common reasons are:
Vertical integration is a business strategy that companies choose rarely. To make it work for you, it is necessary that you assess the potential benefits and make sure it is aligned with your long-term business goals.
Code Ninja has an outstanding reputation for delivering projects as an offshore software development company. We have worked with high-growth startups from different regions where we consider a user-centric approach for software development.
You might be wondering what ‘sets us apart from other software development vendors. Well, our partners speak for us. Here are some of qualities that helps us stand out among the crowd:
1. How to use outsourcing to grow your business?
The holy grail to grow your business is “outsourcing”, of course.
How?
Well, the major reason is that it liberates you and your in-house talent to focus on core business operations rather than multitasking. You do your own work and let the experts do their own. This way it helps your business grow.
Also:
Hiring, training and retaining resources is frustrating and drain resources. When you outsource your project, you get the best value for your money as they handle everything
Outsourcing companies regularly train their workforce with latest practices and technology to stay ahead of the curve. This helps them tackle every complex problem, keep their skills sharp and serve clients with the best. You can also get consultation on which technology is the best fit for your business. Keeping the in-house talent trained and up-to-date can cost you an arm and leg
You should have someone at the back to troubleshoot and fix when the IT systems are down. This is how you can save your business operations from any kind of disruption. Outsourcing your IT department provides you with people who can take care of the downtime and keep your business running.
One of the best features of hiring an offshore software development company is that you get both reactive and proactive support. As in sometimes the bugs are fixed after they happen, the other times they are detected early on and fixed.
2. Why in-house software development not a feasible option for startups?
Developing a new digital product could be a website, an app, a chatbot, CRM, an inventory management system, etc., is easier to ask for than actually bringing it to shape and launch.
There are a lot of things to look into when you want to build a new product, like team management, technical details, deadlines, and what not.
Inhouse development means hiring the software development company first and then moving forward with the development and product execution. Whereas, outsourcing means hiring the team instantly without worrying about establishing the workspace/infrastructure.
Inhouse development means hiring the software development company first and then moving forward with the development and product execution. Whereas, outsourcing means hiring the team instantly without worrying about establishing the workspace/infrastructure.
| In-House Development Team | Offshore Development |
|---|---|
| Costly – it’s expensive since you have to spend on the workspace or office space infrastructure, run payrolls, etc. |
Reasonable – offshore development is inexpensive yet offers value for money at the same time. No infrastructure or admin-related hassles or costs are involved. |
| Upskilling team – in-house management is responsible for upscaling the skills of their resources/team. | Software development vendor has to upskill their resources with the latest tools and technologies. |
| Hiring is tough, developers are in high demand, and you’ll have a tough time fending off the poaching attempts of your competitors. |
You can hire developers from a vast pool of talent since the hiring is global. |
| Company culture – the team is better aligned with the company’s culture and driven by the high- spirited team of developers. |
May not be well-connected with company culture, and language, and cultural differences may exist. |
| Better communication – closely operating teams communicate well and there are little to less chances of misunderstanding requirements. |
Communication relies on tools – chances of misunderstanding. |
3. How You Can Find and Hire the Best Offshore Software Developers with Code Ninja?