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.

Key Highlights and Statistics of IT Outsourcing Industry

• Revenue in the Segment IT Outsourcing is projected to reach US$430.50bn in 2023.
• Revenue is expected to show an annual growth rate (CAGR 2023-2027) of 8.07%, resulting in a market volume of US$587.30bn by 2027.
• The average Spend per Employee in the Segment IT Outsourcing is projected to reach US$123.60 in 2023.
• In global comparison, most revenue will be generated in the United States (US$156.20bn in 2023).

Recent Developments in the IT Outsourcing Market

• March 2022 – Infosys collaborated with Telenor Norway to transform its finance and supply chain operations.
• March 2022 – Cognizant collaborated with Microsoft with an aim to provide improved medical care with a new digital health solution to enhance remote patient monitoring.
• February 2022 – WNS Holdings Limited unveiled WNS Triangle.

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.

What is Offshore Software Development?

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.

Different Software Development Outsourcing Models

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:

Offshoring Software Development

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.

Nearshore Software Development

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.

Onshore Software Development

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

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.

Project-Based Outsourcing

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:

• Outline Project Requirements:

Highlight the scope, budget, and timeline of your project before hiring remote developers to better understand the skill set required.

• Identify and Target the Location of Offshore Developers or Teams:

Explore the regions that suit your budget and pinpoint a location from where you want to hire an offshore software developers team.

• Look for Reputable Vendors or Outsourcing Companies:

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:

• Check the company’s portfolio
• Do competitor research and comparison
• Go through their Clutch profile, LinkedIn Page or Official Website
• Explore their work culture through their online presence
• Review client’s testimonials
• Initial Screening and Work Model Selection

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.

• Review Contract:

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.

• Managing Offshore Teams:

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.

Platforms Where You Can Find and Hire Overseas Developers for Startup

• Directories

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.

• Freelancing Site

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 Software outsourcing companies:

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.

7 Crucial Factors to Consider at the Time of Hiring Offshore Developer

1. Technical Expertise: The first and foremost thing to assess while hiring an offshore software developer. In the screening process ask the right questions and make sure they are expert in their field.
2. Communication Skills:Communication is the key to offshore software development projects. Things can go south if there is no proper communication between both parties. Most of the time a developer has all the technical expertise required for the project but poor communication skills make it harder for the client to understand the progress and what’s been done on the project.
3. Cultural Sensitivity and Adaptability:One of the challenges that most companies face while hiring developers from offshore outsourcing company is a cultural shift. Usually there is huge difference in the work culture and ethics of the developer and client. While hiring an offshore software developer make sure they are adaptable to this shift and have better understanding of your culture.
4. Problem Solving Skills and Critical Thinking:In software development projects, if potential problems are not timely identified and solved, they can lead to complex bottlenecks. So, while hiring an offshore software developer, make sure they are able to solve complex problem and find creative solutions with their proactive approach.
5. Time Management Skills: Effective time management is really important when you are working across different time zones. A good offshore software developer should be able to manage the time properly in order to complete the project in the designated timeline.
6. Adaptable to Changing Requirements: Software development projects are unpredictable having flexible requirements. An offshore developer who is adaptable and is willing to learn new technologies and approaches is a good fit for your project.
7. Attention to Detail and Precision: Attention to detail and solving a problem with precision is what you need to look for while hiring an offshore software development team.

1. South America – Brazil, Argentina, Chile, Colombia, and Mexico

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.

2. Asia – India, China, Vietnam, and Pakistan

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.

 3. Eastern Europe – Ukraine, Poland, Belarus, and Romania

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.

• Applications scrutinization and gigs categorization
• Setting up interviews of the vetted applicants.
• Interview processes
• Technical assignment and assessment.
• Signing of the contract.
• Onboarding and introduction with the team.

Cost Analysis of Offshore Software Development for Startups

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:

• Location of the offshore teams
• The level of experience and expertise of the developer
• Complexity of the project
• Project timeline
• Engagement model (dedicated team model is expensive than fixed price model)
• Platform Support
• UX/UI Requirements
• Back-end processing

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.

Benefits of Hiring Offshore Developers for a Startup

• Cost Saving:

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. 

• Access Top IT Talent Pool:

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.

• Exposure to the Global Market:

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

• Optimized Option to Manage workload Across the Company:

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.

• Speed to Market:

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.

• High Quality Retention:

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.

• Reduced HR Cost:

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.

• Help with Complex Projects:

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 well.

Overcoming the Challenges of Hiring Offshore Development Team

• Cultural Differences:

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.

• Time Zone Differences:

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.

• Language Barriers:

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.

• Security Concerns:

Intellectual property theft and Data breaches can happen in offshore software development.

• Quality Control:

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.

• Infrastructure And Connectivity:

Developing countries still face issues like frequent power outages, internet connectivity and other infrastructure issues. This can disrupt productivity and development issues.

• Legal and Regulatory Issues:

Every country has its own legal and regulatory requirements. If these are not followed, problem can occur.

• Trust Issues:

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

Is Offshoring a Suitable Model For Your Startup?

There are several factors that you need to consider before opting for this model. For instance:

• Nature of the Startup:

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.

• Scale or Stage of the Startup:

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.

• Project Requirements and Size:

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.

• Budget:

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.

Why Do Companies Engage in Vertical Integration At a certain Point of Outsourcing?

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:

• Reduced Cost Efficiency:

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.

• Quality Control:

To sustain control over the production phase and maintain quality, most of companies decided to opt for vertical integration.

• Flexibility Issues:

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.

• Security Issues:

At some point, clients want to maintain the privacy of intellectual property for the sake of competitive advantage. Hence go for vertical integration.

• Strategic Alignment of Business Goals:

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:

• Capacity Constraints
• Strategic Reasons
• Industry Trends

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.

Read Our Case study :-

Helping Region’s Largest Energy Distribution Company Achieve its Mission of Net Zero by Hiring Offshore Development Team

An X-Factor for Hiring an Offshore Development Team from Code Ninja Consulting Inc

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:

• A proactive and experienced team working on agile methodology adapting to new requirements quickly.
• Signing and execution of non-disclosure agreements as requested.
• Product quality checks and control at every development stage, not just at the end.
• Hiring within a week (in most cases) and vetted developers available for instant hire.
• Post-release support and maintenance.
• A dedicated project/delivery manager in case you hire a team.
• Positive reviews from previous and current clients.
• Ability to scale in the future as the project grows.

Conclusion

In short, hiring offshore software developers is the smart move for your startup. If you are looking for a cost-effective option and access to a versatile talent pool, offshoring is the only option for you. Also, sometimes you don’t find the perfect team for your project right away. So, it is better to look for the ideal software development team with due diligence and assess them on the basis of the factors outlined above in the blog.

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:

• Value for your dollar:

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

• Leverage Cutting-edge technology at low cost:

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

• Get lesser down time:

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.

• Reactive and Proactive Support:

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

3. How You Can Find and Hire the Best Offshore Software Developers with Code Ninja?

• Code Ninja offers flexible options and models of interaction based on client requests.
• You can easily and quickly scale up your team from one to a dedicated development team.
• We’re offering high-quality services of staff augmentation, dedicated teams, and self-managed teams, to fulfill your complex tasks.
• Read about our work experiences, go through testimonials and case studies can better guide you about us.
• Sourcing and interviews are risk-free and there are no hidden costs.