How To Choose An Offshore Software Development Company

Yet, software development imposes lots of distinct services, including business analysis, project management, UX/UI design, and quality assurance performed by different specialists and programmers. Software development nearshoring is mainly due to flexibility when it comes to upscale or downscale teams or availability of low cost skilled developers. The nearshoring of call centers, shared services centers, and rose as offshore outsourcing was seen to be relatively less valuable.

offshore software development statistics

The BPO industry is a small segment of the total outsourcing industry in India. The BPO industry workforce in India is expected to shrink by 14% in 2021. BPO is typically categorized into back office and front office outsourcing. The Asian IT service market is still in its infancy, but in 2008 industry think tank Nasscom-McKinsey predicted a $17 billion IT service industry in India alone. Protection of some data involved in outsourcing, such as about patients is one of the few federal protections.

#4 Time Zone Advantage

For a mid-level developer, the average hourly rate will most likely not be less than $40. Your offshore software development company should have tight security protocols and legal restraints like NDAs in place to keep all data and software safe. It has grown into a large offshore software development center that can handle software application development, web app development, and mobile app development. Whether working with a nearshore software development team or hiring an offshore software company, arranging effective working procedures is not possible without the proper tools. As mentioned, budget savings are the most important factor driving the rise of IT outsourcing.

  • It is often perceived to reduce hiring and training specialized staff, to make available specialized expertise, and to decrease capital, operating expenses, and risk.
  • The business strategy outlined by his slogan recommended that companies should take advantage of a specialist provider’s knowledge and economies of scale to improve performance and achieve the service needed.
  • If a demand for uncommon technologies in your country is pressing, you may find a specialist overseas.
  • It is also geographically close enough for Americans to visit without requiring visas or an overnight flight.
  • The nearshore and offshore software development rates by country clearly show that various IT services are twice as cheap in the outsourcing destinations than doing the same job locally in the US.

Nearshore development is the outsourcing of technical activities or the implementation of software projects to nearby countries. For example, if your company is located in the United States, nearshore outsourcing destinations are Mexico, or possibly Brazil, Chile, and Argentina. Argentine developers have the best English skills and the highest literacy percentage in Latin America..

This makes the country a great nearshore software development destination for Western Europe; Ukraine also makes an attractive offshore development spot for the US and Canada. Based on the duration of the project and the agreement terms with your IT provider, you may pay a fixed-price or on an hourly basis (time & material). It is possible to agree on a monthly, weekly, semi-monthly, or semi-weekly basis.

Communication & Cooperation Procedures For Software Outsourcing

However, ending a government oursourcing arrangement has its difficulties too. Once you set an achievable timeline, you can expect them to provide the deliverables on schedule for testing and additional feedback. Be sure to communicate everything you want them to know and paint a crystal clear picture of your vision. Ensure you’re satisfied with their plan before the project moves on to the development stage.

A China-based company, Lenovo, outsourced/reshored manufacturing of some time-critical customized PCs to the U.S. since “If it made them in China they would spend six weeks on a ship.” President Obama promoted the ‘Bring Jobs Home Act’ to help reshore jobs by using tax cuts and credits for moving operations back to the USA. The same bill was reintroduced in the 113th United States Congress as the Bring Jobs Home Act (S. 2569; 113th Congress). It has been suggested that “workers require more education and different skills, Offshore Software Development working with software rather than drill presses” rather than rely on limited growth labor requirements for non-tradable services. Companies such as ET Water Systems , GE Appliances and Caterpillar found that with the increase of labor costs in Japan and China, the cost of shipping and custom fees, it cost only about 10% more to manufacture in America. Advances in technology and automation such as 3D printing technologies have made bringing manufacturing back to the United States, both cost effective and possible.

offshore software development statistics

The complexities of offshoring stem from language and cultural differences, travel distances, workday/time zone mismatches, and greater effort for needed for establishing trust and long-term relationships. Many nearshore providers attempted to circumvent communication and project management barriers by developing new ways to align organizations. As a result, concepts such as remote insourcing were created to give clients more control in managing their own projects. Nearshoring still hasn’t overcome all barriers, but proximity allows more flexibility to align organizations. Because of the benefits outlined in the previous article, software outsourcing has become the solution for many firms worldwide.

Software outsourcing also comes in various forms that are classified by area, such as onshore, nearshore, and offshore. If you’ve decided to go the offshore route, the next question is which country is best suited for your offshore software development. Eastern Europe, and Ukraine in particular, attracts with favorable rates where you can end up saving up 70% on software development.

Reasons For Outsourcing

The team has a level of English that is at least intermediate and upper intermediate levels. Brazil, like Argentina, is only 2-3 hours ahead of the EasternUnited States. They also are quickly learning English as they strive to be a bigger player in the world economy. Poland is ranked 41st in the Open for Business Rankings and 34th on Forbes’ list of the Best Countries for Business.

The phenomenon of offshore and nearshore software development arose mostly due to lower pricing, as well as the search for expertise or extra talent. CodeStringers is a quality-focused boutique software development company that develops enterprise and consumer web and mobile cloud software. When it comes to outsourcing activities in Asia, India is the first name that comes to mind.

offshore software development statistics

Ensure they have systems in place to communicate all updates regarding the development process quickly and transparently. Always check if the staff is fluent in English or whichever language you prefer. Remember to keep your budget low enough to save money compared to local rates — but high enough to get the best quality and value for your money. Please complete this reCAPTCHA to demonstrate that it’s you making the requests and not a robot.

While Pfizer moved some of its R&D from the UK to India, a Forbes article suggested that it is increasingly more dangerous to offshore IP sensitive projects to India, because of India’s continued ignorance of patent regulations. In turn, companies such as Pfizer and Novartis, have lost rights to sell many of their cancer medications in India because of lack of IP protection. Mandated benefits like social security, Medicare, and safety protection are also motivators.


It would be a great error to be overly enthused and choose a software outsourcing company in a hurry. To achieve corporate goals, you must select the right software development outsourcing company in India. When you outsource software development, you receive the benefit of working in several time zones.

offshore software development statistics

Due to a great technical basis and the recent growth of the IT industry, countries like Ukraine and Poland have many talented and highly experienced specialists. This is the greatest advantage to working with IT companies outside your country’s borders. The selection of a software vendor will involve considerations such as pricing, quality, and vendor coordination.

This puts China at a disadvantage unless the outsourcer is willing to have its key staff members work late hours. The term “Midsourcing” subsequently became known as contracting a local or regional manufacturing service provider to arrange for the outsourced task. BPO can be offshore outsourcing, near-shore outsourcing to a nearby country, or onshore outsource to the same country.

Offshoring Manufacturing: Benefits & Best Countries To Consider

When offshore outsourcing knowledge work, firms heavily rely on the availability of technical personnel at offshore locations. One of the challenges in offshoring engineering innovation is a reduction in quality. Global labor arbitrage can provide major financial savings from lower international labor rates, which could be a major motivation for offshoring.

Use the tips we have mentioned in this article to understand how you can offshore software development without setbacks in the process. Once you have zeroed in on the right offshore software development company, you’ll be able to enjoy the many benefits of offshoring. Since offshore software outsourcing partners hire top developers worldwide, offshoring software development gives you access to top-notch talent. Now, you may have several questions — like where to find an offshore software development company, whether they all produce the same quality of output, and how you can distinguish a good offshoring partner from the rest.

A further example of environmental de-regulation with the objective of protecting trade incentives have been the numerous exemptions to carbon taxes in European countries during the 1990s. The tradeoffs are not always balanced, and a 2004 viewer of the situation said “the total number of jobs realized in the United States from insourcing is far less than those lost through outsourcing.” There are many outsourcing models, with variations by country, year and industry.

If you are having trouble seeing or completing this challenge, this page may help. It is usually a good idea to have your in-house team planning strategies for a new business. Delegate time-consuming tasks that make your business inefficient owing to a lack of knowledge. Time, like cost, is crucial and can be a competitive advantage for businesses that work round the clock and require sync-ups and conference calls. India is three hours and thirty minutes ahead of Eastern Europe and nine hours and thirty minutes ahead of the United States.

Mexico is the closest geographical country to the United States and is the US’s main economic trading partner. There is almost no time difference, and there are many Americans in the tech sector of Mexican descent. It is also geographically close enough for Americans to visit without requiring visas or an overnight flight. Because of this geographical advantage, numerous Mexican outsourcing firms have established operations in the United States. This allows companies to streamline production, boost competency, and increase their bottom line.

How To Choose An Offshore Software Development Company

However, it is necessary to carefully research the location in which you choose your vendor, because factors such as communication language, time zone, culture, or the ratio of cost to quality need to be taken into account. Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to manage outsourcing in a structured way, maximising positive outcome, minimising risks and avoiding any threats, a business continuity management model is set up. BCM consists of a set of steps, to successfully identify, manage and control the business processes that are, or can be outsourced.

Reasons To Nearshore

Its geographic distance to the US and Western Europe presents some challenges, . However, the cost is substantially lower than in other locations, ranging from $18 to $40 per hour. On the other hand, an academic study by the London School of Economics was at pains to counter the so-called “myth” that RPA will bring back many jobs from offshore. A 2012 series of articles in Atlantic Magazine highlighted a turning of the tide for parts of the USA’s manufacturing industry. Hiring at GE’s giant Appliance Park in Louisville increased 90% during 2012. To those who are concerned that nations may be losing a net number of jobs due to outsourcing, some point out that insourcing also occurs.

Furthermore their time zone is favorable for North American firms– they are between 2 and 3 hours ahead of Eastern Time, depending on the time of year. As a result, Argentina’s IT development staff is the most expensive in Latin America. Depending on programming skills, language, and seniority, pay ranges from $20 to $50 per hour. Latin American countries are becoming desirable outsourcing destinations for American projects. Time zone, culture, and even language differences are smaller in this region as compared to Eastern Europe and Asia. Consequently, the hourly cost is fairly high, ranging from $30 to $55 per hour.

What Services Do Offshore Software Development Companies Offer?

According to Giz’s Ukraine’s Information Technologies Sector report, there are currently over 200,000 active IT workers in Ukraine, with over 25,000 IT graduates joining the market each year. Additionally, the Ukrainian government has created the “Ukrainian Startup Fund” to give a jump-start to their Information Technology Sector. As a result, the newer Ukrainian firms can be as inexpensive as $25/hour whereas the more experienced ones can cost $46/hour. According to the Kearney 2021 Global Services Location Index, Vietnam remains in the top six in the global services value chain .