Guide to Offshore Software Development: What Every Business Should Consider

Quick Overview: Are you planning to speed up your product launch, need technical expertise to expand your development team, or considering hiring an individual programmer or QA expert to make your product market-ready? If so, this offshore software development guide is for you. Read on!

Organizations continuously look for innovative ways to reduce costs, improve efficiency, and maintain a competitive graph. As such, the demand for global talent is at an all-time high.

Offshore software development has turned out to be an effective strategy to achieve just that. Irrespective of size, scale, industry or business model, companies outsource their development tasks to overseas experts to fill the tech skill gap at affordable costs.

Offshore development is a growing trend, with the market expected to cross $170.9 billion by 2026, growing at a 12.5% annual rate.

But why is this shift gaining traction?

The reasons are understaffing, lack of expertise, and rapidly evolving technologies. Most importantly, hiring expenses and infrastructure overhead can be a burden for growth-stage businesses, especially startups. Because of sociocultural and demographic factors, offshore teams work as one-stop solution providers at a much lower cost.

In this comprehensive guide, we are going to talk about the ins and outs of offshore software development, along with the benefits and challenges and how to overcome them. By the end of the read, you’ll get a clear idea of this model and what factors you need to consider for a successful offshore partnership.

What is Offshore Software Development?

Offshore software development is a type of outsourcing where companies assign their software development tasks to a team located in a different country, often a different continent/time zone. This approach enables businesses to access a global talent pool, reduce operational expenses, and focus on more core activities.

The primary reason behind choosing an offshore company from a different continent or time zone is that your business can cost-effectively access specialized resources. An example of this would be when a business in the USA hires a team from India. We all know that the cost of hiring a team in India is much lower than in North American and West European countries. Additionally, India has a large pool of experienced and skilled software developers, which helps US companies access a large talent pool based on their project requirements.

In fact, offshoring offers a cost-effective solution for businesses to accelerate their project timelines and enhance productivity despite having some fixable challenges like communication barriers and cultural differences.

Here are some data you need to consider while going for an offshore product development model:

• According to Deloitte, 70% of companies use outsourcing services primarily to save costs.
• The same survey shows that 57% of businesses use outsourcing to focus on their core business.
• 66% of US companies outsource at least one business process overseas.
• Around 54% of businesses around the world use offshore teams to engage with their customers.
• 92% of the top 2000 public companies outsource their IT operations on a daily basis.

What is the Difference Between Onshore, Nearshore, and Offshore Software Development?

The difference between offshore and the other two models of software development outsourcing primarily comes down to location. The difference in location, in turn, impacts cost, talent availability, time zone differences, and collaboration efficiency.

Onshore Outsourcing

Onshore outsourcing is when you hire an external development team from your own country or region. For example, if a Las Vegas-based company outsources its project requirements to a company based in Toronto, that would be considered onshore outsourcing.

In a nutshell, the client and the development team are located mostly in the same area and share the same time zone.

Nearshore Outsourcing

Nearshore outsourcing means outsourcing your software development requirements to other countries or continents with similar time zones. An example would be when a client from Western Europe outsources development tasks to a company based in Eastern Europe.

Offshore Outsourcing

Offshore software outsourcing refers to the relationship between clients and vendors located on opposite sides of the globe, having different time zones. As said earlier, when a US-based company hires a development team from Ukraine or India, it’s called offshoring.

Here’s a detailed comparison of onshore vs nearshore vs offshore development to help you evaluate and choose the right outsourcing model.

Benefits of Offshore Software Development

If you plan to build software, it’s very tough to decide whether to build software in-house or hire a software development team from another continent. However, the advantages of offshore software development outweigh those of other outsourcing models.

To drive the point home, we’ve taken inspiration from our leaders and summed up why this approach could be a total win for your business.

1. Cost-Effective Solutions

"We’ve done projects for overseas firms at a lower cost by up to 60%. For startups, that’s the kind of savings that let them go head-to-head with big enterprises instead of just trying to survive.”

• Atri Kansara, VP – Operations & Delivery, Radixweb

Cost-cutting is the biggest benefit of partnering with an offshore development center. You don’t have to get into the hiring process, employee training, office space, and purchasing software and hardware licenses, as your offshore partner takes care of everything.

Beyond that, you’re also saving on long-term employee expenses like payroll taxes, insurance, administrative overhead, and compliance with local labor laws. As a result, you can save huge amounts of your project and focus on your core business goal.

2. Access to a Larger Talent Pool

“The best products come from the best minds. So when you go global, you get access to developers with a broad spectrum of skills, developers who have experience in working with offshore clients. Real innovation starts right there.”

• Dhaval Dave, VP – Operations & Delivery, Radixweb

The world is your talent pool when you go for offshore software development.

When it comes to software development for startups, they initially struggle to find the right team. Limited budget and short time period are the biggest reasons for losing business opportunities.

On the other hand, working with software developers across the globe opens up a new world of possibilities. Startups can hire experienced developers with enterprise-grade backgrounds without burning through their budget. Specialized skills, round-the-clock productivity, and cost-effective solutions help them grab opportunities they might otherwise miss.

3. Faster Time to Market

“You need to be fast and you need to be smart with your budget – you get these two things that are non-negotiable today with an offshore team.”

• Vinit Kariatukaran, VP – Operations & Delivery, Radixweb

The recruitment process for the IT team consumes 50% more time than for other job roles.

This data indicates that it will take around 66 days on average to identify and recruit a suitable candidate for a tech role.

This is not an ideal scenario when you need to build something fast or scale your team quickly. Enterprises often have to roll out new features, like a critical security update, on short notice. But if their development team is already stretched thin, it could take months to get it done.

This is where offshore development helps shorten your hiring process and saves time. It’s a good way for businesses to avoid development slowdowns and build on-demand products.

4. Scalability and Flexibility

"You have all the flexibility you need with offshore teams. You can scale up, switch things around, and adapt to whatever the project throws at you.”

• Maitray Gadhavi, VP – Sales, Radixweb

Increased flexibility and scalability are the significant benefits that you can leverage from offshore software product development. As per the project requirements, you can quickly scale up/down your development team without affecting the pace of the project or extra hassles.

Moreover, these developers can work with you when the onshore team is unavailable. This flexibility can enhance your project timelines and help your business to meet tight deadlines.

It’s indeed a helpful benefit to those who generally face fluctuations in demand for their products or services.

5. Helps You Focus on Core Business

"The whole point of outsourcing is to let companies focus on their core competencies. And when you do that, business growth and efficiency follow."

• Jaydeep Patadiya, AVP – Sales, Radixweb

It’s quite challenging for IT startups or early-stage companies to strike a balance between managing their tech needs and focusing on their core business operations. It generally troubles business owners and company leaders to make the right tech decision if they are not tech-savvy. As a result, valuable time that should be spent on growth and strategy gets consumed by software development challenges.

In such cases, offshore software developers work as a reliable partner to take care of the tech decisions. They help CEOs, business leaders, and founders to focus on strategy, growth, and innovation.

Challenges of Offshore Software Development and How to Mitigate Them

Offshore development has a lot to offer, but like anything else, it comes with its own set of hurdles. The following are some challenges that you may face in the process, but you don’t need to worry about it because we have also shared some tips to mitigate or address those risks.

Let’s go through it.

Language and Cultural Barriers

India, China, the Philippines, Poland, and Ukraine are some of the best offshore software development countries where English is not the primary mode of communication. This may sometimes result in miscommunication between English-speaking clients and regional vendors, leading to product delays and poorly developed products. Occasionally, these differences might also raise ethical concerns.

Furthermore, there are significant cultural differences between these countries. This implies that not only would the official holidays be different, but the work culture as well.

How to Overcome

When you hire offshore software developers, ensure all members possess good English skills to avoid miscommunication. Regular virtual meetings and open discussions about project vision can keep everyone on the same page and lessen dissatisfaction. You can also conduct English proficiency assessments and cultural awareness workshops to improve team communication.

Time Zone Difference

Previously, businesses considered time zones as an advantage. But it has now become a serious challenge. Working with overseas teams often involves significant time differences, sometimes up to 9 hours, which makes aligning business hours challenging.

This delay can slow down communication, as teams may have to wait hours for responses instead of resolving issues instantly.

How to Overcome

To avoid delays in project delivery, it’s good practice to schedule regular calls or meetings for at least 30 minutes weekly for team discussions on project details. You can also schedule overlapped hours for daily stand-up meetings. Modern communication tools like Slack and Trello are very useful for task management and progress updates.

Legal Considerations and Security Concerns

Before teaming up with a foreign business, organizations should consider lock-in legalities. Without having a proper understanding of the offshore company’s local jurisdiction, laws, and regulations, founders may expose themselves to legal complications.

Furthermore, offshore software development outsourcing involves sharing intellectual property and sensitive company information. Data leakage, unauthorized access, and security breaches are serious issues.

How to Overcome

Ensure that the company has an NDP (Net Domestic Product) and verify intellectual property rights in the software development agreement. The IP should belong to you. Also, specify clear objectives regarding timelines, payment, and acceptance/rejection procedures to avoid future misunderstandings.

Moreover, establishing strict security standards, such as secure data transmission, confidentiality agreements, and adherence to data protection regulations, is crucial.

Quality Assurance

Getting a quality software system in the end can get tricky when the development team is geographically distant. They might have their own methodologies, standards, tools, and tech stacks, which might not always match yours. This mismatch can lead to inconsistencies, subpar product quality, and extra rework.

Also, because of the cost-effectiveness, some firms might compromise on quality. You will end up getting a product that’s rushed or lacks attention to detail.

How to Overcome

To overcome quality challenges in offshore software programming, set code quality and coding standards, conduct periodic on-site training visits, and implement frequent QA and testing protocols.

Key Factors to Consider When Choosing an Offshore Partner

There are thousands of offshore software development companies in the world, and they all claim to be the best. How do you figure out which one actually is? In most cases, choosing a reliable partner can be a more important decision than the project itself as it all depends on the development team, their relevant skillsets for your business, and a team that ticks all the right boxes.

So, how do you make sure you’re going with the right offshore partner? Well, the following are some of the important factors to consider:

1. Experience and Expertise

Check the team’s work quality, and overall expertise before making a decision. You need to determine their industry experience and technical expertise by checking the background, portfolios, case studies, and clientele they have worked with.

This way, you can get an idea of whether they have enough development knowledge to add value to your project. A team that has worked on similar projects or industries will already understand the intricacies of your product. In fact, they should be equally invested in your success as you are.

Furthermore, you can check their reviews and ratings on renowned platforms like GoodFirms, Clutch, G2, DesignRush, etc. These company-listing websites with real client feedback give you a clear picture of their strengths, industry reputation, and rankings across different domains.

2. Communication and Collaboration Standards

If you feel communication could be a challenge or a barrier with an offshore software development company, make sure you evaluate the communication skills at first interaction and ensure they are fluent in English or your preferred language. Also, directly connect with each PoC, such as the project manager and product owner, who will be working on your project. They will be the ones you will communicate with almost every day.

Also, make sure the offshore product development partner shares regular updates and progress reports to help you track and analyze performance for better project management.

3. Comprehensive Solutions

What you don’t need today might be essential tomorrow. Another quality to check in your offshore software outsourcing company is that they specialize in offering a wide range of services so that they can support your future project requirements.

You may need to add new features, switch to a different platform, or even change tech stack. If your outsourcing partner covers full-cycle development services, you won’t have to waste time searching for a new team every time a new requirement pops up.

4. Speed and Agility

A great offshore development company should be agile in delivering products without unnecessary delays. They should start fast without any months-long hiring process, adapt easily to changes on the fly, and work in shorter development cycles.

Apart from their cost-effectiveness, you should get all the required resources to expedite the development process. For example, if you need to have early client feedback, the team should be able to create a fully functional MVP, preferably within a few weeks.

5. Security Parameters

You cannot compromise on security, regardless of the development methodologies you choose or the regional laws the offshore team follows. The software provider must follow the latest security guidelines and protocols to protect all data and software products against cyber-attacks and vulnerabilities. You also have to check how the company manages the risk of intellectual property theft.

Offshore Software Development Trends to Watch Out

As technology advances, work cultures shift, and development strategies change, so do the standards for offshore partnerships. In the past, many small and mid-sized businesses were hesitant about outsourcing due to security and reliability concerns. But with the generalization of remote work, the offshore software development model has become the go-to strategy for all.

Here are some key offshore software development trends to consider:

• Increasing adoption of remote-first culture
• Mandatory dedicated offshore teams as a standard
• Green development despite cost considerations
• AI-powered development and testing for time and cost efficiency
• AI-driven DevOps and DevSecOps methodologies
• Zero trust security and hyper-automation in development

Radixweb as an Offshore Software Development Company

With over 25 years in the IT market and 4,200+ successful projects, Radixweb has built strong relationships with global clients through its offshore teams. We've remotely worked with 3,000+ clients across 25 countries, and executed successful partnerships irrespective of distance.

Take a look at our expertise as an offshore development partner:

• Working round-the-clock for everyone to bring collaborative success.
• Great expertise and experience in multiple industries like healthcare, fintech, education, retail and eCommerce, logistics, manufacturing, and more.
• 650+ of the talent pool – from newbies to experience with advanced English skills.
• Tech specialists with great industry experience and communication skills.
• Cost-effective solutions and a wide range of services.
• Positive feedback from our clients – 4.9 rating on Clutch, 5 rating on GoodFirms, 4.8 rating on G2, and 4.9 rating on DesignRush.
• 85% of employees are seniors and mid-level experts, and 70% of tech experts have been working with us for 5+ years.

Examples of Successful Offshore Software Development Projects

Let's go through some of our most impactful offshore case studies and success stories where we collaborated with global clients to create innovative, scalable solutions:

Case Study 1

A German tech startup was struggling to manage its HR tasks because of legacy, disparate systems, too much manual work, and a lot of back-and-forth. They needed a better way to handle their hiring, employee records, and overall HR processes.

As they turned to us, we figured out exactly what they needed and built a single, easy-to-use platform that streamlined all their HR operations.

The software eventually cut down manual work by 63% and increased employee engagement by 40%.

Learn more about the project here.

Case Study 2

A well-known FinTech company had a major issue with their outdated debt collection system. It was tough to access data and manage collections, which was ultimately slowing them down and frustrating their users. They brought us in as their offshore tech team to modernize the whole thing. We gave the platform a fresh, user-friendly design, optimized data management, and improved overall performance.

The results were 150+ new accounts acquired and 6% annual portfolio growth.

Learn more about the project here.

Case Study 3

A healthcare provider in the UAE wanted to add telehealth features to their existing system. Their current setup wasn’t built for it, and they needed an easy way to connect virtual consultations with patient records. We worked as their partner for offshore development solutions and built a telehealth platform that integrated with their Electronic Health Records (EHR) system.

The outcome was huge - patients saved time, doctors could manage consultations more easily, and the provider was able to reduce 500 in-person visits a year and 1200 in-person visits.

Learn more about the project here.

Your TakeawaysProduct delivery or project completion is not what makes a great offshore partnership. Beyond technical expertise, soft skills matter just as much - working with a partner who is empathetic, understanding, and holds high ethical standardsWhen everyone understands each other’s priorities and works together, things run as planned, deadlines don’t feel like burdens, and the final product actually does what it’s supposed to.When this kind of teamwork happens, you get the best of offshore development. The end product is built efficiently, works reliably, and helps your business thrive. Everyone wins - your team, your company, and your users.If you’re still hesitant about offshore software development services, let’s talk. We’re an ISO 27001:2022 and ISO 9001:2015 certified company, recommended by 98% of tech leaders. We’ll walk you through our process, explain how we deliver, and show you how we uphold the highest development and security standards - all with complete transparency and dedication.Let’s talk?