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Building a tech startup is a journey fraught with challenges, more so with rising costs, dynamically evolving software technologies, and tighter competition. Therefore, it isn't surprising that many startups and corporations turn to offshore software development to support their goals.
The global managed services market was valued at $161 billion in 2021. By 2027, this number is expected to exceed $300 billion. This indicates a growing demand for offshore software development in the upcoming future.
But what about the economic recession that is going on now? As it takes more time for startups to raise a new investment round, founders try to mitigate costs and think of the profit first – offshore software development comes to the rescue.
Offshore software developers is an excellent possibility for founders not to give up hope in 2023 and to continue developing their business even during these economic changes.
In this article, we'll share some tips on offshore software development, its pros&cons, top countries for offshore software developers, and how much offshore development costs.
What is Offshore Software Development
Offshore software development, or ‘offshoring’ is the process of engaging an external vendor in a different country to take on the responsibility of building software or apps. The term ‘offshore’ describes the fact that there is a substantial distance, and hence, time-zone difference between the client and the location of the offshore developers.
Startups gain various benefits from software offshore outsourcing, including cost reduction and a shorter time to market. Offshore development services aren’t limited to building an app from scratch. Developers may provide specific services such as back-end development, UI/UX design, or app development.
For example, Dollar Shave Club, which is based in the US, engaged Uptech team to develop new features for its app. US-based ecommerce company – GOAT also hired us to help them with mobile app development.
With Uptech team operating from different parts of the world, we could set a productive collaboration environment that resulted in clients' successful product releases.
Offshore Software Development Statistics
"In the coming year, outsourcing is predicted to be an antidote for economic woes." This is the quote from Accelerance Global Software Outsourcing report 2023.
According to the data they gathered:
- Global software outsourcing revenue in 2022 was $116 billion in 2022 (+6.3% compared to 2021);
- The revenue is expected to reach $145.7 billion by 2027 (+4.7% CAGR 2022-2027);
- 60% of companies outsource some software development in 2023.
Outsourcing proves to be a resilient activity amidst the global pandemic challenge, based on Deloitte's 2020 Global Outsourcing Survey. The report mentioned 70% of respondents cited cost reduction as the key driver for outsourcing. Deloitte also reported that 68% of the respondents highlighted that outsourcing helps in enabling cloud technologies in their organizations.
And again, the demand for offshore software development is expected to grow in the coming years. According to ManpowerGroup, 69% of US companies are facing difficulties in hiring skilled talents in 2019, with IT professionals being one of the hardest to hire. UK’s employers are also facing the same problems, with 67% of tech leaders agreeing that tech talent shortage is disrupting momentum.
Offshore Software Development: Pros & Cons
Talent crunch in developed Western nations has triggered a hunt for offshore software development companies in talent-rich, cost-efficient countries. However, you’ll need to be aware of the pros and cons of such an arrangement before contracting an offshore IT development agency.
Pros of offshore software development
Offshore software development is preferred as it delivers the following benefits to businesses.
When you offshore software developers in a country with a lower cost of living, you enjoy the immediate benefit of lower development costs without compromising on quality.
To get a better picture of how much you can save, consider how much a US startup has to pay for a developer’s salary. According to Glassdoor, the average monthly salary of a US software developer is $97,763 per year but the same position in Eastern Europe only brings home $36,000 annually.
Startups couldn’t afford to be burdened with a large team of developers on a monthly payroll, particularly if they’re idling. With software offshore outsourcing, you’ll have the flexibility of expertise, the number of developers, and the tenure of the collaboration. You can scale up or down according to your business needs.
Besides that, offshoring also means that you don’t need to end up with a monthly commitment of employees’ social benefits, insurance, and other perks.
Hire From a Broad Talent Pool
Building a piece of software involves IT experts in various disciplines. Depending on the type of software you’re building, you may find it tough to find such expertise within the local candidates.
With offshore outsourcing, you gain access to a global pool of IT talent. Whether it’s a Node.js expert or programmers skilled in less popular languages, you’re likely to find the right candidate from top IT outsourcing regions.
More Focus on Business
Building a startup is a tedious juggling act and offshoring accords the co-founders to spend more time on core-functionalities. Instead of dabbling with programming or picking up new IT skills, the founding team can dedicate their effort on marketing, PR, and make ample preparation for the product launch.
Cons of Offshore Software Development
While offshore software outsourcing does bring substantial benefits, there are also some drawbacks.
Differences in Time Zone and Culture
The fact that offshoring is about hiring developers in countries far apart from your own can mean a large difference in time zone and culture. For example, if you’re working with software experts in China, you’ll need to deal with a 12 hours time difference. This is complicated by the fact that not many Chinese developers are fluent English speakers.
Part of successful outsourcing relies on effective communication between your team and the outsourced vendor. As face-to-face meetings are not possible, project requirements, milestones, progress reports, testing, and other necessary documentation must be agreed prior to starting the project.
Lack of Transparency
Compared to managing an in-house team, you have no control on how the external vendor is developing the software. Neither do you have authority on how the vendor is managing sensitive information and how they keep their developers motivated towards a common goal. With that said, there are IT vendors Like Uptech that practice open communication to avoid misunderstandings and distrusts.
How to Offshore Software Development Team: 6 Steps
Admittedly, finding an offshore development team isn’t simple but it is manageable if you’ve laid the proper foundation for it. Here’s what needs to be done.
1. Define your goals
Before you reach out to potential offshore software development company, you need to define what services you’re after.
- Are you looking for an outsourced team of developers that can build an app from scratch?
- Or are you seeking assistance to improve the UX experience of an existing apps?
2. Choose The Right Partner
The next step involves seeking potential partner with the experience, skill sets, and capacity to handle such tasks. What’s equally important is for the vendor to demonstrate an adequate understanding of your business. This will help to ensure that the vendor stays close to your business goals when developing the software.
To hire the best offshore software development partner, you should compare it with other candidates. Here are a few things to help you:
- Check company’s Clutch profile and reviews;
- Review client’s testimonials; (Check out our testimonials from Eatbale – food tech startup from Sweden and Yaza – real-estate startup)
- Check their portfolio;
- Explore their expertise;
- Check their pages on Behance, Dribbble;
Uptech is a professional offshore software development company with 7+ experience developing products in:
- Fintech software development services
- E-commerce software development services
- Healthcare software development services
- Real estate software development sservices
We focus on business value and user needs, not only on sophisticated code. Uptech team suggest improvements and alternatives, make changes, and evolve continuously. We help you reduce the scope, cut the cost, and reach your business needs.
3. Choose the best model of work
Most offshore software developers offer a few types of collaboration options:
- time and material;
- fixed price;
- dedicated team.
Each model offers its own pros and cons. The dedicated team approach offers stability, control and is most suited for long-term projects.
Meanwhile, fixed price is great for short-term projects with clearly-defined requirements, and time and material provide flexibility for projects with vague requirements.
4. Choose communication tools
Proper communication is the key to seamless collaboration between an offshore IT vendor and its client. At Uptech, we use an array of communication tools, such as Slack, Jira, Zoom, Figma, and Miro to work closely with our clients.
5. Give feedback
To prevent the outsourced developers from veering off target, it’s important to hold periodic checkins where progress reports are communicated to the client. You’ll need to scrutinize if the developers are heading in the right direction and provide actionable feedback accordingly.
6. Be Partners - Be One team
Based on my experience working with a diverse range of clients, I can vouch that the secret recipe to offshoring success is the amazing teamwork between the vendor and client. In short, you’ll need to work in sync with the outsourced developers as if they’re part of your team.
Top Countries For Offshore Software Development
So, what’s the best country to turn to when you need an outsourced software development company? Given the global demand for IT expertise, many countries across the world are vying for a spot in the preferred outsourcing destination list.
Eastern European Countries
Eastern European countries like Ukraine, Poland, Belarus, and Romania have stamped their spots in the IT outsourcing industry. The region hits the sweet spots of cost-effectiveness, talent, cultural and language similarity, and a manageable time zone. While Eastern European countries may not rival Asian developers in price, they compensate with consistency, quality, communication, and timeliness.
Uptech team is mainly located in the Eastern Europe countries. Though we have memebers in Asia, Western Europe. So we can gather the team that suits your time-zone perfectly.
Asia has long been a well-known outsourcing spot for app development. The region boasts at least 4 million IT professionals eager to take on any type of project. It’s an open secret that cost is the primary motivating factor for outsourcing to Asian countries. For example, an app developer in India commands an average salary of $20,000 per year, a fraction of their US-based counterparts.
Given the proximity to US startups, it isn’t surprising for South American countries to emerge as an offshoring powerhouse. Countries like Brazil, Argentina, Chile, Colombia, and Mexico are driving the IT outsourcing industry in the region.
Argentina’s rise as the preferred Latin American outsourcing country is due to strong government support and high-quality education, particularly in tech subjects. The country’s IT outsourcing industry is also spurred by its lower salary rate and cultural similarity with US-based clients.
How Much Does Offshore Software Development Cost
While offshore software development generally results in cost-saving, the resources used differ depending on the type of project. As such, it’s impossible to place an exact figure on building a particular software. However, experience tells us that building a software application with an offshore team from Eastern Europe will cost between $50,000 - $250,000.
The final offshore software development cost depends on a few factors.
- App type and complexity - You’ll be paying the minimum if you’re building a simple app with no interactive elements. However, a complex app like Uber will cost significantly more.
- Platforms support - Building software that targets a single platform is also less expensive than one installable on all popular platforms.
- UI/UX requirements - A plain one-page web app with a minimalist design is going considerably affordable. But one that involves complex 3D visual processing, dozens of icons, and graphics are definitely to cost more.
- Back-end processing - For apps like DoorDash, most of the processing happens at the backend. Building a backend engine doesn’t come cheap even if you’re offshoring.
What Are the Cost Components Of Offshore Software Development?
Besides the direct cost implicated in building the software, there are other factors that may determine how much you’ll be paying for offshore software development services.
- Technical Complexity - This is what we’ve mentioned above, which includes the app type, supported platforms, UI/UX requirements, back-end processing, and 3rd party integrations.
- Project Scope - Offshore outsourcing service isn’t strictly limited to building the app. Vendors may also offer QA testing and post-release support but they are charged separately from development.
- Deadlines - Are you working on a tight schedule with no room for mistakes? If so, the vendor may need to channel more resources to your project and this may increase the developer’s fees.
- Tech Stacks - Complex software applications require a team of developers skilled in different tech stacks. The more IT experts are involved in your project, the higher the bill is.
Why Offshore Software Development to Uptech
Uptech is an international software development company. Throughout the years, we’ve thrived in a vibrant IT outsourcing industry and have worked with companies on Fortune 500, Inc. 5000 lists and helped to scale-up teams fast for technology startups. Our customer-centric approach to app development and industry know-how results in our client’s remarkable growth and our long-term partnership.
Our product development philosophies have attracted clients like Aspiration, a US-based fintech startup that provides alternative banking solutions with an app. Aspiration not only allows its users to manage financial transactions but invest with the app.
We’ve worked closely with the client throughout the development stages. Our team ensures that the app’s idea is well-tested with a feasibility study before executing short iterative sprints to develop the app. We kept our client updated with the progress and sought feedback to ensure we’re staying on the right course.
Uptech’s consistency in delivering top-quality app development services doesn’t go unnoticed. We’re featured on Clutch as one of the Top Development & IT companies for 2022 and top B2B companies. Our team has also bagged the DesignRush Award from a highly-authoritative industrial publication.
These achievements speak volumes of how we focus on business value, user needs, not only on sophisticated code. We suggest improvements, make changes, and evolve continuously. We help to scale up with experienced team to meet your growth.
All signs point to offshore software development as the preferred method of building apps in the coming future. Startups, particularly, stand to benefit greatly from this arrangement. We’ve shown how to choose the right IT outsourcing vendor and where to find them.
Also, we’ve illustrated our success as a leading software outsourcing company in Eastern Europe and how we’ve helped various startups.
Talk to us to learn how you can leverage our team of highly skilled software developers for your startup.