Offshoring is a type of outsourcing where a company delegates a project to a third-party software development vendor in an overseas country. For US-based customers, it might mean working with a vendor from APAC region or Eastern Europe to benefit from lower rates while keeping quality to a high standard.
An offshoring model offers significant cost-savings but does present risks related to communication, management/collaboration issues, security risks, and a lack of IP protection.
Let’s take a closer look at the pros and cons of offshoring software development models to paint a clear picture.
Benefits of Offshoring Software Development.
1. Cost reduction
Offshoring’s cost reduction is perhaps the most well-known potential benefit. Hiring a specialized expert team abroad is a legal and cost-effective approach to develop software when labour costs are a roadblock. For instance, Ukrainian IT specialists offer a great Price-to-Quality ratio. The average wages in Ukraine are lower compared to the majority of European countries, but at the same time cost doesn’t translate into lower quality of a delivered product.
2. Access to Specialized Skills
Companies that focus on hiring experts with specialized skills to tackle software products manage to maintain control over core business functions and complex in-house projects while outsourcing smaller portions offshore that later plug into the end-product. This “augmented team” approach avoids most security risks, protects intellectual property and reduces dependency on the vendor. It allows access to experts for the job while mitigating some of the largest risks associated with delegating development projects overseas.
3. Flexibility in addressing short-term needs
Offshoring is an efficient way to quickly address newly emerging needs while allowing an onsite team to focus on core business activities. Correctly executed offshoring enables flexibility in meeting deadlines and spikes in demand quickly allowing for straightforward scaling.
Offshoring is also a great way to quickly put together MVPs and prototypes that can be used for collecting feedback and concept refinement before starting the development process.
4. Easier entry to foreign markets
A trusted offshore partner will help you navigate the language barriers, cultural differences, legislation issues and other challenges that can slow down entering new foreign markets.
An ideal offshore partner is a responsible expert with a good understanding of your business needs and goals. Cultural differences between teams are an asset since diverse teams equip you with the understanding your target audience in their home country and can also develop relevant solutions that speak to a diverse set of priorities. Ukraine is a European country and delegating software development to Ukrainian IT specialists means working with people who share the European worldview, values, and culture.
Disadvantages of Offshoring Software Development.
1. Potential communication issues and time zone incompatibility.
Time zone incompatibility and language barriers are among the larger challenges of offshoring software development projects as they can cause delays or miscommunication. While the time zone incompatibility is almost inevitable, a language barrier gradually becomes less of a problem as most IT specialists are close to fluency in English.
2. Intellectual property risks
Before signing an agreement with an outsourcing provider, develop a plan for protecting your intellectual property including any data, algorithms, code, or trade secrets. Think about patents and copyrights first and then consult with a legal adviser.
Audit your company’s digital assets prior to starting any collaboration to ensure that everything is accounted for, secured, and can be easily monitored for unauthorized access, security breaches, and vulnerabilities that may put your company at risk.
One of the main disadvantages of offshoring is that intellectual property laws vary by country and may favor different parties depending on where the work was initially performed.
Offshoring software development can be successful for those who take the time to understand the pros and cons of such a model and are familiar with how to leverage its benefits. Prior to making a final decision, ensure a proper vendor assessment. Consider company reputation, company portfolio, ask for references, figure out which communication tools are being used, select the right KPIs, and continue monitoring workflow.
Recently, Ukraine has been listed among Europe’s top software development outsourcing destinations. With more than 200,000 highly skilled IT professionals on the market and a welcoming business climate, Ukraine will be up and coming on the radar of all software development companies looking for an outsource partner.
Check out Klik Soft’s proposal – an ideal combination of the best USA management practices and hands-on experience of Ukrainian IT professionals.