What Is Offshore Software Development

So, you’ve decided to reinforce your project with a remote developer or even a whole external team. Then you’ll be in good company – such tech whales as Google, Microsoft, Whatsapp, and Alibaba all rely heavily on offshore developers. By now, the global outsourcing market is worth more than $85 billion, and the number continues to grow.

From this article, you will learn all the ins and outs of offshore product development. We also have some tips on hiring a top-notch remote software development team.

1. What is offshore software development?

Offshore development is a business practice that involves delegating some software engineering tasks to the remote third-party contractor rather than assigning it to the in-house team. Often, the offshore development services provider operates in a foreign country.
Cost reduction remains the primary reason why businesses opt to bring a part of their processes to the remote destination. 31% of the US companies that cooperate with offshore services providers name better expenses control the major reason.

Other reasons include:

  • Access to the skilled talent pool at lower wages;
  • Lack of developers with specialized expertise within a company;
  • Need to unload the in-house workforce;
  • Lowering the need for transition service agreements.

2. How does an offshore team work?

Today’s most common offshore software development business models are different shades of three main approaches. These are fixed cost, time & materials, and the dedicated team models.

1. By fixed cost offshore IT outsourcing, an offshore software company operates within a budget that was agreed upon beforehand. This approach is the most widely-used type of outsourcing contract. The fixed price model contributes almost half of the total deal value in the US tech outsourcing industry, according to the KPMG report.

With fixed-price offshore software outsourcing, the main concern is that the client gets an illusion of everything going according to the plan. Meanwhile, the project may have already made it halfway to failure.

By its nature, software development is a volatile process where nothing is carved in stone. Requirements change, uncaught bugs pop up, end-users complain, and the client comes up with this bright idea of a new killer feature two days before the deployment. Pressed by budget restrictions, offshore programmers will inevitably start implementing the fastest and cheapest solutions just to get something working and delivered.

Billing – fixed project cost.

Use cases – fixed price model works either for small projects where the expenses are easy to estimate. It also suits for long-time cooperation with a narrow scope of responsibilities.

2. Time and resources outsourcing is basically freelance contracting on a B2B level. You’re hiring remote software engineers to work alongside your developers on specific short-term tasks. For instance, you can request two offshore Java development specialists with particular framework experience as an addition to your team for completing the tasks for the next sprint.

The benefit of such a model is that you literally purchase the developer’s time and expertise needed to get the particular scope of work done. You pay an hourly rate instead of keeping an extra salary position. Once the tasks are finished and tested, you don’t have to hold the specialist on the bench until next time.

Billing – per hour.

Use cases – Time & Material outsourcing practice best suits for small startup projects with clearly defined and time-limited scope of tasks.

3. With the Dedicated Team model, an offshore development company provides you with their own team members. Alternatively, they can put together a bespoke team of internal specialists to work on your project.

This option will usually cost more compared to the Time & Material software offshore development. You are renting the full-time employees of another software development company, thus have to pay their full-time wage.

The Dedicated Team model offshore IT development comes with the benefit of smooth teamwork and the expertise backed by your offshore software services contractor.

Billing – fixed cost per month.

Use cases – a solid choice for the projects with a clear roadmap for the next 8-12 months.

3. Pros & cons of offshore outsourcing

Annually, over 300K tech positions are outsourced in the US. The main benefits of offshore outsourcing software development and staff augmentation include:


  • It would be a mistake to believe that offshore development is cheap. However, it is usually way less expensive than hiring a full-time in-house developer.
  • The ability to improve company performance by taking non-critical tasks off the in-house developers’ shoulders.
  • Easier and faster recruitment process.

Of course, offshore software product development comes with its own pitfalls and risks as well:


  • For 50% of US businesses, the quality of the services is the main concern of offshoring.
  • Security threat is another consideration that deters IT companies from offshore software solutions.
  • Possible issues with communication caused either by time difference or cultural gaps.

4. Best practices of offshoring

  • Make the most out of technology for connection and communication with your remote crew. There are plentiful collaboration tools available today. You can keep your in-house and offshore developers in-sync as if they were in the same office.
  • Distribute control over the development processes. As the project owner, you want to oversee the decisions your offshore vendor makes regarding product development and resource management.
  • Monitor progress and test the quality. While the project owner shouldn’t set unrealistic deadlines, a clear timeframe should exist. The progress should be measured all through the development, too.
  • Secure sensitive data and intellectual property. Common protection practices include legal consulting, signing NDAs, as well as the vendor’s security infrastructure audit.
  • Encourage and facilitate cultural exchange and integration between your internal and remote teams.

5. Offshore Software Development Firms: Who are they and what services they typically provide

The variety of service development approaches is one more factor to consider when choosing the right offshore outsourcing software development company. The choice will define the distribution of work shared between the internal and offshore software developers.

  • The project-based offshore development model provides you with extra hands for when you need to complete a one-time specific amount of work. This approach is often used by businesses with one-off or pilot projects with well-documented specs and requirements.
    Project-based partners can, but usually don’t aim for further long-time cooperation. In the short run, you gain an advantage cost- and quality-wise. Although, if the requirements frequently change or the project scope is quite large, it’s worth to consider cooperation models that are more beneficial strategically, such as offshore software development center.
  • When working by the staff augmentation model, an offshore software development company allocates it’s own employees to your project for a limited period of time. The clients draw on the services of staff augmentation vendors to obtain domain specialists for a particular task on favorable terms. Unlike classic outsourcing, this model allows full control over the project development. It also provides more room for tracking progress and performance.
  • While outstaffing companies offer a skilled workforce to get the job done, the offshore dedicated center model is focused on providing services. In this case, the remote team takes charge of the assigned scope of work. This includes development, management, as well as maintenance and technical support if needed.

6. How to Find the Perfect Offshore Development Team

Three-quarters of clients are satisfied with their offshore partners, says Deloitte’s survey. However, among a plethora of companies offering offshore application development services, a few are really high-qualified experts. Here’s a checklist of things to do for finding a reliable, trustworthy, and committed outsourcing partner.

  • Determine which cooperation format suits your business goals – whether it’s a long-term partnership or a one-time project.
  • Research the position and authority of a potential outsourcing partner within the industry.
  • Review the portfolio to understand their domain expertise. It will also help you evaluate the level of experience with the stack of technologies required for your project.
  • Take time to get into their business values and culture. In this way, you could see if your team would find common ground with foreign colleagues easily.
  • Verify the references and get feedback from the previous clients.

Want to delve even deeper into the detail of hiring a remote workforce for your next project? Check out this elaborate article dedicated to hiring offshore developers process.

7. Tips on how to conduct offshoring

Of course, the product owner can not just sit back and relax once the contract is signed. There are still a few crucial you should do to ensure productive cooperation that translates into top-quality software.

  • Establish the standards of quality and stick to them. Make sure that quality standards cover both code and architecture, and that they are well-documented. Perform code review on a regular basis, as well.
  • Set up uniform workflow processes for the in-house and remote teams.
  • Acknowledge the achievements of your external team and provide positive feedback.
  • Hold regular check-ins and maintain constant communication.
  • Be ready to pay more than you’ve expected. Many business owners go for hiring remote developers to cut costs. But more often than not, unforeseen complications happen, and the project ends up costing more.


With no doubt, joining forces with the offshore software development team reveals immense opportunities for boosting software engineering processes. Hopefully, now you know where to start on your way to fruitful and mutually beneficial cooperation with the offshore partner.

If you’re looking for an offshore development team and consider Ukraine as your offshore project development destination, let’s get in touch! Our experts are ready to help you choose a solution that works the best for you.

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Back in 2013, I founded Echo with the simple business idea: "Connect great tech companies around the globe with the brightest Ukrainian software engineers." We've employed hundreds of talents so far and keep going.
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li-url Lou Reverchuk

IT Entrepreneur

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2 years ago

If you are looking for ODC set up in Bangalore reach out to Pattem Digital.

Hanna Norris
2 years ago

Hey Lou, That’s a great post. But as per our research, outsourcing in India can be beneficial for your business. What do you think is the right location or country to outsource software development?

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