When Is Offshore Development The Right Option?

If companies want to remain competitive globally, they must minimize overhead, use resources economically, and leverage strategies that impact a positive ROI on all aspects of the developmental pipeline. When it comes to the Software Development Lifecycle (SDLC), whether the developmental model to be used is Agile/Scrum or DevOps, there are a few critical choices that CIO and CTO executives must make when determining how each step in the SDLC will be carried out, and more importantly, by whom.

Deciding who will carry out the steps and modules of a software engineering project offers execs several choices, including:

  • Internal Software Development: As the most classical form of software development, companies who employ teams of their own (internal) salaried engineers to develop software often pay according to a standard value tradeoff, while still paying more than a company that uses offshore teams.
  • Outsourcing/Contracting: Outsourcing typically entails hiring external persons or teams to carry out often-specialized tasks to help the company complete projects. Outsourced job roles usually encompass freelance/contract work but can include long-term remote employees that are simply not in the internal, local geographic area of the company.
    • Nearshore software development: As a subset of offshore software development, nearshore software development encompasses using teams of specialists that are near the home country of your company.
    • Offshore Software Development: Offshore software development is a type of outsourcing method of using teams of specialists that are not in your country to have modules, tasks, workflows, and projects completed at a lower cost, while still maintaining 100 percent ownership of the product.
  • Onshore Software Development: Onshore software development includes using the specialized skills of workers in your country or local region, which can consist of internal teams or specialists that are not a part of your internal, salaried teams, but are still relatively “local.”

The cost of the entire engineering pipeline for software development is a critical factor that many businesses, especially startups, try to reduce. Using skilled offshore specialists who can be hired for cheaper than local specialists helps lower developmental costs while still obtaining a positive value and ROI. However, only a few situations genuinely call for the utilization of offshore teams instead of onshore and onsite specialists.

While both onshore development and offshore development methods offer strategic benefits and roles that are best carried out by either, there are some critical roles that offshore engineers may play in the software development pipeline:

  • Coding/Programming
  • Testing
  • QA
  • Security testing/Hardening
  • Support/Maintenance
  • And much more.

Delegating critical software development tasks and SDLC phases to remote, offshore teams is a good idea, mainly - if not entirely - when internal members have completed the planning and strategic stages of the SDLC, and only if the project can be broken down into clear directives that do not require direct interactions from internal executives. 

Often a hybrid approach - of having internal teams take care of strategic planning, architecture design, project management, and post-developmental support/maintenance, while offshore developers handle the phases of the SDLC of the application in development - may be the best approach. Regardless of how it is implemented, it is critical for company executives to accurately implement offshore developmental processes so that it doesn't increase expenses but produce value while reducing overhead and project costs. Consider these factors when determining if offshore development is right for your company:

  1. Location (Time & Communication)
  2. Skill (Value)
  3. Cost (Resources)

Keep in the forefront the significant purpose of outsourcing - lowering costs/resource requirements by hiring specialists in other countries who charge less but offer the same value. If internal teams provide high value, but at a high price, outsourcing to a team in another country may help. But if the offshore team offers 50 percent less value at a 50 percent cost reduction, using such a team becomes disadvantageous since the same value is not retained.

What Is Offshore Software Development?

While it is possible that internal, salaried employees can carry out all the necessary tasks for a software development project to reach completion, it often requires hiring specialists, paying high salaries, training skilled personnel, and managing all the moving parts internally, which requires a massive amount of resources.

The alternative is to outsource some or all project tasks to remote teams, companies, or individuals in other countries (which is offshore software development) that are still specialists offering exceptional value, but charge less in salary. When teams or specialists are in a nation, that is close to your home country, that is a subset of offshore software development called nearshore software development. Offshore/nearshore software development often offers companies similar or more value for the same price.

What Is Onshore Software Development?

Contrasting with offshore software development, onshore software development usually entails using the services of a contractor or specialist that is local, and falls under the umbrella of “outsourcing.” However, onshore software development can also include using internal engineers within your company to complete the tasks of a software development project and does not always equate with outsourcing.

Onshore And Onsite Development

There are several key factors associated with onshore and onsite development that differentiate it from offshore development processes. Primarily, onshore development focuses on working with specialists within a close geographic range or locale. In contrast, onsite development entails specialists working directly with a business firm or enterprise directly within their HQ or business offices.

Onshore development allows for quick and seamless integration of specialist teams, enabling managers to easily delegate tasks to team members for optimal development pipeline and project efficiency. This advantage also allows processes and workflows to be intimately integrated with development teams and members, which - along with managing everything internally without needing to explain across cultural and language barriers - expedites the ramp time to productivity and time-to-market timeframes. Reduced communication friction and the ability to work within the confines of a known work cultural setting give onsite development processes a  critical advantage.

Factors To Consider

A myriad of factors must be considered when determining if - or when - using offshore development is appropriate for a project. The three primary factors associated with measuring appropriateness are:

  1. Location (Time & Communication): Country, language barrier, culture gaps, time zone differences, etc.
  2. Skill (Value): Specialized skills, the value of skilled remote teams/workers, etc.
  3. Cost (Resources): Value versus cost, resource requirements, costs for managing remote teams, etc.

A fourth minor factor includes:

  • Teams: obtaining a balanced team of offshore senior, mid-level, and junior specialists, is vital, along with other supporting members.

Company executives must deliberate on several other factors before deciding whether to use offshore development teams for their software development projects.

Phase Of The Project

There are some critical aspects of the internal project that make it vital for executives to analyze the situation before hiring offshore teams for developmental aid.

Primarily, there are three major phases of software development - pre-development, the development lifecycle, and the post-development phase. Within the software development lifecycle (non-DevOps), there are typically five to seven component-based steps:

  1. Planning
  2. Analysis
  3. Design/Development
  4. Implementation & Integration
  5. Testing

It is typically unanimous that the strategic pre-development stages - which include strategic project ownership management, architecture strategizing, and development team management - should be carried out entirely by internal company managers and executives. Likewise, post-development phases can be carried out effectively by internal teams to maximize ROI and the cost vs. value benefit. Simultaneously, some companies like to free themselves a bit by letting offshore workers hold the reins of support, maintenance, and updating of the software systems after development. 

The primary area where offshore developers get involved is with the SDLC itself, primarily the second to the fifth step in the SLDC above. That means that while companies often plan the development of the application (step one) internally or with the offshore teams, they then work with the external teams for step two (analysis) and then slowly turn over the reins during the major developmental and testing stages (steps three to five). Various tactics work for different companies with different internal teams, varying requirements, and goals, and may occur in different parts of their projects.

It is easy to see how offshore development is best when the developmental project is well planned out. The company only needs to delegate specific development requirements and tasks directly to the offshore team. However, onshore teams are more likely to provide better results if a large amount of input and involvement is needed, such as architectural design/development or copious amounts of strategic planning. 

One reason for that is communication: the more advanced and demanding a project is, the more communication is needed. Local time zones, similar work/country culture, and no language barrier are all advantageous for everyone to collaborate effectively. But the most crucial factors associated with offshore development are cost and value; these two factors must align to provide the best benefit for a company that seeks to use offshore specialists. 

Communication Requirements

The most significant aspect of all requirements linked to managing an offshore development project revolves around collaboration. Since the core of collaboration is communication, utilizing offshore teams comes with several difficulties - the language barrier and the cultural obstacles associated with how communicatory practices are carried out. The two main managerial tasks related to using offshore teams include:

  1. Delegating tasks effectively
  2. Managing tactical tasks to align with the long-term project goal

For executives and managers to efficiently carry out such tasks, they must be able to communicate with offshore specialists effectively. Hiring teams in countries with large numbers of English-speaking development specialists - such as the Philippines, India, parts of Europe, parts of Africa, and South America - can help mitigate language barriers.

Other issues may pose difficulties and require more resources for completing your project, such as:

  • Culture
  • Accent

Some primarily English-speaking countries still have issues with communicating with US-based teams, such as India - mainly due to the accent and the way certain words are pronounced. Such issues are important and are critical talk-points that executives and business strategists must consider, as having project delays due to communication problems offsets any financial gains a company obtains by hiring cheaper offshore development specialists.

Different Time Zones

Another critical aspect of offshore development that must be taken into account is the difference in time zones between the hiring and offshore teams. This issue of time zones means that if the offshore team is across the world, the morning for the remote team will correspond to the evening of the stateside team, resulting in a lack of overlapping time for the two teams to communicate and collaborate on critical project points.

Any number of issues may come into play when offshore teams are used for developmental tasks within the SDLC. The time zone of the hiring company is radically different from the one associated with the offshore team:

  • No overlap time for conferences, meetings, or feedback
  • Problems communicating and collaborating on critical sections of the project
  • A lack of mutual discussion on how the project is going
  • A lack of direction on what to do for modules and sub-projects
  • A potential lack of understanding of what specific company directives and directions mean

While these are serious issues, there are ways to reduce their impact in most circumstances, namely by ensuring that there is some “overlap” time between time zones where both the stateside and the offshore teams are awake. Specific key stateside workers can also change their schedules to work when they can collaborate with offshore teams at night/morning.

Using nearshore development teams may offset the issue of time zone differences. Such teams would presumably be in a closer time zone and still allow a company to save on money and resources by leveraging their services. Merely managing schedules so that there is an overlapping period for discussions and meetings between the two teams should mitigate the issue of time zone differences. However, onshore development does not require such changes to “business-as-usual” schedules, as everyone is in the same time zone, allowing real-time collaboration between the two.

Cultural Gaps & Language Barriers

Cultural aspects of how business workers communicate with each other may influence how well projects are completed. Possible cultural issues often result from different cultures having different practices on how managers are to fulfill their roles - especially when it comes to task delegation - and how employees are to obey directives.

For instance, in the IT world, specialists need to speak up if they feel that there may be a better way to fulfill a task or sub-routine directed by a manager. In some cultures, it is a sign of disrespect for the specialist to disagree with or open a discussion about the directives that a manager gives to complete a task. Cultural dichotomies may create issues (due to miscommunication and cultural differences) that result in software errors. A considerable amount of time may be required to fix errors or less-than-optimal application modules.

On the flip side, working with specialists in the same continental region can significantly reduce the likelihood of dealing with differences in culture, making collaborations more productive and efficient as teams get on the same page quickly once tasks are laid out.

Technical Requirements

The more complicated a technical project is - or, the more difficult the phase of the SDLC that the project is at - the more critical communication will be. Projects and subprojects with complicated technical requirements (such as architectural design) will demand more clarity and accuracy between the communication lines. 

Dealing with an onshore team for a project of this type, however, will mean more time available to go back and forth with each other to discuss specifications and obtain QA feedback. Thus, the earlier phases of the SDLC, which require more strategic planning and architectural design, are often best carried out by internal or onshore teams. Specific highly interactive developmental methodologies - such as DevOps - may also be challenging to implement with offshore teams because of the difficulty of maintaining overlapping times for stateside managers to discuss feedback with offshore teams.

Availability Of A Trusted Code Reviewer

Developing and writing code is a critical part of the SDLC. However, the program needs to work as intended and be devoid of security holes and poorly written code. Some applications also need to be written with scalability in mind from a strategic point, while others may need more enhanced security. Someone technical within the company should review written code and provide feedback on the quality of every function, regardless of its source. There should also be internal specialists that work to minimize bugs and security vulnerabilities and undertake code refactoring as needed, which could mean more costs in the long run.

Costs may be lower using offshore development teams. But still, the value must live up to strict expectations. Suppose communication barriers or lacks in specific skill sets exist. In that case, it may cost more in the long run for internal executives to manage, collaborate, and iron out the ensuing problems resulting from the offshore development team’s side.

Post Development Work Needed

Post-development work is always needed after an application is successfully engineered. Companies have roughly two options - have internal teams undertake the post-development work - which includes support, maintenance, patching, testing, etc. - or has outsourced teams take over such tasks.

To determine the best plan of action once the development work is completed, companies need to ask themselves some questions:

  1. Will the product need constant updates?
  2. Will the product need to be turned over to an internal team or taken to market?
  3. Will the product need constant security updates to comply with legislation?
  4. Will the product scale be in its current form?
  5. Will the product require new features in the future?

Knowing and planning these details out will influence the decision-making, which - when aligned with the long-term project strategic plan - will help executives determine whether using offshore teams for support & maintenance is more advantageous than using internal teams.

Budget Of The Project

The main reason companies turn to offshore development teams is to lower costs and lower resource requirements. Getting the same value in work output for a lower price is very much a financial advantage that most companies want.

However, while offshore team hourly rates are indeed lower, company executives need to balance this lower cost against the time it may take (that is, longer) to complete the project because of the challenges mentioned above - communication barriers, time-zone differences, culture differences, etc. - thus offsetting the low hourly costs. The costs of post-development work required must also be taken into account when comparing the prices of using offshore teams versus the costs of using onshore or internal teams.

When To Say No To Offshoring

Despite the definite positives associated with using offshore development firms, it must be explicitly stated that onshore and onsite development firms better serve most projects. There are only a handful of cases where utilizing offshore development processes is genuinely advantageous.

Onshore and onsite development processes are virtually always advantageous for small and medium projects due to the minimal amounts of moving parts that must be managed internally. The higher team consistency associated with onsite firms typically equates with a more optimal SDLC and overall project completion time-frames due to better team and task integration.

The most massive challenge associated with offshoring is effectively communicating requirements to offshore teams while aligning those requirements with the overall strategy (which requires intimate collaboration and internal, business-based critical thinking that is carried out and communicated by managers and executives). Offshoring requires time and energy to set up trusting and consistent relationships with offshore teams. In contrast, such offshore regions must align with the language, timezone, and work culture of the internal business.

Project Size

Offshoring massive projects is one of the only times that offshore specialists almost always make sense due to the lower overseas rates of hiring offshore specialists. Offshoring is also typically advantageous for long projects that require long-term development work from skilled engineers for the same reason. Offshoring tasks are rarely suitable for smaller projects unless the offshore team has a relationship with the company.

For a more excellent time-to-market, it is best to avoid offshoring for small/medium projects since kinks take time to work out, and communicating the specific SDLC requirements takes time that can be used to complete the actual SDLC phases internally. Remember, offshoring is a long-term investment that must increase the development pipeline’s value for the money that is spent, all without the time factor negating the benefit. This becomes more significant as more time is required for offshore projects and results in a negative ROI due to the time it takes to work out critical kinks with offshore teams when mistakes are unavoidably made.

Strategic And Planning Phases

Determining the project’s specific details in the initial stages requires critical thinking and management-determined strategies, all of which means that it is not a good idea to offshore SDLC phase tasks until the design/development phases of the SDLC. Even the code reviews should be done internally or via onsite specialists to streamline the processes according to the company’s long-term goals and business model, both of which only internal members would be intimately privy to.

Similarly, offshoring architecture design and strategic planning phases could result in quick failure because the planning of the project requirements, along with the problem-solving that is required to align the project with the company’s goals, are best done locally by those who truly understand the company’s goals for the project. Only after the planning is completed can the details and instructions of what to do - and precisely what is needed - be clearly articulated so that offshore teams need to only complete the task(s), instead of figuring out what to do from a strategic standpoint.

Well-Defined Requirements and Offshore Teams

Having requirements that are clearly articulated is vital for offshore teams to succeed. However, the fact that consistency in the personnel working on the project is also required is related to this critical concept. Requirements are seldom so well defined that offshore teams with high turnover rates can continue working optimally on all the project’s moving parts without it failing at some point in the development pipeline. To this end, consistent personnel - which is often more typical of onshore/onsite development - is significant to the project’s success.

Meaningful discussions regarding requirements need to be had, mainly within local teams that know the enterprise’s project goals and business model more than offshore personnel. Delegating tasks associated with the SDLC requires teams to work together and know exactly what needs to be done. This is something that internal management can accomplish better when dealing more with onshore teams. Lastly, it is best to remember that, ultimately, developers need to take a story and convert it into code, which requires clearly-defined "story elements" as determined by the product owners and internal managers - the “authors” - which need to tell the story to external members in the event that offshoring is used. To this end, clear communication is the most critical factor in succeeding with such projects.

Gain An Edge With The Right Approach And Information

Using offshore development is a crucial way to obtain high-value work while minimizing developmental costs and resource requirements associated with engineering robust and efficient applications. There are several advantages to using offshore teams - high-quality work, lower costs, quicker time to market (if no issues arise) - while there are also some potential pitfalls that can be avoided if onshore or internal teams are used - language barriers, culture barriers, time zone differences, etc. The key is utilizing offshore teams correctly, at critical points within the SDLC, and in a way that requires little interaction or direct actions from the main company, allowing the offshore teams to quickly and effectively produce high-quality results in a short time, for less money.

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