What Is Offshore Software Development?

By George Fironov ·Subscribe

It’s never been easier to find offshore software development providers. But locating the right one, and managing the relationship for success — that’s still as hard as ever.

Outsourcing is nothing new. We could even go as far as to say that outsourcing is the lifeblood of our whole economy. All the biggest companies rely on outsourcing for a majority of their business and technology processes.

The ‘offshore’ part adds difficulty to outsourcing, because it means working with companies from different countries. How do you trust a vendor that you never meet with in person?

As managers, we need to be able to work with, and successfully deliver projects in all kinds of situations. And I think success in offshore outsourcing requires a bit of a different philosophy than other types of projects.

In that spirit, I want to share with you how I look at offshore outsourcing — the ‘why?’, the benefits, and requirements for success.

Why use offshore outsourcing?

In this case, the easiest answer is also the most truthful — offshore outsourcing is a method to save money.

But insane cost lowering is a plague that I don’t want to contribute to. It’s good when it’s balanced budget optimization, however when it turns into a “low costs above all” mentality, I think it’s a major issue.

It makes workers frustrated, it demotivates people, and above all it can hurt the quality and efficiency of business operations.

And so, I want to show that there are plenty of other benefits to offshore outsourcing, and that it has a valid place among different types of crucial technology services in our global economy.

Ever since the web was born and spread across the Western world, software outsourcing masters were sharpening their tools on increasingly complex products.

This led to the creation of a market that, in 2019, was valued at $66.5 billion. (source – Statista)

In that market, every niche is full of different providers with specialized experience. They’re all around the world: in India, Eastern Europe, Australia, Japan. It’s easier than ever to find a programmer, or a team of programmers, who are uniquely trained to solve that one problem that your team can’t get around. Or build that feature that you don’t have resources to build.

What does all of this mean? Ultimately, offshoring software development isn’t a way to cut costs, even if that was the initial idea.

It’s a savvy tactic for modern, technology-powered companies. It’s a way to shorten time-to-market. It’s a way to benefit from the unique experience of developers who have built countless other products similar to yours.

And it takes smart managers not to fail at the task of managing offshore development teams. It takes people who know how to find and verify great vendors, and also when not to negotiate.

Negotiations in offshore software development

Negotiations are an important part of most major deals, and developing custom software is usually a major deal for all the people involved. 

But how do you negotiate in order to get the best possible deal? Perhaps you don’t do it at all.

When you buy a bushel of apples from your local fruit vendor, it might be OK to try and negotiate a better price. Even if things go awry, you can just go to another fruit vendor next time.

Low cost, low risk, one-time purchase.. Negotiate away!

But developing software, especially in the current economy, is a different business engagement altogether.

The costs can be huge.

Risk? Considerably higher compared to buying apples.

It’s not a one-time purchase, it’s a long-term business relationship.

Whether you’re hiring a single remote software developer, or organising a whole team of offshore programmers, the relationship between you is what will create the value of your software. 

Here’s why.

At the beginning of 2020, professor Maurice Schweitzer and researcher Einav Hart, from University of Pennsylvania, published exciting new research on negotiations.

Their biggest contribution lies in considering what happens after the negotiations. 

Most research ends the moment the deal is signed, and so the advice you get often borders on aggressive, manipulative tactics that will win you the “yes” by any means necessary. 

But in a long-term business relationship, that win can be very short-lived.

Schweitzer and Hart performed an experiment involving wage negotiations on a group of 1,200 people. 

They concluded that the people who negotiated the most, were also the ones getting the smallest value out of the business engagement.

What’s even more important, the studies show that it’s often not a good idea to negotiate at all. In Hart’s words: 

“…in many cases we might be better off not even starting this process — not engaging in negotiation that may end up creating conflict.”

Conflict can easily result from negotiations because the process of negotiating often leads to both sides seeing each other as enemies. Suddenly they’re not business partners, but foes with conflicting interests.

Luckily, it’s possible to avoid this problem altogether. The solution is finding a proven vendor with good prices. For this, you need to adjust two things: your mindset and your strategy.


Adjusting your mindset about negotiating software development


When you start communicating with different companies, sending RFP’s, or casually discussing options with business development people, it’s important that you get your priorities straight.

You might be tempted with promises of using bleeding-edge technology, applying world-class best practices, and the cherry on top is when all of that comes at a price that’s simply too good to be true.

But when the price seems too good to be true, it’s usually because it is too good to be true. You’re just not being told exactly why they can charge so low.

The problem is that there are a lot of overpriced software developments services out there. There’s no escaping this fact.

On the one hand, you don’t want to spend too little, but on the other, overspending can be even worse.

In a market where very few companies publicly inform about their standard rates, how do you know that you’re paying the right price and getting quality in return?

You can remove the bad apples from your list of potential vendors by focusing on what they stand for, and not on their prices.

Look at who they are, how they talk, how they write emails. Pay attention to what they say about past clients. Be on the lookout for any warning signs of unprofessional behaviour.


Adjusting your strategy for offshore development


Now that you know what to look for, where and how do you look for the right type of outsourcing company? When offshoring, the big challenge is that you’ll probably never meet your service provider in person. This is ripe ground for scams, so it’s important to stay cautious.

The easiest way to find your offshore software developers would be to go to Clutch.co, or a similar service, and choose a provider with good ratings. Or, if you’re looking for individual remote developers, you might use an outstaffing service like ours. There are plenty of similar sites where you can find providers along with reviews from their clients. 

It definitely won’t hurt to activate your social networks, ask around on Linkedin and Facebook. You’ll get a lot of recommendations if you have a sizable network.

To verify providers the most important thing, in my opinion, is to focus on their portfolio. Use their apps, browse websites that they built, see what kind of companies they’ve worked with.

If there’s no NDA, you can also ask detailed questions about their past projects. When they fail to answer your questions, or you don’t like what you hear, or their answers indicate a lack of attention to quality — it might indicate that they’re not professionals.

But if they don’t hide information from you and act professionally when talking about past clients, then they might just be the right partner for you.

Ready for offshore outsourcing?

When you’re searching for offshore software development providers, try these adjustments in your strategy:

    • Don’t look for lowest prices — look for trustworthy people
    • Negotiating isn’t always necessary — if you find a trustworthy service provider, asking for a discount might be insulting and result in a toxic business relationship. If they’re prices are absurdly high or low, you shouldn’t work with them anyway.
    • Scrutinize their portfolio — really get in there, use their products if possible, ask about past projects
    • Look for warning signs — if they disrespect past clients in conversation with you, they hide information, or show other signs of unprofessional behaviour, then they’re probably not a good business partner and should be avoided.


Hope this article helps. Good luck!