Cost Breakdown: Offshore Vs Onshore Software Development — What You Need to Know
For most business leaders, the biggest difference between offshore development and onshore development is the cost. Though, variables like time zones and communication differences also have a massive impact on projects.
If you are confused about whether to hire offshore vs onshore, this guide will help you out. But first, you need to understand the differences between the two hiring concepts.
Onshore Software Development: This means your project is started and completed by vendors in your country.
Offshore Software Development: This means your software is developed by international developers located outside your country.
If you agree that the only difference between an offshore and onshore company for software outsourcing is the price, then you’re missing a few other considerations.
Chances are, you’re considering going for offshore development to save on costs. In most cases, the offshore developer hourly rate starts at $30 per hour.
This is shallow compared to an onshore developer who starts at $120 per hour for most economically developed countries.
“That’s a huge difference!” you might say. But what looks good on the surface can have some real impact on your project once you dig a little deeper.
But let’s not make a decision just yet. Ask yourself: what are the deliverables for the cost?
There are several things you and your team should note before deciding to develop offshore or onshore. This will help prevent unnecessary challenges and hidden fees during your project,
Offshore developers are often on the opposite side of the world to you and your business.
This might mean that offshore developers exhibit different cultural norms that could impact your project, which in turn may end up costing you more in the long run.
It’s also possible that there may be a difference in the level of standards. That is to say, their definition of ‘done’ or ‘perfect’ might not be the same as yours.
Before you choose an offshore vendor, these are the risks of outsourcing your software development to an international vendor that you will need to consider.
Many offshore developers are not native English speakers which means they might have difficulty understanding exactly what it is you mean. Let’s take the intricacies of Australian dialogue as an example. Something we drop into conversation like “that looks sweet” is easily misunderstood.
Getting the project clearly understood, which is a crucial step, could then take more time between you and the developer.
Outsourcing your software build can be a good idea for your business, but not to the detriment of effective communication.
Building successful software requires clear communication at all times between the teams and the product manager.
Lack of Knowledge About the Target Audience
Your product likely requires the developer to fully grasp the profile of your desired user, which could be problematic for an international team to be fully across if your desired user is local.
Cultural differences may present a challenge for a developer who doesn’t fully understand your target audiences’ psychology or motives for buying decisions.
Time Zone Barriers
If your developer messages you for a quick request on the project, how would you respond when you have a 12-hour time difference between your locations?
If the developer has to wait for 12 hours or more before receiving your reply, that might mean a lost day working on your project. If these delays pile up, they can extend your project timeline exponentially, not to mention the additional cost at your end!
The Difference in Standards
It might be tempting to say local developers offer higher quality outcomes than others, but that would be biased.
However, when it comes to quality expectations, the territory is a little murky. Your definition of quality might not be the same as your offshore developer which may lead to a lot of back-and-forth to become aligned.
Replacement of Developers
Oftentimes, offshore developers work under extremely tight deadlines which can, unfortunately, lead to burnout. When this happens, the expected project length will need to be extended because a new developer will be brought on to continue your project.
The additional time needed to hire another developer, while explaining the project scope from scratch again, is at the risk of jeopardising your project’s success.
Programming Language Preferences
Every country has its own programming language preferences, which may differ from your area. An offshore developer might choose a language that isn’t well supported in your region.
In this instance, it would be hard for you to edit, expand or support your new software in the future without returning to the initial offshore developers.
While the initial lower hourly rate might look tempting, a blown-out timeline and ongoing challenges may mean that offshore development isn’t the right choice for you and your business, especially if you’re on a tight budget.
If your project has a flexible launch date and the offshore challenges are not much of a hurdle for you, hiring an offshore developer might work for you.
Otherwise, if your project requires high attention to detail and you’d prefer a more local solution, we’ve outlined what you should expect from an onshore development company below.
When you choose an onshore developer or agency, it means that you are working with someone within your local region or country. The vast majority of the time, onshore companies have higher upfront costs. While keeping this in mind, it’s important to remember that working with a suitable vendor will almost always guarantee you greater long-term value.
Having no barriers between the developer and the designers is highly advantageous. This collaboration ensures ease of execution and will lead to a higher quality product.
When working with an onshore developer or company, it means you are dealing with someone in your own (figurative) backyard! With no, or minimal, time differences you can reach out to your developer any time you need them.
This also makes face-to-face communication, such as workshops, possible. We’ve found that face-to-face communication can positively impact your project requirements, timeline, and budget because it means you have more opportunities to ensure your developers understand exactly what you want and need.
You have unlimited opportunities to collaborate with your vendor if they are onshore. Through collaboration, your developers will have a better chance to understand your business, scope and product. Since you are in the same region, they are better positioned to understand your target market more accurately than an offshore team.
Collaboration will also help your development team quickly set your feedback in motion and ensure timely and successful product delivery.
The team is also more likely to address assumptions and challenge you instead of delivering every requested requirement when they’re not needed or beneficial.
Low Chances of Project Delays
With more transparent communication through collaboration, onshore companies have lower delay rates. Without challenges such as time differences, communication, and market understanding, a project that takes an offshore company a year might take an onshore company 6-8 months.
Similar Laws and Tax Policies
When you work with an onshore company, you can enjoy the security that comes with having the same laws, taxation policies and regulations.
Safeguarding Your Intellectual Property
Most onshore developers protect your intellectual property (IP) without you even needing to ask. For example, all WorkingMouse developers assign the rights to us, which are in turn assigned to our customers. Alternatively, when you hire offshore, they may not adhere to your country’s IP or copyright laws. This may happen because their country lacks such compliance regulations.
When you hire onshore, you are more likely to be protected under the relevant copyright and IP laws.
Flexible Support plans
It’s easier to engage in software support plans from an onshore company after completing your project. Even though offshore companies offer these plans as well, for the same reasons we’ve outlined above, it might not be as helpful due to the communication and time zone challenges.
Before you can make your decision as to whether you will outsource your software development onshore or offshore, there are many factors to consider, such as your business goals, the project’s scope, support, and how much collaboration is needed to complete your project.
If you plan to choose an offshore team, you can now feel prepared to counter the obstacles surrounding that decision. However, if you do choose to hire an onshore vendor, you now know that you have the chance of building a long-term partnership that will always be there to support your business and help you launch the best product possible.
Now that you understand the pros and cons of hiring offshore vs onshore developers, check out our software pricing guide to discover the hidden prices behind software development.