SOFTWARE OUTSOURCING

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.

The Considerations

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

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.

Language Differences

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.

Communication Constraints

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.

Onshore

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.

Direct Communication

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.

Effective Collaboration

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.

Conclusion

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.

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ABOUT THE AUTHOR

David Burkett

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