Offshore Software Development: Everything You Need to Consider

Offshore software outsourcing makes creating your software product from scratch easier and assists with deadlines, staff management, tech peculiarities of the project, etc. There’s no need for a significant emphasis on running the IT project and doing other things when you outsource duties to specialists.

At Cleveroad, we’ve successfully guided many clients through different offshore software development projects: from MVP and PoC development to full-scale product delivery, AI integration and legacy software modernization. We’ve gathered our experience in this article for you to learn the following:

• Whether offshore software development model is suitable for your business
• Offshore development advantages
• Common offshore IT collaboration pitfalls and ways to solve them

Offshore software development is the practice of transferring a software development project (fully or partially) to a third-party software development vendor located in a faraway country, with a large distance between them and you, but typically with lower labor costs. Long regarded as a cost-cutting tactic, offshore development in 2025 has evolved as a strategic approach to accelerate time-to-market, attain flexibility, and grow capacity for delivery through product-based teams.

This strategic shift is well captured by Helen Yu, who emphasizes its dual impact on cost-efficiency and customer experience:

For example, if your company is located in the US, you can hire a skilled and cost-effective IT vendor from Central and Eastern Europe, like the following European countries as Estonia, Poland or Ukraine; or if your business is from Australia, you can outsource software development to the offshore IT company to Central and Eastern Europe or Southeast Asia. Many companies also mix offshore and nearshore teams in hybrid cooperation model to obtain a balance between around-the-clock efficiency, overlapping timezones and closer cultural similarity.

Besides cost-effectiveness, modern offshore agile development enables access to DevOps-advanced teams that become an integral part of agile delivery cycles, rapidly adopting new technologies such as AI-based development, automatic testing, or cloud-native architecture. In order to make these processes more scalable, offshore IT providers use the Build-Operate-Transfer (BOT) delivery method to establish offshore teams with an option of internalizing operations once stabilized.

Offshore software outsourcing in 2025 is more than just transferring traditional engineering tasks to a skilled IT company. Modern companies offshore a vast range of services, from classic development and DevOps to AI/ML engineering, data infrastructure, and product strategy. The scale of this shift is backed by numbers: according to Report Linker, the global IT outsourcing market is projected to reach $425.19 billion between 2021 and 2026, while Statista forecasts the IT consulting and implementation services market to hit $82.44 billion by 2027.

Companies typically outsource the following services within an offshore model:

Bespoke software engineering services

End-to-end bespoke software development services (including web, mobile, or enterprise-class systems creation) is tailored to meet a company's unique business needs. Offshore teams drive faster time-to-market, lower expenses, and agile scaling without sacrificing quality.

Dedicated development teams

Experts like offshore software programmer teams, designers, and QA engineers are a natural extension of your in-house developers, according to the dedicated development team services. This model gives you full control over delivery and reduces hiring, training, and planning of capacity to a minimum.

Cloud infrastructure & DevOps

Professional DevOps teams set up CI/CD pipelines, track infrastructure health, and manage AWS, Azure, or GCP releases. Outsourcing DevOps services reduces operational overhead and speeds up release velocity, enabling faster iterations and more resilient infrastructure.

AI/ML & automation development

Modern offshore providers have AI development teams that design and deploy, predict, and personalize automation processes (e.g., recommendation engines, NLP integrations, and MLOps pipelines). They can also assist with AI Proof of Concept development to validate ideas before scaling full solutions.

Data engineering & Business Intelligence

Offshore data engineers also handle business intelligence consulting services: data ingesting, data transformation, and warehousing, while setting up scalable data pipelines used for analytics, reporting, or AI-based insights. This allows you to gain control over growing volumes of both unstructured and structured data.

Cybersecurity & compliance

Professional offshore teams conduct audits, implement encryption procedures, ensure regulation compatibility (e.g., HIPAA, FDA, SOC2), and design a secure system architecture that can abide by today's risk standards.

Product management & discovery

More companies nowadays outsource early product discovery, business analysis, and agile roadmap planning. Product managers, BAs, and UX strategists offer feature alignment and stakeholder awareness day one.

You can also outsource software product maintenance, data storage, or security. Software development offshoring became the optimal solution to all business problems: you can remotely collaborate with an offshore programming team from around the world.

Offshore outsourcing is only one of IT outsourcing models for cooperation. In order to have a full picture of software development outsourcing, you should also consider other models of IT outsourcing like:

• Onshore software development
• Nearshore outsourcing
• Hybrid software development

It's important to know the distinctions between outsourcing software development models so that you can make a good decision when it comes to your product strategy. These models represent a different combination of cost, control, and speed, and it's a decision that is significantly related to your priorities, team seniority, and scope of project. We’ll talk more about all of the listed outsourcing models below.

Onshore cooperation model refers to outsourcing software development to a team located within the same country as your business (e.g., US businesses can outsource software development from Silicon Valley to San Francisco, Sydney-based Australian startups can cooperate with onshore companies from Melbourne, etc).

Onshore software development approach offers several advantages:

• Simplified communication. Working with a team in the same time zone and sharing a similar cultural background can lead to smoother communication and collaboration.
• Easier project management. Physical proximity allows for face-to-face meetings and closer oversight of the development process, potentially simplifying project management.
• Alignment with local regulations. Onshore teams are familiar with local data privacy laws and regulations, reducing potential compliance issues.

However, onshore development can also be more expensive due to higher labor costs in tier 1 countries. The talent pool for specific skill sets might also be more limited compared to a global search.

Nearshore software development involves outsourcing software development to a team in a neighboring country or region. It offers a middle ground between onshore and offshore software development options:

• Favorable time zone overlap. Nearshoring often benefits from some time zone overlap with your team, facilitating communication and collaboration compared to a completely different time zone.
• Potentially lower costs. Labor rates in nearshore locations tend to be lower than onshore rates, offering cost savings while maintaining a high level of quality.
• Cultural similarities. Nearshoring teams might share some cultural similarities with your business, potentially leading to better understanding and project execution.

But kindly note that the nearshore software development is as useful and effective if you look for an IT provider nearby. However, in this case, you can be geographically limited in your choice. And here offshore comes to help you.

The hybrid model combines the best of onshore, nearshore, and offshore collaborations. The model allows companies to blend speed of delivery and cost-effectiveness with control over operations, especially when scaling digital products or backing continuous web development projects.

For this model, onshore outsourcing is used to retain strategic activities like product ownership or business analysis, but technical delivery in the form of coding, QA, or DevOps is divided between nearshore and offshore development locations. The teams operate with a single, unified process and sometimes use offshore agile development techniques to stay in sync across locations. This is particularly fitting in those firms that want to create dedicated offshore teams and have in-house control over key decisions.

Hybrid outsourcing software development model balances offshore collaboration's strengths (e.g., reduced costs and global talent access) without sacrificing alignment and local quality assurance. Some companies use it in long-duration offshore custom software development, product support, and continuous delivery projects.

Not entirely sure which software development model is most aligned with your strategy? Take a look at the summary table below to get a quick comparison between how each model stacks up in cost, control, and scalability.

First, let's consider the main benefits for you as a customer in case you decide to use offshore development services.

Offshore outsource software development makes available cooperation with a variety of technical experts competent in needed business domains. A wide talent pool is one of the reasons why software outsourcing companies from all over the world open their headquarters and R&D centers in this region.

The internal recruitment may be completed in some days rather than months. Outsourcing allows you to hire as many people as you want. So, you may select the best offshore software developer (or a whole team) by considering different specialists from all around the world with various talents and expertise. Additionally, offshore IT staff augmentation enables you to seamlessly expand your team with specialized skills, providing the flexibility to scale resources up or down based on project demands.

As a rule, offshore software development helps optimize your product creation costs with the help of the lower hourly rates. The cost-saving factor is the primary motivation for businesses to start offshore IT development cooperation, according to DL ACM. Central and Eastern Europe, for example, has gained popularity among offshore outsourcing software development companies due to its pool of talented professionals, government support, and favorable tax conditions for the IT sector. Most companies in this region offer competitive pricing and top-quality services, providing an ideal balance of value for money in the software solutions they deliver.

The development costs may also be influenced by software development time. Furthermore, many offshore software development service providers strive to give their clients the best possible circumstances, offering them additional pleasantries (like some free services).

Software development offshoring can be a tricky business, and you never know how many developers you'll need at any time during the project. However, one of the biggest advantages is its inherent scalability. Offshore development teams can easily adjust their workforce based on your project's evolving needs.

For instance, we screen CVs within 24 hours, arrange interviews within 3 days, and handle negotiating and contract signing within 1-2 weeks, ensuring a smooth and swift hiring process. Onboarding and integration take just 1-3 days, allowing you to scale your development team up or down quickly to meet fluctuating workloads or changing project requirements. This enables you to optimize your development costs and resource allocation throughout the project lifecycle.

Working with outsourcing professionals allows you to acquire a dependable final product that has been examined and corrected on time. For this reason, every software development offshore project includes not only a project manager but also a QA team that is responsible for debugging written code to ensure that future product runs smoothly.

When offshoring a project, you must take into consideration the risk of geographic distance, time differences, and talent scarcity. These obstacles require coordinated communication, expert project governance, and cultural alignment. That is why we highly recommend involving an experienced offshore software development partner like Cleveroad: we integrate overlapping schedules, transparent workflows, and integration-ready teams.

Explore the most common offshore IT challenges to understand how to find proper solutions in outsourcing cooperation.

When dealing with offshore IT development staff, time zone difference is crucial. If you and your vendor are in different time zones, communication may take a little longer. In addition, product development may be delayed from time to time if the organization has a critical question that requires your response and permission.

At Cleveroad, we mitigate time zone differences by offering overlapping working hours and maintaining clear, proactive communication through matching our meetings timetable to your working schedule. Our team adjusts its schedule to ensure timely updates and fast responses to any critical questions or approvals you may need, minimizing delays and keeping the project on track without compromising development speed.

Among the emerging concerns related to the offshore software development model is increasing saturation of traditional outsourcing hubs. With increasing calls for qualified engineers, shortages of mid- and senior-level talent are common in most territories, especially the specialists dealing with AI, cloud infrastructure, and cyber security specialties.

Cleveroad effectively breaks through the global tech talent gap with its tried-and-tested R&D centers in Poland, Norway and the US; and in-depth talent network. We maintain a current database of 2,100+ pre-screened tech experts and have over 280 in-house engineers: 75% of them are middle and senior-level specialists. This allows us to create scalable, cross-functional teams in short time with the precise profile you require for the project. Unlike the traditional recruiting process, typically lasting several months, we give you instant access to the database of engineers who can begin the onboarding process in as little as several days.

Data leakage is one of the most pressing challenges today because working with offshore IT companies typically entails providing some information. Even sharing seemingly minor project details with third parties, such as architecture plans, internal workflows, or proprietary algorithms, can pose a significant risk. If mishandled or leaked, this information could be exploited by competitors or malicious actors, leading to reputational damage, financial losses, or legal issues.

To solve this problem, our specialists at Cleveroad highly prioritize data security by offering comprehensive Non-Disclosure Agreements (NDAs) to ensure your intellectual property is protected. Moreover, a reputable company like Cleveroad always employs robust technologies like user privacy policies and private data storage with encryption.

Additionally, Cleveroad holds ISO 27001 certification, confirming that we follow strict protocols to identify, manage, and reduce risks to your data. It ensures that we have robust processes in place to protect sensitive information from breaches, unauthorized access, and other security threats at every stage of development.

If you value quality over quantity, start thinking about it now. Quality assurance is a priority at Cleveroad. That’s why we employ a full-cycle software testing process throughout development, utilizing skilled testers and testing as well as automated testing tools (e.g., Charles proxy, Postman, Xcode, Appium, Gmeter) to ensure your project meets the highest quality standards.

It’s high time to consider what practices to apply when outsourcing software development to an offshore IT company.

The success of your offshoring software development journey isn’t just about saving money: it’s really about finding a partner who gets your goals, shares your tech vision, and fits right in with your team vibe. A good vendor isn’t just writing code, but speeding up delivery, shaping your architecture, and working smoothly with your team members.

Before you opt for offshore software development, here’s what to do to find a solid, reliable partner:

1. Start by exploring top offshore IT destinations like Estonia, Poland, or Ukraine. Central and Eastern Europe offers expert engineers, AI and DevOps talent, and strong legal frameworks at competitive rates.
2. Next, research the vendor’s experience using reputable sites like Clutch, GoodFirms, or Techreviewer. Look for legit case studies, real feedback, and a solid project history. For instance, if you take Cleveroad, we’ve got 70+ reviews with average 4.9 rating on Clutch.
3. Ask for direct references and niche-specific success stories. Cleveroad openly shares outcomes from partners and offers access to a portfolio of successfully delivered projects in FinTech, HealthTech, Logistics, and other domains to help you assess our technical expertise and industry fit.
4. Don’t forget to check how the offshore agile development vendor handles communication, onboarding, and delivery. Cleveroad conducts solution workshops and Discovery Phase services prior to kick-off, sets up shared Slack and Jira spaces, and assigns dedicated coordinators to ensure everything aligns with your setup.
5. Also, think beyond just developers. Real offshore wins often come from having the right support roles like UI/UX designers, DevOps engineers, QA engineers, business analysts. Cleveroad builds cross-functional teams that are ready to scale with your project, whether you're scaling an existing software or launching a new one.

So, picking the right offshore tech partner doesn’t just save your budget, but it boosts speed, adaptability, and strength across your delivery pipeline. And with a Cleveroad team, your offshore setup runs just like your in-house team.

To illustrate how this looks in action, here’s a real-world example from one of our clients, AVFX, a U.S.-based audiovisual production company. They were choosing between three vendors: two nearshore teams based in the U.S. and our offshore team at Cleveroad.

AVFX appreciated how quickly our team understood their system requirements, proposed the right technical direction, and aligned with their in-house roadmap for building a custom presentation management platform.

Here’s what the AVFX team had to say about working with Cleveroad:

A successful offshore software development outsourcing partnership starts long before the first line of code is written: it begins with clarity on what you want to achieve and why. Without well-defined objectives, even strong development teams can lose focus, deliver misaligned features, or spend time on unclear priorities.

To avoid these difficulties, clearly outline your:

• Product vision and expected outcomes
• Functional and non-functional requirements
• Target audience and user flows
• Budget limitations and delivery timeline

You can also apply the SMART framework, ensuring your goals are Specific, Measurable, Achievable, Relevant, and Timely. This gives both you and your offshore partner a shared, structured reference point for planning, execution, and tracking.

By doing this early, you minimize ambiguity, streamline onboarding, and ensure your vendor's team can translate business needs into scalable, practical solutions aligning with your product roadmap.

You with your IT vendor should implement robust project management methodologies like Agile or Scrum to ensure flexibility and responsiveness to changes. Use project management tools such as Jira, Trello, or Asana to track progress, assign tasks, and manage deadlines. Moreover, you should clearly define roles and responsibilities to avoid confusion and ensure accountability.

Conduct regular stand-up meetings to monitor progress, address issues, and make adjustments as needed. Establish clear milestones and deliverables to track the project’s progress against your offshore agile development timeline. Regularly review and refine project management processes to optimize efficiency and effectiveness.

At this step, you and your offshore IT provider should define preferred communication channels (e.g., email, project management tools, video conferencing) and establish a communication frequency (for example, daily, weekly meetings). This ensures clear and consistent information flow throughout the engagement. A structured communication set in cooperation with your IT offshore vendor minimizes misunderstandings, fosters a collaborative environment during offshore software project completion, and allows for timely decision-making.

Data security is a top priority in offshore IT outsourcing. In order to properly protect it, you and your vendor can implement strict security protocols to protect sensitive information and use encryption for data storage and transmission to safeguard against unauthorized access. Moreover, the provider can help you establish access controls and authentication mechanisms to ensure that only authorized personnel can access critical data. They’ll also help you follow industry standards and regulations, such as GDPR or HIPAA, to ensure compliance with data protection laws.

Let's also explore the trends a software offshore development vendor may use to optimize your project's success throughout the development lifecycle. By working with an offshore development partner that embraces these trends, you can expect significant advantages in terms of cost, efficiency, and security. These trends are particularly relevant for web and mobile app development, where innovation and agility are crucial for success.

The popularity of cross-platform development frameworks like Flutter and React Native is on the rise in offshore development. These frameworks allow developers to build applications that work seamlessly on both iOS and Android platforms using a single codebase. For example, you can use cross-platform development services to reduce development time and costs compared to creating separate native apps for each platform.

Cloud-based solutions are becoming increasingly popular for offshore software development projects involving IT infrastructure services. This involves building applications designed specifically for the cloud environment, leveraging its scalability, flexibility, and cost-effectiveness. Finally, cloud-based solution development allows for easier deployment, maintenance, and updates, making it ideal for modern applications.

Offshore software development companies are increasingly incorporating AI into their workflows. This includes using machine learning to automate repetitive tasks like code generation and testing, freeing up developers to focus on more complex aspects of the project. AI can also improve development efficiency by analyzing project data and suggesting optimizations.

As data breaches become more common, security is a top priority for any offshore outsourcing programming project. Offshore development companies are placing increasing emphasis on robust security practices and data protection measures throughout the secure global software development process. This includes employing secure coding practices, regular vulnerability assessments, and adherence to data privacy regulations.

While offshore software development offers numerous advantages, cost remains a key decision-making factor. So, let’s analyze the cost structure of working with a development team from the offshore companies.

Offshore outsourcing development pricing depends on geography, role seniority, and the project’s tech stack. Below, we compare average hourly rates across top outsourcing regions, helping you plan your budget for full-scale delivery or team extension.

While Asia offers the lowest entry-level pricing, and Latin America stands out for its overlapping time zones with North America, Central and Eastern Europe often provides the best cost-to-quality ratio, especially for complex projects involving AI, cloud infrastructure, or regulated domains like healthcare and finance.

So, depending on the region you choose and the project's complexity, the development costs will vary. Feel free to contact us to know Cleveroad software developers' hourly rates to evaluate the cost-efficiency of the candidates.

Cleveroad is a professional offshore software development outsourcing company headquartered in Estonia and with R&D centers in Poland, Norway and the US. For more than 13 years, we have assisted startups, small businesses, and large corporations in achieving their objectives and bringing ambitious ideas to reality.

We have 250 in-house software developers and over 2100 IT specialists in our talent pool across Europe. Cleveroad receives numerous industry awards and recognitions, including Clutch Spring Global Honoree 2025, 7th place in Clutch Top 1000, Clutch Global Fall Champion, Top Service IT Companies from Design Rush. Moreover, we possess AWS Tier Partner Status, which means we meet high standards for cloud expertise, security, and scalability. It enables us to deliver reliable, infrastructure-optimized solutions for offshore software development projects.

There is a large benefit set you can get working with us:

• Collaboration with an offshore software development provider certified with ISO 9001 and ISO 27001 for security and quality of your software for particular business domain
• Your app idea protection through Non-Disclosure Agreements (NDAs) execution per your request
• On-demand outsourcing software development services: software development from scratch, UI/UX design services, IT consulting services, and many more
• You can hire our team of highly skilled developers proficient in implementing a wide range of cutting-edge technologies like AI and ML, cloud computing, the Internet of Things, Blockchain, etc.
• Your work supervision by our project management office to ensure that the intended results are delivered on schedule, in compliance with your company needs, and within your budget
• Flexible cooperation models (e.g., IT staff augmentation services, Project-Based Cooperation, Dedicated Team) to choose to start working with us

Our portfolio includes a bunch of offshore software development projects in different domains. And we would like to tell you about the latest ones.

• Transportation management system with route planning. This solution is built by our offshore software development team for an enterprise that offers warehousing and logistics (generally dropshipping) services.
• Social network for like-minded sports enthusiasts. Our offshore software development skills were trusted by the US-based firm, which gave us the task to create cross-platform app for aligning teams to sport activities.
• Multifunctional retail and ecommerce SaaS solution. It is a versatile SaaS platform developed by our offshore IT experts with a powerful toolset (including Inventory and Warehouse Running, Receiving, etc.) for retail companies focused on e-commerce and omnichannel sales.
• B2C system for digital auto insurance. Using our offshore software development services, the US-based car insurance company was able to create a new and robust online services ecosystem to manage auto insurance.
• RPM solution for behavioral health support. As an offshore outsourcing vendor, we’ve designed this solution for the healthcare domain to help customers struggling with depression.

Here’s what Neil Nedley, our client from Nedley Health Solutions, had to say about collaborating with Cleveroad on this offshore healthcare project: from idea validation to full-cycle RPM platform delivery:

The offshore IT development sphere offers businesses a range of opportunities, according to which they are able to save their efforts, time, and money. If you also want to save your resources and achieve good results, you can also apply to offshore IT professionals in order to obtain a completely new product, flexible and thriving on the market. Cleveroad’s team is ready to support you at every stage: from Discovery Phase and AI Proof of Concept development to scalable product delivery using a cost-efficient offshore model.