Offshore Software Development: The Complete Guide for 2022

Updated 20 Oct 2022

15 Min



There are piles of things you should remember, creating a product from scratch: deadlines, staff management, tech peculiarities of the project, etc. Everything will be easier if you use offshore outsourcing software development. There’s no need for a significant emphasis on running the project and doing other things when you outsource a portion of duties to specialists.

Offshore software development is quite popular these days. The stats prove it: the worldwide IT outsourcing market is expected to obtain $425.19 billion in revenue from 2021 to 2026. Statista indicates that IT outsourcing services market profit will reach $413.72 billion by the 2021 year-end. According to Deloitte, the most visible and reachable benefits (due to outsourcing popularity in 2021) were cost reduction, operational effectiveness, and consistency.

statista graphic

IT outsourcing market revenue (Source: Statista)

This article will show you whether outsourcing software development (offshore especially) is suitable for your company. You’ll also know more about offshore development advantages. Then we’ll tell you how to avoid common pitfalls while selecting and working with an offshore software development company and more necessities.

What is Offshore Software Development: Essence and Types

Offshore development means transferring a project (fully or partially) from a client to a third-party software development vendor.

But keep in mind: intending to outsource the entire building workflow, you should better cooperate with a software development vendor, not a freelancer. Here’s the thing: a freelancer may be an expert in one related field or some more (e.g., mobile or web development, etc.). While to create, let's say a mobile app, you need at least one skilled designer, QA engineer, and software developer.

You can find such an IT vendor for cooperation, acting upon three common types of outsourcing services delivery: onshore, nearshore, and offshore. We’ll tell you more about each of them right now.

Onshore, nearshore & offshore outsourcing

The common types of outsourcing services

The Onshore Outsourcing

The onshore (or domestic) outsourcing implies the vendor is located in the same region as yours. This geographical closeness is a crucial factor in onshore outsourcing: it means there would be no language and cultural barriers, as well as time zone ones (which contrasts sharply with development offshore software). The arisen issues can be resolved more promptly and efficiently by easily organized live meetings. You may also monitor the partner’s development workflow with less effort and time.

But keep in mind that such a model is only appropriate if a budget size is not an issue. Onshore outsourcing is a pretty expensive thing, typically having higher tax rates and labor remunerations. You can also face the tech talent shortage issue.

The Nearshore Outsourcing

This outsourcing model means that your contractor is situated in a neighboring country. Nearshore software development also has advantages almost similar to the previous outsourcing type: due to the little time difference (or even its absence), you can easily monitor your vendor's workflow and deal with possible problems. There may also be no significant cultural or language obstacles, which helps you and your contractor intensely focus on the project and finish it within the shortest time.

Nevertheless, you should understand that nearshoring is also a high-priced thing that isn’t intended to be used if you are on a tight budget.

The Offshore Outsourcing

When it comes to an offshoring software development organization, you should expect its headquarters to be located on the distance from your region: for instance, in Central Europe or Asia. These are the most popular outsourcing locations, with flexible and competitive price sets and labor resources.

However, outsourcing the project to offshore development, you should remember the following. Due to the geographic distance between you and your offshore software development vendor, a significant time zone distinction can influence the development workflow. You may also come up with serious cultural and language barriers, but all these problems are not hard to resolve while adequately handled, and we’ll discuss them a bit later.

This way, the outsourcing model depends largely on the location of you and the company you partner with. If you’re from the US and you outsource, for instance, to Estonia — you apply for offshore software development services because the hour zone may differ.

What Services Can Be Outsourced?

Outsourcing gives companies a range of indisputable benefits, including pricing flexibility, large talent pool, scalability, and so on. There is a vast of tech-related services that can be outsourced: mobile development services, web development, UI/UX design etc. Let’s dig deeper.

  • Mobile app development. You don’t need to hire an in-house team, pay fees and sick days, hardware and software, or office rent. Offshore software developers will build a cutting-edge solution for you without extra expenses for equipment and working space.

  • Web development services outsourcing provides your business with a leg up over the competition with a flawlessly operating web product. This product will boost your company's online presence, as the outsourced team would do their best for a flexible and modern website development in the shortest time.

  • UI/UX design. Keep in mind that you obtain a range of preferences outsourcing this service. The skilled designers will make all the complex things amazingly simple. As a result of cooperation, you’ll obtain an intuitive app interface or site one, easy to navigate. Moreover, you’ll be able to focus on other essential business issues entrusting your design creation to the vendor's safe hands.

  • QA services. Developing software solutions needs thorough testing of every app part to ensure it works without bugs. Even the best offshore software programmer can make mistakes, but they'll soon be tired, being obliged to write test cases and check each product detail. In this case, outsourcing is an excellent approach to maintain your solutions at their best without exhausting your devs.

You can also outsource software product maintenance, customer support, data storage, or security. Outsourcing became the optimal solution to all business problems, even at the time of the world pandemic restrictions: you can remotely collaborate with an offshore programming team from around the world.

Read our case study: The application for effective networking allowing to easily remember all the new acquaintances

When to Apply to an Offshore Development Vendor?

In order to stay competitive in a fluid market, the companies have to implement the latest IT technologies in their workflows and products. But, if you’ve got no experience in the tech sphere, an offshore outsourcing software development company can help you. What are other situations when you’re able to outsource product creation?

When you’re on a budget

Engaging in-house software developers is high-priced for SMBs or startups with limited funds. Recruiting skilled staff usually costs a lot of money; thus, the financial problem is critical when deciding whether to outsource software creation or not. The offshore dev process is an economically rational option that allows you to work on your project with experienced software developers while remaining within your budget.

When your business requires flexibility

Working with offshore IT staff, you have a right to wait for fulfilling contractual obligations that can be changed by agreement of both parties. Compared to recruiting a full-time software development engineer for a short-term project, this makes much more sense. When working with an offshore development software team, your responsibility to them terminates after the project is over.

When you need to improve the quality of your services

The fundamental values of a business should be quality and innovation. They provide customers good value for their money, put the company ahead of the competition, and help it win the market. If you see that the quality of your goods and services is decreasing, now is the greatest time to explore hiring offshore software engineers.

We named only the most common reasons to use offshore software engineering, but there are more than three ones. You may add something to this list, when you start working with an offshore outsourcing team, and see how convenient it is. Now we’ll keep discussing offshore software outsourcing advantages and challenges.

Offshore Software Development Benefits

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

Reasonable development costs

Most offshore software development companies provide their customers with flexible prices and first-grade services. Central Europe, for example, gains its popularity concerning a bunch of talented individuals, state backing, and low taxation for the IT sector. It also displays the ideal value for money balance of the software provided.

Below, you can see the average hourly prices of the most popular offshoring development destinations.

Average hourly wages for software development offshore services (according to Clutch & GoodFirms)

Outsourcing regionsHourly wages for work (in US$/h)

Central Europe


Western Europe


North America


South America




The development costs (as well as software development time) may also be influenced by staff size, technology stack used, experience, and duration of the collaboration. Furthermore, many offshore software development service providers strive to give their clients the best possible circumstances, offering them additional pleasantries (like some free services). At Cleveroad, for instance, we don't charge for company analysis and counseling, and we also give out free marketing bonuses.

Take a look at software development rates across Europe

Quicker concept implementation and delivery

The total time spent on recruitment can be reduced by cooperation with an offshore software company. You can always speed up the project completion by collaborating with as many experts as you need. But keep in mind: just doubling the team will not necessarily cut the project completion time down. Such a relationship would be valid only if jobs are properly partitioned between staff members and they contact each other well.

In this case, the time to market and costs would be reduced, and you'll be able to outperform your domain competitors.

Qualified talents

IT outsourcing makes available cooperation with a variety of technical experts competent in needed business domains. For example, there are over 9K of annual tech graduates in Estonia, and this number is growing. Such a wide talent pool is one of the reasons why 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 developer (or a whole team) by considering different specialists from all around the world with various talents and expertise.

High scalability

Development is a tricky business, and you never know how many developers you'll need at any time of the project. The offshore software development model allows you to scale up and down easily: expand your team if you need to speed up product development or reduce the number of specialists if you don't have any jobs for them to do. This way, you'll avoid overpaying and time-consuming employee searches.

Offshore software development outsourcing enables a variety of cooperation models, ranging from dedicated teams to staff augmentation, in order to provide organizations with the most efficient and fitting solutions appropriate for different issues.

Low building risks

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.

The latest technologies

Most offshore software development companies specialize in certain sectors or operate with technology stacks that are rare for the in-house team qualification. So, you may be able to hire a certified professional (or even a team) with the needed hard skill set from a vendor’s company. This may help you build an advanced product that will be competitive in the market.

offshore outsourcing benefits

Why offshore software development is so popular: benefits of your choice

Offshore Software Development Challenges

The offshore software development model is attractive for a lot of companies due to its set of undeniable advantages. But it also has a bunch of hidden hazards, and you should know them in order to easily obtain a product that will satisfy your company’s business needs. We’ll name the most common of such challenges to help you understand how to offshore software development with fewer problems.

Time zone differences

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 schedule all meetings in advance to improve communication efficiency and reduce possible time lags.

Communication issues

This is one of the most common software offshore development problems, which can be traced back to various factors. Your communication, for example, may degrade as a result of your vendor's poor command of the English language. To cope with it, pick an IT partner, assess their English proficiency ahead of time, or discuss it individually with the company's representative or team members.

Security challenges

Data leakage is one of the most pressing challenges today because working with offshore software companies typically entails providing some information. You can address the problem by contacting a partner firm and signing an NDA.

You should also ask the vendor if they employ security technologies like user privacy policies, private data storage, and encryption or if their solutions comply with the General Data Protection Regulation (GDPR), among other things.

Quality assurance

If you value quality over quantity, start thinking about it now. You should also be active in the software outsourcing workflow, attending all meetings to keep track of the business position and grasp the team's daily challenges.

Moreover, examine your forthcoming team's skill set (including hard and soft abilities). Keep in mind that both types of capabilities are necessary for optimal growth.

offshore dev challenges

What is offshore development challenge set: the pitfalls you should be aware of

Offshore Software Development Steps

It’s high time to consider what steps to take before the offshore software development process starts and how to find a reliable company.

Get the Work Done on Your Side

Even if you choose to assign all technical tasks to an outsourcing team to develop offshore software, you would still have much to do as a stakeholder.

1. Research your target audience

Before looking for an offshore software programming vendor, analyze competitor solutions to see what extra features you can provide your audience to help them solve their problems. You can check many aspects of your competition if your project involves offshore site building. You can find out where their traffic originates from, what technologies they work with, and how they scale, for example. It's achievable owing to the plenty of web analytics tools, and the information you gather may help you make better judgments.

2. Obey regulations

If your domain requires it, you must check that the product you plan to develop complies with current laws. It may be relevant for software that uses private data or those linked to payments. For example, if you need to develop a healthcare solution, you have to make your app GDPR compliant (if your target audience is from Europe) or HIPAA compliant (oriented on the US market). In case your app deals with payment cards and systems, it should be PCI-DSS compliant: this standard helps to protect private data from being hacked.

3. Identify your needs

We mean technologies to use, and specialists to hire (e.g., designer, developer, etc.). If you're not sure about all this, you can ask for consultation with your offshore software development company.

It's a good idea to complete this list before contacting a company or at least take a break after consultation with its representatives to consider these points. This way, you'll have a clear understanding of what you need and define your goals.

4. Define your goals

Developers without well-defined objectives may be unsure of what they need to perform and, as a result, may feel constrained and lose productivity. All this leads to increased project risk and lower earnings for your business; the quality of offshore programming services will also suffer. Setting clear, achievable goals for your offshore staff is important to your software project's success.

How to do it? For example, you can use a SMART system, according to which your goals should be Specific, Measurable, Achievable, Relevant, and Timely. This abbreviation will help you analyze the set goals and improve them to obtain a high-quality product.

Choose the Right Offshore IT Outsourcing Company

There are hundreds of offshore software development companies. How to choose the most reliable one? Let's try to find this out.

Verify the references

What is offshore software development company trustworthy to cooperate with? How to find it? Look over the company's website for information on previous projects or their general experience. Case studies, testimonials, and blog pieces, to name a few examples. All the data might reveal a great deal about the organization and its history.

Check the rankings

You may take it a step further and look for specialist rankings on sites like Clutch or GoodFirms. Based on customer evaluations and other criteria, they will offer you the finest outsourcing companies in your chosen location. If you're looking for offshore software development services in Central Europe, for example, you may select companies based on characteristics, such as development kinds (e.g., mobile development companies).

Protect your idea

Make sure that your concept is properly secured. For this purpose, you can contact a vendor to find out whether they sign a non-disclosure agreement (NDA) or not. It's essential if you have a unique app idea and want to know it won't leak anywhere.

Looking for a reliable vendor?

Get your free tech consultation and project estimation at no charge.

Offshore Development Advantages Offered by Cleveroad

Cleveroad is a professional offshore software outsourcing company from Estonia. We have assisted startups, small businesses, and large corporations in achieving their objectives and bringing ambitious ideas to reality for more than 10 years. Our variety of IT services and bespoke software solutions improve workflow efficiency, address business issues, and aid in the acquisition of competitive advantages.

There is a large benefit set that we offer our clients (but it’s not limited to them):

  • An experienced team rapidly adapting to new requirements and modifications
  • Non-disclosure agreements (NDAs) execution per your request
  • Product quality assurance and control at all stages of the development workflow
  • Profound software development experience in various business sectors
  • Innovative building approaches and a cutting-edge tech stack
  • Post-release support, maintenance, and advertising services

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

One of our works is connected to the healthcare domain. It’s a mental health app called Nedley Lifestyle Scorecard (NLS) designed for customers struggling with depression. Using NLS, people can enhance their mental state during a particular time.

We’re also active in the logistics and transportation sphere, adding a case not long ago to our portfolio. This is a full-fledged management transportation platform built for an enterprise that offers warehousing and logistics (generally dropshipping) services. The app is intended to cut costs and save time for route planning, optimize fleet running prices, etc.

Our other offshore development work is RetailOps — a versatile SaaS platform with a powerful toolset (including Inventory and Warehouse Running, Receiving, etc.) for retail companies focused on e-commerce and omnichannel sales.

Bottom Line

The offshore software outsourcing IT 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.

Frequently Asked Questions

Offshore software development means transferring a project (fully or partially) from a client to a third-party software development vendor.

The main benefits of offshore software development services are:

  • Reduce development cost
  • Diversity of qualified talents
  • Scalability
  • Strong skillset
  • Employee training
  • Quicker concept implementation
  • Low building risks
  • Latest technologies

There are several steps to approach offshore software development:

  • Decide on features for your target audience
  • Take care of regulations
  • Define your business goals
  • Mind needed tech stack
  • Start searching for reliable outsource software development offshore vendors

Offshore software development has its own challenges:

  • Time zone differences
  • Communication issues
  • Security challenges
  • Quality assurance
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