IT Offshore Outsourcing: Pros and Cons
Providers of offshore IT services have long since proven their worth. The flexibility of this solution helps organizations reduce overhead and switch to more cost-effective resources when drastic cutbacks are required. If you’re still weighing the positives and negatives of this approach, this post aims to complement your vision of the topic and help you understand if it’s suitable for your business.
Before we dive into the pros and cons of IT offshore outsourcing, let’s define it. In this approach, you delegate your software development activities to vendors of offshore IT services located overseas or in a location at a significant distance from your headquarters. For instance, we at nCube provide offshore IT staffing in regions such as Central and Eastern Europe (Poland, Ukraine, Romania, the Baltics), Western Asia (Armenia, Azerbaijan, Georgia), and Latin America (Brazil, Argentina, Mexico). These countries have a strong potential to become centers of software development excellence for EU and North American companies due to various reasons:
- Large talent pools with a wide range of tech skills: Over 2 million software engineers;
- Skilled software engineering teams at reasonable rates;
- Strong focus on high-quality STEM education;
- Effective communications and alignment with Western business approaches;
- Partial or full workday overlap with North American and EU time zones.
Thanks to these reasons, offshore IT staffing as an approach to expanding internal tech units is quite popular these days. According to Statista, in 2024, the market of offshore IT services will reach 512.47 billion dollars in revenue.
Below is a brief overview of the strengths and weaknesses of this approach.
Now let’s go over the pros and cons of IT offshore outsourcing in more detail.
Pros of offshore IT services:
- Cost reduction
The high cost of in-house software development is the main reason prompting businesses to delegate their software development tasks to overseas providers. As Accelerance reports, businesses can save from 40% to 70% of overall costs by partnering with offshore IT services. Not only are the rates of software engineers lower in offshore regions but also overseas facilities let you cut back on team administration, retention, and IT infrastructure expenses.
- Access to a wide range of tech skills
- Scaling up and down easily
In the ever-evolving market, offshore IT services offer a high level of agility that companies need to adapt quickly. It’s a fact that offshore facilities are easy to scale. So, when your project requires more skills, chances are you can build a full-blown team within several weeks thanks to vast networks of software engineers. On the other hand, when you need to disband or reduce your unit, providers of offshore IT staffing can do it on short notice.
- Speeding up your current project
Providers of offshore IT staffing can help free up your core team from routine tasks. Unlike the outsourcing model, where a team takes on a project and develops it from the ground up, offshore developers can step in at any stage of the project and bring it up to speed quickly. On the other hand, offshore development squads require a great deal of involvement on your part. Although it acts as an autonomous unit, your offshore team will follow your lead and interact with you directly.
Disadvantages of offshore IT staffing
When it comes to the pros and cons of IT offshore outsourcing, it’s worth reviewing the following negatives that can potentially impede cooperation with your offshore unit.
- Time difference
In this day and age, remote collaboration is the norm. However, it can be hard to establish efficient communications among team members located in different time zones. With this in mind, many companies choose to stick to in-house teams.
Yet, there’s another way to look at the time zone challenge – an offshore development model comes with a unique overlapping coverage. In a 24-hour timeline, your internal and offshore team will dedicate 8 hours per day each, which equals 16 hours of work done in a day.
- A laborious management process
While your offshore squad will be fully dedicated to achieving your goals, you’ll be deeply involved in the software development process. From team formation to managing your offshore unit, the client of offshore IT services is responsible for team management, setting up workflows, and communications. The provider typically covers employee retention, HR processes, overhead, IT infrastructure, but the project’s outcome is always the client’s responsibility.
- Communication barriers
Offshoring is a multicultural concept, given that the team members will have diverse communication patterns, as they typically stem from different cultures and backgrounds. That being said, offshore IT services should facilitate providing developers with in-depth language proficiency and a track record of being a part of offshore development projects.
- Intellectual Property
Letting providers of offshore IT services handle your operations can pose IP risks. Thus, it’s a good practice to implement security standards and strategies on your side rather than relying solely on your offshoring partner, even if they’ve signed a Non-Disclosure Agreement.
Popular destinations for IT offshore outsourcing
One of the major offshore software development benefits is the ability for companies to select among a variety of IT hubs and find developers who perfectly match their competence needs, rates, experience, ability to work in a distributed environment, and other relevant aspects. Let’s take a look at destinations that reign supreme in IT offshore outsourcing.
Central and Eastern Europe (CEE)
CEE offers good value for money, which is why it is recognized globally as one of the best hotspots for IT offshore outsourcing. The primary beneficiaries of this region are North American companies that rely on the strong IT potential of Poland, Ukraine, the Czech Republic, Hungary, Bulgaria, and Romania, which collectively have around 1 million software developers.
Time zone: A significant offshore software development benefit of CEE is an ample time window for real-time collaboration. This makes it an ideal spot to build a nearshore unit if you’re located in Western Europe and the UK, ensuring complete alignment between your remote and internal team members when working on your project. When it comes to offshore outsourcing, despite differences in time zones, there are usually a few hours of overlapping work time.
Cost: The cost of IT offshore outsourcing in CEE varies from $21 to $118 per hour, excluding vendor fees, as per Accelerance. To find more affordable rates, Ukraine, Moldova, Romania, and Bulgaria are good options, while the Czech Republic, Hungary, and Poland have higher costs of living, which can affect pricing.
Latin America (LATAM)
LATAM is the go-place region for many companies in times of after-Covid belt-tightening. LATAM’s top IT offshoring/nearshoring destinations include Brazil, Argentina, and Mexico, with an estimated pool of one million IT experts. Brazil alone accounts for half of this talent repository. If you’re a tech leader looking for outsourcing opportunities, let’s explore what LATAM has to offer.
Time zone: If you’re located in the USA, LATAM is a true gem when it comes to synchronizing remote and in-house teams. Mexico shares the same time zone as the USA, offering up to 8 hours of overlap, while Brazil and Argentina are in the EST time zone, providing up to 7-5 hours of shared regular work hours with businesses in the US, which is more beneficial than software offshoring.
Costs: The hourly rates for nearshore outsourcing to Latin America are comparable to those in CEE, typically ranging from $28 to $105 per hour, excluding vendor fees. However, it’s worth noting that Brazil tends to have higher rates than Mexico and Argentina, according to Clutch’s data on developer rates.
When it comes to IT offshore outsourcing, it would be remiss not to acknowledge the significant role of Asian countries as a talent powerhouse that has dominated the outsourcing market for decades, primarily due to their cost-effectiveness. But offshoring there can be a double-edged sword, with high chances of compromising between the price and quality. Therefore, in the 2010s, global tech leaders began exploring alternative outsourcing hubs in Eastern Europe and later in LATAM.
Your reliable offshore IT staffing provider | nCube
As a company that provides offshore IT staffing, we strive to help you make the most of offshore IT services. Here’s what our approach includes:
A full dedication approach
We aim to strengthen your in-house unit with fully dedicated resources. The engineers we source for you will join your team on a full-time basis, working for you 5 days/40 hours per week. In our approach, engineers will follow your engineering practices and communication patterns as well as adopt your company culture. This way, your offshore team becomes a part of your organization, supplementing your home-based squad.
A customized team formation process
Each client is unique, so we will dive into our network to find candidates that fully match your requirements when it comes to tech skills, company culture fit, English, and other competencies. We are always ready to go the extra mile when it comes to meeting your offshore IT staffing needs.
No intermediaries between you and your team
With us, you will work with and communicate with your offshore team members directly, retaining full control over the provided team. Our approach assumes you will assign tasks and manage the software development process as you see fit.
Only skilled software engineers
As a provider of offshore IT services in Central & Eastern Europe and LATAM, we offer you the opportunity to add best-in-class talent to your team. All developers you’ll meet have undergone our internal screening process, including tech skills, company fit, and English tests. On top of that, the market in our targeted offshore locations is studded with quality engineers with experience working at offshore IT services for EU, UK, and North American companies, which guarantees excellent English skills and domain experience.
Let’s connect to discuss the pros and cons of IT offshore outsourcing for your organization and how nCube can help you build your offshore unit.