The Pros And Cons of Offshore Outsourcing Software Development


Top Pros And Cons of Offshore Outsourcing Everyone Should Know pros and cons of offshore

Offshore outsourcing is outsourcing your product development or any business operation to a vendor established in a different part of the world.

 The idea of choosing the offshore outsourcing model can be lucrative. Still, anyone looking to do so should learn about all the pros and cons of offshore outsourcing before taking the next step.

Without any delay or fancy introductions, let’s take a quick look at all the pros and cons of offshore outsourcing to determine how viable it is for your business.

Pros of Offshore Outsourcing

1. Saves Additional Costing

While the cost-saving won’t be revolutionary, offshore outsourcing can help you save a lot of additional costs in terms of infrastructure, tech stack, etc.

All outsourcing partners come equipped with existing infrastructure with the right tech stack for developing your product, and you don’t have to pay any additional fees, which are all part of the contract.

Countries with low cost of living can also help you save expenses since their rules are far more relaxed, and the prices can be fair for them while being less expensive for you.

When outsourcing, you’re also free of the obligation to pay taxes and other benefits that you usually have to pay to a full-time employee, and it saves more resources in the long run.

2. Grants Access To Specialists

It’s obvious, but it still needs to be said. With offshore outsourcing, you’re not stuck within the boundaries of your living country or region. The world is enormous, and each country has all your required skills to offer through their professional developers or outsourced employees.

With a larger talent pool to access and your specific requirements, you can always access the cream of the crop when creating your team.

3. 24/7 Uptime

It’s the age of the internet, and everything’s always online. The same rule applies to businesses; standard business hours don’t apply in most cases anymore.

But regular human beings can’t keep working 24 hours a day. That’s where your outsourced team comes in. Outsourced team members are always from different time zones and can cover the hours when you or your in-house team can’t be present.

As a result, someone is always present to serve the clients round the clock, and you have feasible 24/7 support for customers that can increase brand reputation along with higher customer retention rates.

4. Allows Better Focus on Core Business Operations

There are a lot of things to do in any business you look at these days. The highly competitive environment of the modern market demands the most effort from every existing business.

The entire process can get somewhat overwhelming, and a team of helping hands can alleviate the additional pressure.

As a small business, you don’t have enough manpower to handle all the company’s aspects and product development. Offshore outsourcing takes on the development process, allowing internal teams to focus on core business operations like customer support, sales, marketing, etc.

5. The Government Policies Are Favorable

Many countries offer special tax exemptions and incentives to companies that invest in their country’s economy by employing outsourcing. When you outsource your business processes to such a country, you’re helping yourself and the country you’re outsourcing to.

Also, you enjoy the additional benefits of special incentive bonuses that increase your profit and can help you improve your business’s bottom line.

6. Additional Scalability

Offshore outsourcing comes with a very flexible team structure that allows you to upscale or downscale your development team anytime. Not all phases of development require an entire group of veterans, and you can quickly relieve additional developers of their duty to free up space.

You can also add in more members when you want to complete the entire software development life cycle within a lower development time. High flexibility to change team scale this way is great for cutting down additional costs for individual payments.

7. Faster Delivery Time

As one of the earlier points mentioned, offshoring allows you to add the best of the best to your team. When you’re working with the finest who have previous experience with similar products, they know exactly what they’re doing.

With their expertise and knowledge of the right approach within the shortest time, the team can deliver a finished product much faster, reducing delivery time.

8. Introduces Versatility In Your Workforce

With the additional flexibility that allows you to scale your team whenever you want, you can adjust the team to take on different bigger projects whenever the need arises.

Working with different professionals on different projects and using abundant project management and development tools increases diversity within the work environment.

9. Improves Risk Mitigation

Partnering with a professional and experienced vendor or outsourcing team means the team takes complete responsibility for all the possible risks arising within the development cycle or post-delivery and publication.

When you and the vendor share the development risks, your risk mitigation is increased, and the development goes on relatively smoothly.

10. Helps To Improve Poorer Economies

Many poorer countries have low living costs due to economic downfall but still hold high-potential professional experts who can bring high value to your project.

By outsourcing to a poorer country, you’re creating employment in the said country while making sure you have a great specialist working on your product development.

Cons of Offshore Outsourcing

1. Less Control Over The Operation

With an offshore team, you’re not present in person to communicate about different issues or immediately address any changes. These minor delays can turn into development nightmares in the long run.

When working with any offshoring team, it’s not just about choosing the bidder with the lowest price. It’s about ensuring they communicate well, allowing you to create changes as fast as possible.

2. You Might Run Into Different Logistical Challenges

Offshoring can cause delays, sure. But logistics is a bigger challenge when working with a team halfway across the world from you.

The most vital of them all is the culture and language barrier. Though anyone can be fluent in English, there will always be certain expressions and meanings that get lost in translation, creating communication issues.

Other issues can arise due to time zone changes and differences in the mentality of each individual in the organization.

3. Your Public Image Might Be Under A Negative Light

From a general perspective, Americans have a negative view of outsourcing labor overseas. According to domestic labor opinion polls, 76-95% of Americans have expressed that offshoring is why the U.S. economy is struggling since more workers weren’t hired at home.

While the public fear of offshoring is prevalent in the U.S., you can easily tackle it with fact-based information that can dispel negative client feelings.

4. Payroll And Tax Operations Can Be Complicated

Dealing with your own country’s tax system can be an exhausting process. When you introduce an entirely different tax system into the equation, the process can get even more complicated with the possible rising need for a legal issues expert to handle your payment process.

There’s a high chance that you will not be familiar with all the foreign regulations regarding employee payment and tax procedures. There can also be additional hidden costs in terms of development in the long run.

The last thing you want is to go against any regulation or employment rules. So it’s best to take the help of international tax or payroll experts to help you out.

5. Risks of Internal Information Getting Compromised

The risk of losing valuable and classified data isn’t new or uncommon in software development. You can lose your innovative idea to a rogue third party just because they decided to cash in on your success.

Outsourcing vendors always have complete access to the client’s project, and any rogue individual can steal this data for personal gain. It can either claim credit for the project or sell the information to another competitor.

If you’re outsourcing your project, sign an NDA with your chosen vendor to prevent future data leaks. If you’re an outsourcing vendor yourself, you must always follow the best encryption and secrecy practices to keep client data hidden from prying eyes,

6. Time Zone Differences

While having constant online support around the clock can be a great idea, it can also be a significant detriment to effective product development.

With time zone differences, employees are online at different times. When everyone’s online at entirely different times of the day, communication gets delayed since not everyone can instantly reply at 3 a.m. of the night.

With delayed communication, it takes the developers more time to implement any new features or improve the existing ones. Feedback implementation gets delayed, and these slight delays pile up in the long run, increasing development time.

Final Comparison

Saves additional costsLess control over the operation
Grants access to specialistsMight run into different logistical challenges like cultural and language barriers
24/7 UptimeThe public image might become negative at times
Allows better focus on core business functionsPayroll and tax operations can get complicated
The Government policies are favorableRisk of internal information getting compromised
Additional scalabilityTime zone differences may not always work in your favor
Faster delivery timeLanguage barriers and cultural differences can cause delays
Improves versatility in your workforce
Improves risk mitigation
Helps to improve poorer economies

Is Offshore Outsourcing Right For You?

The following scenarios are when offshore outsourcing can be considered the proper method for your business:

  • You’re planning to expand into new international markets
  • You’re planning to set up local offices in different locations
  • You want to utilize a broader talent pool with diverse resources
  • You need the benefit of lower labor costs and operational expenses
  • You want your internal team to focus on improving your business procedures
  • You want access to specialized skills to fill the gaps in your in-house development team

To Wrap It All Up

Want to achieve the perfect balance of internal and external teams to maximize your business operations? Impala Intech can help you out.

Our professional development team’s expertise in multiple programming languages and project tools allows us to take on challenges and facilitate improvement and growth.


Is Offshore Outsourcing Suitable for All Businesses?

Offshore outsourcing may not be suitable for businesses with susceptible data or requiring in-person interactions.

What Are the Environmental Implications of Offshore Outsourcing?

Offshore outsourcing can increase carbon emissions due to longer supply chains, but it depends on the industry and practices.

How Does Offshore Outsourcing Affect Domestic Employment?

Offshore outsourcing can lead to job displacement in some industries but may also create jobs in others.

What Is the Role of Cultural Differences in Offshore Outsourcing?

Cultural differences can affect work style, communication, and business practices, requiring cultural sensitivity.

What Are the Tax Implications of Offshore Outsourcing?

Tax implications vary by country and involve transfer pricing and tax avoidance issues.