Is it worth hiring offshore developers for a startup?

A skills shortage is impacting the future of software development worldwide. According to Statista, more than half of the surveyed global companies have experienced a skills shortage that has constantly held them back. In 2023, 54% of companies still lacked technology skills, but this is not because the job market is stagnant. Actually, the number of job opportunities for software developers is set to increase by 22% in 2030. Still projects experience this shortage because they cannot find the ideal candidate for themselves.

This situation also affects the value proposition of domestic developers and software engineers. So, hiring them ends up being too expensive for most of the startups. Moreover, it may not be profitable to hire them locally because:

• there are no right professionals;
• there is lack of required expertise;
• specific market demands;
• it is more profitable to hire developers from countries with weaker currency.

All these and many other reasons highlight offshore hiring as the best strategy, as it would finally let a company tap into a worldwide talent pool with minimized recruiting costs. Diversifying your talent pool can be especially helpful for niche or in-demand skills, including emerging technologies like AI/ML, data engineering, and programming languages like Java.

As the quest for top talent intensifies, many entrepreneurs are considering the option of hiring offshore dedicated developers. But is this strategy truly beneficial for your startup? In this article, we’ll discuss the pros and cons of offshore development, exploring key factors – cost savings, access to specialized skills, and the challenges of managing remote teams.

Should you skip in-house hiring for outsourcing?

According to recent reports, businesses spent over $700 billion on outsourcing. Breaking this down by segment, IT outsourcing spending was projected to reach $519 billion. Business process outsourcing spending was forecast at $212 billion. Moreover, companies are increasingly turning to workers who are abroad to replace laid-off U.S. employees. For example, Google recently cut hundreds of core workers and moved jobs to India and Mexico. Yet, it doesn’t mean that in-house hiring is dying, as according to the survey conducted by Mayple 42% of companies still prefer to be completely in-house, so let’s compare these two.

The choice between in-house hiring and software development outsourcing depends on a company’s goals, resources, and specific needs. In-house hiring allows for better quality control and alignment with company culture, though it can be costlier and slower to adapt. Outsourcing offers cost savings and the ability to scale quickly but may come with risks related to quality, control, and team cohesion.

It must be said that companies find that a hybrid approach – maintaining in-house talent for core functions while outsourcing non-core activities – can provide a balanced solution that maximizes the benefits of both strategies.

Offshore software development challenges

Even though offshoring is a valuable strategy for any company, there are still some challenges. Managing these challenges requires technical expertise, project management skills, and cultural awareness.

Time zone differences

Different time zones can influence communication and project timelines in a globalized work environment, especially when teams are distributed across various geographic locations.

Communication delays

If the members of the team are in different time zones, you will probably have just a few hours of overlap in which real-time interactions can take place. This can lead to the undesirable delay in email/Slack communication. For example, if your core project team, which is located in New York (EST), has a question or clarification of a task with a developer in India (IST), a 3 PM EST request might not be reviewed until the next morning in New York, thus creating a 12- to 15-hour delay. However, with proper scheduling, effective use of communication tools, and overlapping work hours, these challenges can be mitigated, ensuring smooth collaboration and timely project delivery. For example, JPMorgan Chase & Co’s profit for 2024 rose 18% to $58.5 billion. with offshoring teams in the Philippines.

Scheduling challenges

If the team members are in different time zones, then it becomes quite complicated to schedule a meeting or a work session. For example, if a team meeting is scheduled at 10 AM PST, it would be 1 PM EST and 6 PM GMT. It might be inconvenient or even difficult for participants in other zones, especially those in Asia, where it might fall early in the morning, causing problems in attendance.

However, these challenges can be effectively managed. Use virtual meeting tools like Zoom or Microsoft Teams and you will be able to facilitate collaboration across time zones. Utilizing scheduling tools like When2meet or Doodle allows everyone to indicate their availability, making it easier to find a suitable time for all participants. Additionally, using a time zone converter like World Time Buddy can help visualize these differences, ensuring better coordination and fostering greater participation.

Impact on project timelines

Time zones can contribute to delays in project milestones when interdependent tasks rely on asynchronous communication. If one team cannot start their work until they receive information or approvals from another team in a different time zone, it can create a bottleneck. Suppose a marketing team in Australia relies on analytics data from a team in Ukraine. If the Ukrainian team completes the analysis only after their workday ends, the Australian team might experience a delay in developing their campaign strategy by an entire day. This problem can be easily solved with the set we have mentioned above.

Time zone differences pose challenges to global teams, especially in terms of communication, collaboration, and project timelines. However, these challenges can be effectively managed through thoughtful scheduling, the adoption of asynchronous communication tools, and clear processes that account for the delays caused by time differences. Proactively addressing these issues can lead to successful project outcomes, regardless of geographical location.

Lack of face-to-face communication

A lack of face-to-face communication can reduce the quality of collaboration, which often results in less effective brainstorming and problem-solving when immediate input is important.

Moreover, it is difficult to maintain the same quality standards within a team spread across different geographic locations. Different work practices, policies, and quality control measures can impact the overall quality of products or services.

Imagine, during the critical moment of product launch, a development team in Eastern Europe requires instant feedback from the business operations team, which is based in North America. If the development team sends the requests in the evening, that means the business team will only review them on the next day, which further delays important development iterations.

To address these challenges, organizations can use specific tools to enhance communication and collaboration among remote teams, like Slack, Asana, Trello, or Miro.

Cultural differences

Offshoring involves working with teams from different cultures, which can lead to communication barriers, misunderstandings, and problems aligning work processes and expectations.

Different cultures also bring varying expectations around work hours and responsiveness. In some cultures, it may be common to work longer hours or respond to messages immediately, while in others, work-life balance is prioritized. A team in Latin America may operate differently than a team in East Asia, where there may be expectations around availability after traditional business hours. Misunderstanding these cultural nuances can lead to frustration and misalignment of project goals.

Understand and respect different cultural practices, such as varying attitudes toward hierarchy, deadlines, and decision-making processes.

Addressing these challenges, and your developers will be able to create successful offshore software projects that meet their clients' needs and goals.

Benefits of hiring offshore developers

In this section, we'll explore the numerous benefits of hiring offshore developers, including cost savings, access to specialized skills, improved project efficiency, and enhanced business agility.

Price-to-quality ratio

Companies use offshore jobs to reduce costs. A typical software developer in the USA earns about $105,706. In contrast, in Eastern Europe, the average salary ranges from $48,000 to $54,500 per year, which makes it one of the cheapest regions to hire software developers. These large wage differentials make it very attractive for companies to lower costs by substituting U.S. workers with overseas developers. As Brian Jackson, CEO of a major technology company, put it, “If you can find high-quality talent at a third of the price, it’s not too hard to see why you’d send jobs offshore.” By lowering costs through offshoring, firms can gain a business advantage over their competitors.

Reduced time-to-market

Offshore hiring can significantly accelerate product development and reduce time-to-market for various reasons.

• 24/7 development cycles. Offshore teams located in different time zones can provide round-the-clock productivity. Work can continue outside traditional business hours, allowing for continuous progress on projects.
• Focus on core competencies. One benefit of having some development components outsourced offshore is that they can free up core competency work by in-house teams to focus on strategic initiatives.
• Agile development practices. Offshore teams can adopt agile methodologies, allowing for iterative development processes that facilitate faster pivots and improvements based on feedback.
• Pre-built frameworks and solutions. Offshore teams bring established frameworks, tools, and best practices that can accelerate development and minimize redundant work.
• Scalability and flexibility. Offshore teams can be quickly scaled up or down based on project needs. This flexibility allows companies to respond swiftly to market demands and deadlines.

Pre-vetted talent pool

Accessing a pre-vetted pool of skilled developers provides significant advantages for companies looking to streamline their hiring process and enhance the quality of their workforce.

Reduced hiring time

Pre-vetted talent pools consist of candidates who have already gone through rigorous screening processes, ensuring that only qualified individuals are presented for potential roles. This minimizes the time spent on searching, interviewing, and vetting new hires. For instance, if you are looking for a development team, then an IT outstaffing company can significantly shorten the recruitment timeline from weeks or months to just a few days.

Increased quality of candidates

The pre-vetting process involves thorough assessments of candidates' technical skills, problem-solving abilities, and cultural fit with companies. For instance, when Devico assesses candidates we use the following steps to do that:

1. Communication & English language skills

2. Technical assessment

3. Teamwork, problem-solving & ownership evaluation

4. Commercial project readiness

This means that employers can expect higher-quality candidates who meet their specific requirements.

Lower risk of turnover

Pre-vetted candidates are more aligned with the company's needs and culture, leading to better job satisfaction and lower turnover rates. When the right candidates are matched to the proper roles, they are more likely to stay long-term.

Faster onboarding

Seasoned and tested developers come equipped with the skills and knowledge necessary to hit the ground running. This leads to faster onboarding processes and reduces the time it takes for new hires to contribute effectively. A development team can onboard a new developer from a pre-vetted pool and have them start contributing to live projects within days rather than weeks, accelerating project timelines.

Diversity of skills and expertise

Pre-vetted talent pools typically include a diverse range of skills, experiences, and backgrounds. This can enhance creativity and innovation within offshore software development teams. A global tech firm can access developers proficient in different programming languages, methodologies, and industries, allowing for a well-rounded approach to problem-solving.

Accessing a pre-vetted pool of skilled developers offers numerous advantages, including reduced hiring times, increased candidate quality, lower turnover rates, and cost efficiencies. This way, companies can streamline their recruitment processes and speed up project timelines, leading to greater success in a competitive market.

Cut cost

Companies that hire PEOs — professional employer organizations — can cut costs by outsourcing HR functions like hiring, recruiting, compliance, and managing unemployment claims. A study by NAPEO found that the average cost savings from hiring a PEO can lead to a 27.2% ROI.

Should you hire an outsourcing company or freelancers?

When deciding between hiring an outsourcing company or individual freelancers, startups should weigh various factors based on their specific needs, preferences, and project requirements.

Criteria for startups to consider

When it comes to deciding how to manage your projects and resources effectively, understanding your options is crucial.

So, what way to choose – offshore hiring, in-house team, or freelancer? For your convenience, we have gathered the most relevant criteria to help you select the best way for your business.

Criteria 1: Project scope and complexity

• Select an outsourcing company: For large, complex projects requiring diverse skill sets and long-term support.
• Choose freelancers: For smaller, well-defined tasks or projects with a clear scope.
• Consider in-house: If the project requires deep knowledge of your company’s product or culture, or if collaboration with other internal teams is crucial for success.

Criteria 2: Budget

• Pick an outsourcing company: If your budget allows and you value comprehensive services and reliability.
• Choose freelancers: If working with tighter budget constraints, as they often provide lower rates.
• Consider in-house: If you foresee the potential for cost savings over time through the development of internal capabilities instead of continual outsourcing expenses.

Criteria 3: Timeframe and urgency

• Choose an outsourcing company: If you need a team that can quickly scale for rapid delivery.
• Choose freelancers: If you're able to manage less urgency and can afford to onboard talent individually.
• Consider in-house: If you have a non-urgent project that necessitates dedicated attention.

Criteria 4: Level of control

• Select an outsourcing company: If your startup needs a more hands-off approach and prefers established project management protocols.
• Choose freelancers: If you want more direct control over every aspect of the project and prefer communicating directly with the person completing the work.
• Consider in-house: If you need full oversight and rapid adjustments to the project since in-house teams can be more readily accessible and adaptable to changes.

Criteria 5: Quality assurance needs

• Pick an outsourcing company: For projects where quality assurance and consistency are critical, as companies often have structured processes in place.
• Choose freelancers: If you are prepared to invest time in quality checks and are willing to supervise work closely.
• Consider in-house: If your project demands meticulous quality control and alignment with brand standards, as in-house teams can better maintain oversight and adherence to your specific quality benchmarks.

Criteria 6: Skill diversity requirement

• Select an outsourcing company: When you require access to multiple skill sets simultaneously across development, design, and marketing.
• Choose freelancers: For specifics, niche skill sets, or tasks that don’t necessitate a collaborative effort.
• Consider in-house: If your startup values an integrated team culture and collaboration, where various skill sets can contribute directly to the company’s mission and vision.

Criteria 7: Long-term vs. Short-term engagement

• Select an outsourcing company: If you anticipate ongoing work and wish to establish a long-term offshore technology partner.
• Choose freelancers: For one-off projects or temporary needs where the relationship might not extend beyond the project completion.
• Consider in-house: If you are positioning for long-term growth and believe building a robust internal team will provide ongoing value and deepen expertise aligned with your company’s goals.

These criteria will help you decide the method that will be just right for you.

Why hire offshore developers for startups with Devico?

Hiring offshore developers has become an increasingly popular strategy for startups looking to optimize their resources while driving innovation and growth. Partnering with a company like Devico can provide several advantages tailored to the unique needs of startups, such as lower cost of hiring, faster processes, and access to the best experts.

Devico specializes in staff augmentation services and connecting startups with skilled developers worldwide, offering a range of services designed to maximize efficiency and reduce costs.

With a professional staff augmentation services provider at their side, startups can focus on innovation and growth while ensuring their development needs are met with high-quality standards and effective communication.

Conclusion

Hiring offshore developers can be a smart investment for startups looking to optimize their resources, speed up development, and access global talent. While challenges exist, partnering with an experienced offshore development company like Devico can help mitigate these risks and turn potential obstacles into opportunities for growth.

With the right partnership, the strategic advantages of offshore development can lead to successful product launches and robust business growth. The question isn’t whether it's worthwhile to hire offshore developers, but rather how effectively can it be done – and with the right partner, the possibilities are endless.