The impact of offshore hiring in startup growth

You might have heard about Slack. Well, today it is a billion-dollar company. But way back in the day, they started by building their first version using an offshore team. This way, companies could make rapid iterations to bring the product to the market. Other well-known companies like WhatsApp and Spotify also used software development outsourcing in their early days, which helped them scale up and innovate rapidly.

Hiring teams from outside your country is now a great strategy for many startups to reduce costs and grow quicker. This article explores how offshore hiring can help a startup achieve success, have better competition, and shape its future.

Definition of offshore hiring and its impact on global business

Offshore outsourcing implies working with third-party companies or service providers in foreign countries to perform specific business functions or activities.

From over 3 million non-manufacturing jobs it is estimated that 10% to 20% of US service support jobs like software developers, HR professionals, and payroll administrators will be moved overseas in the next decade.

The impact of offshore outsourcing is enormous on world business. As businesses transfer operations from developed to developing countries, offshoring leads to the latter's economic growth.

It has a positive effect on the economy of the country where the offshore company is located. When companies save money through offshoring, they can devote resources to other strategic initiatives; the result can be innovation, expansion, increased competitiveness, or the return of capital to shareholders.

Why has offshoring become so popular?

On average, 137,000 startups are launched every day. That means, nearly 50 million new startups are established every year. However, 90% of them failed due to various reasons, such as cash flow problems, lack of the right team, and many others. Offshoring has become one of the solutions to these difficulties.

And there is no wonder. First, it saves companies money as they hire skilled workers from countries where the labor costs are lower, which allows them to invest in other crucial areas.

Second, offshoring opens wider ranges of talents, allowing companies to find the right people for specific jobs. Offshoring offers greater flexibility in managing teams and resources, thus making it easier for businesses to respond to changes in demand. In general, offshoring helps the growth of companies and their effective competition in global markets.

Key benefits of hiring offshore staff for startup

Let's explore why companies choose offshore hiring closer. Here are some key benefits of tapping into offshore talent for startups.

Swift hiring

Offshoring can significantly accelerate the hiring process. With access to a larger talent pool, startups can quickly fill essential roles without being limited by local talent availability. This agility allows startups to scale their teams rapidly, responding to market demands and business needs without the lengthy recruitment cycles often experienced in domestic hiring.

You get the experts you need

When startups face gaps in expertise, especially in specialized areas or technologies, the common impulse is to recruit specialists directly. While this may seem like a straightforward solution, it often leads to significant costs and inefficiencies. However, in numerous instances, this leads to large costs both for the recruitment itself and later, when it turns out that the company does not need such a specialist constantly. This is where offshore recruitment comes in.

Access to a diverse talent pool

Offshoring allows companies to tap into a global talent pool, gaining access to specialized skills that may not be available in their home country. This infusion of expertise can improve the quality of a company’s products and its innovativeness.

Niche and newest technology skills

The rapid rise of new technologies and companies’ decision to adapt them, necessitates highly specialized skill sets that local markets often struggle to provide. Whether you’re in search of an expert in Software as a Service (SaaS), Artificial Intelligence (AI), or blockchain-based project development, navigating this evolving landscape can be challenging. This is where offshore hiring becomes a strategic solution to access the precise talent you need.

Significant cost savings

Many offshore countries have lower costs of living. This means lower salary expectations. For instance, the average salary for a software developer in the USA is around $132,000 per year. You can hire equally skilled remote developers in Eastern Europe for $25,000-$41,000. That's a potential saving of 60-75% on labor costs alone.

When you hire an offshore development team, you skip the need for office space, equipment, and infrastructure. In the USA, the average office cost per employee ranges from $14,000 to $18,000 per year. With offshore hiring, you unburden yourself from this expense.

Focus on core business functions

Independent recruitment of employees is a long and difficult process, and if it drags on, the company inevitably loses money. Meanwhile, a specialized staff augmentation company professionally deals with staff expansion instead of you— that is, you don’t need to spend your resources on recruiting, and the needed specialist will start working quickly and on time.

Business continuity

With an offshore team, you can ensure business continuity even if there are local challenges or disruptions, such as natural disasters or economic downturns. This ensures that your business remains operational and continues to meet the needs of your customers.

Flexible workforce

A flexible workforce helps you manage resources more effectively and stay agile. You can add or remove team members as needed, without long-term commitments. This flexibility is a lifesaver when you're still figuring out your product and market.

Scale your team on-demand

Need to scale up a team for a big project or scale down after the launch? Not an issue with offshore development. Scaling up or down is pretty easy, as the fluctuating needs of your project and market dictate. With offshore development, you will be able to:

• Scale up fast in cases of big projects or sudden surges in demand;
• Downscale with equal ease at the end of projects or slowing demand for the same services.

This flexibility allows you to respond quickly and effectively to changing market and project conditions, not being obligated to long-term commitments.

Case studies

Numerous examples show that offshore hiring has a huge amount of advantages for all types of companies.

1. WhatsApp

When the company was younger, co-founder Jan Koum outsourced the development of the software to Eastern Europe. That saved WhatsApp cash but still got some great engineers working on their app. The offshore developers actually built the major parts of WhatsApp's system. As WhatsApp grew bigger, they started to slowly hire more in-house engineers in California. Again, this is a good example of how offshore development can help a company start small and grow fast.

2. Slack

Slack is one of the most popular communication tools available today, with over 38.8 million daily active users and 77% of the Fortune 100 companies use Slack. Its success can be attributed to its simplicity and user-friendly design, which have made it a favorite for teams around the world. However, what many people don’t realize is that a significant portion of Slack’s development, including its logo design, marketing efforts, and software for web and mobile applications, was offshored.

This strategic decision to use international talent allowed Slack not only to access specialized skills that might not have been readily available in their local market but also to increase efficiency in getting new features to users quickly. By tapping into a global pool of expertise, Slack effectively reduced costs while maintaining a high standard of quality in its product offerings. This behind-the-scenes approach underscores the importance of offshoring in building a successful technology company, showing that collaboration across borders can lead to innovative solutions and a competitive edge in the marketplace.

3. IBM

IBM is one of the largest technology companies in the world, operating in over 170 countries. The company has a rich history of offshoring that dates back to the 1960s, when it began moving some production to foreign markets. In more recent years, IBM has expanded its offshoring efforts to include software development, consulting services, research and development, and the management of cloud-based computer systems.

As a result of these initiatives, IBM has become the largest multinational employer in India. The company has not only built a substantial workforce in the country but has also made significant investments in India’s infrastructure and economy. IBM has poured billions of dollars into research and development and has established multiple technology labs and centers there, solidifying its commitment to the region and contributing to the growth of the local tech ecosystem.

4. JPMorgan Chase & Co.

JPMorgan Chase & Co. has been actively expanding its presence in the Philippines in recent years, establishing operations in Metro Manila and a captive site in Cebu City. The company has been leveraging local talent to provide a range of services, including software development and operations, as well as mortgage operations and customer care services that cater to its US-based businesses. This strategic move is part of a broader trend in the financial sector, where approximately 80% of the world's largest banks have opted to establish offshore software development operations.

5. People.ai

People.ai is a startup that provides a B2B sales acceleration platform powered by machine learning technologies. While the company is headquartered in San Francisco, it has opened a research and development office in Ukraine to tap into the scarce resource of skilled AI developers.

With this strategic move, People.ai now has access to a talented pool of developers who can drive the creation of innovative products and enhance existing offerings. Additionally, the company enjoys reduced operational costs linked to maintaining an offshore tech office in Ukraine, allowing it to deliver a more competitive product to its customers.

6. Spotify

Spotify expanded into Latin America, starting with Mexico and then moving to Brazil, Chile, and other countries. Spotify was driven by scale and competition, so it began making deals with music rights holders and eventually built business teams in select regions of the Americas. From 2014 to 2023, the number of music listeners in Latin America increased by 986%, accounting for a fifth of Spotify’s global base.

7. Amazon

Amazon has moved its call centers to South Africa, a country with several experienced customer service companies. In addition to customer service, Amazon has also outsourced its R&D to a Ukrainian startup specializing in home security systems. By offshoring its R&D, Amazon gains access to exceptional talent at a reasonable cost.

Give your startup the extra push

Are you ready to take your startup to the next level? Do you want to replicate the success of trailblazers like Spotify? If so, offshore hiring could be the best strategy you need, and Devico is here to help you every step of the way.

At Devico, we truly understand that as a startup owner, you have to deal with a lot of challenges, like limited resources and the need for rapid scalability. Therefore, our offshore hiring services will help bring your ideas to a reality, tap the best talent around the world without the heavy overheads that come associated with this process. From employer of record services to dedicated teams, whatever your requirements might be, we can help you easily recruit and manage employees that seamlessly align with your vision.

The right team of offshore developers can make all the difference. Choose Devico as your partner in offshore hiring and give your startup the extra push it needs to thrive in the fast-paced world of business.

Conclusion

Offshoring has changed the way companies do business globally. By moving business processes and strategically relocating operations to countries with cost-effective labor markets and specialized skills, companies can realize significant cost savings, and improve their efficiency. Offshoring is a distinct process of moving business functions to other countries, opening up opportunities for growth and innovation.

In an increasingly competitive environment, offshoring is a valuable opportunity for companies to rethink their business practices, reduce costs, tap into new markets, and ensure long-term success.

With the help of Devico’s overseas developers for startups, companies can navigate the complexities of the global economy and become leaders in their industries. Contact now and hire offshore developers who will boost your startup to a new level!